Wells Fargo Market Outlook Offers Favorable News for Cyber Security

San Francisco, Calif.-based Wells Fargo Insurance released its 2017 Insurance Market Outlook and Employee Benefits Outlook report in late January, which shows this year’s property/casualty insurance market will again be favorable to buyers.

According to the surveys, most sectors will see a flat to 10 percent decrease in pricing. On the contrary, more change is expected in the health insurance industry, raising concerns for employers about how potential new healthcare reform legislation may affect their employee benefits programs.

The reports also highlight anticipated changes in the rate and pricing environment, including market capacity, cost of prescription drugs and the declining rates of cyber security liability. Additionally, both outlooks address how potential changes to the ACA may affect the insurance industry overall.

According to the Employee Benefits Outlook, employers will continue to face rising medical and prescription drug costs. Health insurance premiums have increased 213 percent since 1999 and will continue to rise. Spending on specialty drugs also continues to rise, with no immediate signs of decreases for medications commonly used to treat complex, chronic and rare conditions.

The report shows 75 percent of employers are concerned about employment retention rates for millennials, while only 28 percent plan to make changes to benefit plans to be more attractive to the millennial population.

“In the property and casualty segment, the market will continue to see rate reductions for the majority of customers, although slightly lower than prior years,” said Doug O’Brien, national practice leader for Wells Fargo Casualty and Alternative Risk Group. “Potential changes to the ACA could also impact workers’ liability, as injured employees may file more workers’ compensation claims, in lieu of healthcare claims.”

There’s some good news for cyber liability insurance. Insurance rates are declining due to the lack of recent large data privacy events as well as increased competition among insurance providers, according to the report. Still, cybersecurity concerns remain very high.

The Insurance Market Outlook report also highlights trends within 18 sectors of the industry, including:

Property: The sector remains extremely competitive from a pricing perspective.

Liability: Automobile liability capacity remains adequate, but shrinking somewhat for larger fleet risks.

Workers’ compensation: Deteriorating returns on investment will drive more stringent pricing and underwriting.

Network security and privacy risk (cyber): The issue remains at the board level and top-of-mind for leaders in the risk space.

Environmental: Threats, such as water pollution and environmental terrorism, propel the demand for this coverage, which is growing 30 percent year over year.

Public company directors’ and officers’ liability: An increase in securities class-action filings continues to be a hot topic.

Employment practices liability: The market remains flat, but timely notification of claims is critical.

Medical malpractice: The industry is shifting from individual claims to “batch” claims.

Kidnap, ransom and extortion: KRE will be indispensable for organizations with international travel exposure.

Contract surety: Limited premium dollars are being chased by numerous markets.