“There are more inland locations included in catastrophe-exposed areas, which is driving up property rates because insurers price the product based on the risk model,” said Craig Nelson, SVP of Towers Watson Risk Advisory and Brokerage Division in Denver, Colorado. “They use the CAT risk model to understand how much of their customer’s portfolio is exposed to catastrophe loss and charge more for clients that own more locations in CAT-exposed area.”
Property rate increases range from five percent to 40 percent with the average being 15 percent to 20 percent, according to Nelson.
The third annual study reported that 22 percent of respondents were not aware of changes in property risk modeling.
“Insurance buyers need brokers and consultants who are qualified to analyze and understand the catastrophe models more than ever. It’s not an exact science. You have to be able to model it yourself and understand where the weak spots are in the modeling,” Nelson told Insurance Networking News. “When you allow the insurance carrier to do the interpretation on their own, you are at a competitive disadvantage.”
The survey also found a lack of enthusiasm for the purchase of cyber insurance. About 72 percent have not purchased network security/privacy liability policies. “Despite the media coverage and magnitude of network security risk, what’s impacting whether people buy cyber insurance is confidence in their own IT departments,” said Nelson. “IT staff has a vested interest in not advocating for cyber insurance because needing it undermines the perceived reputation of the IT department when it asks to purchase it.”
Finally, 57 percent of respondents have enterprise risk management (ERM) programs in place, which is a slight improvement over last year, according to the report.
“It has taken hold but it is still not at the level it needs to be. We should be at a higher figure by now but there are practical barriers to people executing it,” Nelson said. “Some managers don’t think it’s worth it; they think they won’t get a return on investment. ERM needs a corporate champion within the organization in order to be fully accepted.”
