Risks to Watch in the Personal Umbrella Market

By | June 19, 2023

Increases in auto accident severity, attorney involvement and litigation, as well as recreational activities are driving claims in the personal umbrella space — and one expert believes their impacts will only accelerate into the future.

In a recent interview with Insurance Journal, Shannon Cragg, vice president of personal lines claims at Nationwide, encouraged agents to have holistic conversations with their clients to ensure all their assets are protected.

The market for personal umbrella is active and competitive. The AM Best rate filings website shows most filings made have been to increase rates, according to Nationwide. The amount of the increase depends on the carrier and their current pricing levels; several carriers have been particularly active and aggressive in filing for rate.

Auto Accident Severity

Data shows automobile claim severity has been increasing for several years.

According to a LexisNexis Risk Solutions report, automotive claim severity for bodily injury and property damage increased by 35% since 2019, while collision claim severity has jumped 40%. LexisNexis said bodily injury claims were 8% to 10% higher than the prior year, on top of a more volatile surge in 2021 that led to the total bodily injury claim cost increase of 35% since 2019.

In the years immediately after COVID-19 surfaced, “we didn’t see the lower-severity accidents, the commuting back and forth to work, what I would call the ‘bumper hits,'” Cragg explained. At the same time, though, Cragg said there has been an increase in driving speeds and riskiness.

Recent Nationwide research supports this. It shows dangerous driving behavior has not improved since last year. Nationwide reports that 59% of Gen Z drivers admit to being more impatient on the road than they were a year ago — while 47% report driving faster and taking phone calls on a handheld device.

And that’s not all. Thirty-eight percent of Gen Z consumers admitted to looking at their phone more frequently while behind the wheel; 34% of Gen Z drivers video chatted while driving and 24% of Gen Z and 23% of Millennials used or checked social media while driving.

Fifty-four percent of Americans admit they’ve driven more than 10 mph above the speed limit over the past 12 months. More than a third (35%) of vehicle passengers witnessed their driver texting while behind the wheel.

“The trends we’re seeing are not heading in the right direction,” said Beth Riczko, president, P&C Personal Lines at Nationwide. “This unnecessary multitasking behind the wheel is not worth the risk and drivers create danger for themselves, the passengers, others on the road, and even pedestrians.”

Attorney Involvement, Litigation and Bigger Jury Awards

Cragg said nuclear verdicts and attorney representation are also on the rise.

According to the Institute for Legal Reform, “nuclear verdicts are increasing in both amount and frequency.” The median nuclear verdict increased 27.5% between 2010 and 2019 — far outpacing inflation — and there was a clear upward trend in the frequency of nuclear verdicts over time.

“We’re seeing more attorney involvement,” Cragg said. “You’re seeing more increase of disputes, and then when you get a jury award, you’re getting these, kind of explosive awards, at times.”

Cragg believes this this appetite extends into libel, slander and defamation.

Numbers published by Risk Placement Services show that in 2022, awards from nuclear verdicts were more than $18 billion — compared to $9.1 billion in 2021 and $4.9 billion in 2020. RPS reported that the most common losses were from auto claims, product liability, patent infringement, and, increasingly, in the construction space.

Recreational Activities

Cragg also sees more liability stemming from recreational activities, such as owning a boat or swimming pool or operating all-terrain vehicles.

“I think as those things are becoming more and more prevalent, it just becomes really important to make sure you’re protecting your entire portfolio,” she said when speaking about ATVs and side-by-side vehicles.

Advice for Agents

Understanding portfolios and risks is key. Ensuring that clients understand bodily injury or property damage limits do not cap exposure is crucial. Cragg believes the challenges described here will continue to accelerate into the future.

She emphasized having proactive, holistic conversations with insureds.

“I think the challenges I just described are going to continue to accelerate at a faster pace,” Cragg said of the risks outlined in this story. “All of those things that I named — whether it’s medical costs, the tort responses — are outpacing inflation. And so from an industry perspective, how do you price appropriately for that? How do you help mitigate? How do you help inform?”

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Insurance Journal June 19, 2023
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