D&O Prices Plummeting: Record-Level Q1 Drop for Decade

The year-over-year decline in directors and officers (D&O) insurance prices for the first quarter of 2023 is greater than any prior drop over a comparable period in more than a decade, historical information presented in a new Aon report reveals.

Aon’s Quarterly D&O Pricing Index fell 24.9% to 1.84 in first-quarter 2023 from 2.45 in first-quarter 2022, Aon’s Financial Services Group reported. The pricing index captures the average price per million dollars of D&O coverage, tracking premium changes relative to the base year of 2001.

A graph of the quarterly index figures in the report stretching back to Q1 2012, when the index fell 7.0% to 0.9, shows no other year-over-year decline of more than 20%. Second-quarter 2022 came close at 19.9%, with first-quarter 2022 and third-quarter 2022 both near 15%. Before that, you would have to look back to second-quarter 2016 for a similar drop of 16.5%.

Carrier Management, a sister publication to Insurance Journal, compiled a history of Aon’s quarterly year-over-year price change figures for all the first-quarter points shown in the report.

For carriers, the latest drops have not erased extreme price gains ranging from 65% (fourth-quarter 2019) to more than 100% (first-quarter 2020) racked up for several consecutive quarters starting in late 2019.

Those price index changes, however, include the impacts of changes in the clients renewing during each quarter and renewal program changes, such as changes in limits purchased.

Offering a more apples-to-apples comparison, the Aon report presents price changes for primary policies renewing with the same limit and deductible. For first-quarter 2023, that refined calculation shows buyers enjoying a 7.9% price drop for the same amount of primary coverage.

There are no prior first-quarter primary price drops of a comparable magnitude dating back to 2012, the first year shown in the graphs included in the Aon report. Just three years ago, in first-quarter 2020, carriers were raising D&O pricing on primary policies by 26.2%.

According to the report, 80% of primary policies renewing with the same limit and deductible in first-quarter 2023 experienced a price decrease. Only 9% had a price hike.

More than three-quarters of primary policies — 77.5% — renewed with the same limit and deductible, and 94.4% renewed with the same primary carrier. In 2020, when prices soared, only about 50% of buyers renewed at the same limit and deductible.