Commercial P&C Claims: State of the Market

As we kick off a new year, it’s a good time to assess the state of commercial P&C claims in 2023. With rising losses and shrinking profits, the overall situation looks grim. However, this is also a time of innovation and progress, with opportunities to seize.

According to the Triple-I Blog, the insurance industry is expected to post an overall combined ratio of approximately 105 for 2022.

However, commercial lines are faring better than personal lines, and 2023 may bring still more relief. For example, commercial auto insurers are expected to end the year with a combined ratio of 103 and commercial property insurers are projected to have a combined ratio of 99.1 in 2022.

Both of these figures are expected to improve in 2023.

Commercial Auto

According to Fitch Ratings, the average closed claim payment in commercial auto liability rose by 35% between 2016 and 2021. Large jury verdicts and settlements appear to be a driving force.

Despite the increase in claim payment size, Fitch Ratings shows the number of claims dropped in 2020 during the pandemic. This downward trend appears to be reversing already. In 2021, claims increased 12% year over year, although they remained below pre-pandemic rates.

According to the Q3 2022 Commercial Property/Casualty Market Survey from the Council of Insurance Agents & Brokers (CIAB), commercial auto claims increased in the third quarter, possibly because more employees were back in the office. In the third quarter, 50% of respondents reported an increase in commercial auto claims.

Commercial Property

Fires, storms, and other natural catastrophes have been a major factor for commercial property. The National Oceanic and Atmospheric Administration (NOAA) says there were 18 separate weather and climate disasters with losses in excess of $1 billion in the U.S. in 2022, including one wildfire event, one winter storm, one flood, one drought, three tropical cyclones, and 11 severe storms. CIAB says 56% of respondents reported an increase in commercial property claims in the third quarter of 2022.

Higher claims often result in higher premiums. Business Insurance says commercial property insurance rates will likely continue to increase in 2023. Catastrophe-exposed accounts could see increases of 25% or more, along with tighter capacity.

General Liability

Some of the same factors impacting commercial auto and property insurance are impacting general liability. Rising litigation and increasingly large settlements and awards can make claims more expensive. Increases in medical costs can also add to claims. Additional factors, such as the record-breaking number of product recalls seen in 2022, as reported by Consumer Affairs, are also impacting general liability lines.

Employment Practices Liability and D&O

In the employment practices liability and directors and officers (D&O) lines, underwriters have had to deal with growing cyber risks and accountability, SEC rulemaking, increased awareness of discrimination and harassment issues, a focus on sustainability and ESG disclosures, and the ongoing impact of the pandemic. As we covered in our notable insurance claims roundup, there has also been an increase in lawsuits related to the Illinois Biometric Information Privacy Act (BIPA), including a recent $228 million verdict.

Business Insurance says rates have dropped in response to increased capacity. From a claims perspective, however, this remains a challenging sector – and a troubled economy could make it worse. Allianz Global Corporate & Specialty says economic downturns typically increase the risk of D&O claims.


Last but not least, we have the cyber insurance market. Cyber insurance rates have skyrocketed – CIAB says 63% of respondents reported an increase in cyber claims in the third quarter of 2022.

According to Property Casualty 360, claims related to ransomware appear to have dropped. This is a welcome reversal of the ransomware surges seen recently. However, it does not mean cyber claims are no longer a threat. In fact, cyber claims are still increasing, but social engineering claims may now be the bigger threat.

Insurance losses are up, profits are down, and insurers need to find new ways to control losses and tame their combined ratios. See why a better claims process is the solution.

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