Regulation to hike US professional lines insurance

Professional lines insurance is expected to leap by 10% in the US next year as a result of increased regulatory burden, a survey by Torus has revealed.

The survey of more than 100 US insurance professionals found that 87% of managers expect to see management and professional liability renewals to increase, with 67% expecting to see the cost premiums increase by as much as 10% and almost 20% saying they expected renewals to increase by more than this.

Nearly one-third (32%) said they expected to see professional liability (PI) premiums to go up, followed by employment practices (EP) liability (31%), directors’ and officers’ (D&O) (22%) and fiduciary (5%).

Nearly half of managers (49%) cited legislation, including the US Dodd Frank Wall Street Reform and Consumer Protection Act, as having the most impact on the professional and management lines market in the next 12 to 18 months.

They also pointed to the Patient Protection and Affordable Care Act (PPACA) and Jumpstart Our Business Startups Act (JOBS). According to the survey, 28% of managers saw an impact from the PPACA, while 23% saw a greater impact from the JOBS Act.

Some 49% of managers also said reduced compliance and disclosure was the biggest impact the JOBS Act would have on the D&O market. This was followed by crowd funding (21%), the increase in allowed shareholders from 500 to 2,000 (18%), and the ability of companies to advertise their private placement offerings (12%).

Meanwhile, 36% of respondents believed increased demand for PI coverage among Allied Health service providers would be the biggest impact that the PPACA would have on the management and professional lines market.

Demand for media liability coverage was also expected to increase. Social media was seen as posing the most significant risk with small and medium-sized businesses (SME) expected to ask for enhanced cover by 58% in the survey.

Moreover, 27% of respondents said the biggest risks for SMEs was their lack of control over potentially damaging content distributed by employees, while 19% believed it to be increased personal injury exposure such as defamation, libel, slander.

Torus senior vice president head of professional lines Jeffrey Grange said the results of the survey showed a marketplace that was firming across many customer segments and product lines.

“Poor loss experience in major classes coupled with increased exposures is driving rate increases,” Grange said. “2013 will be a challenging environment where coverage, limits and pricing are all on the table and actively re-negotiated at renewal. Underwriters must be prepared to maintain an open dialogue with producers and their clients, listening and working constructively to successfully navigate this complex and continually shifting risk environment.”