Market outlook: Softer with some hard spots

CNY Business Journal (1996+), Mar 11, 2005 by McChesney, Charles

SYRACUSE - Three years after falling, stock-market prices and the Sept. 11 terrorist attacks made property and casualty insurance both more expensive and harder to obtain, insurance agents are reporting an easing of conditions.

Since the Sept. 11 attacks, property insurance rose "100, 200, 300 percent," says Robert J. Connor, managing director for Marsh Upstate New York, based in Syracuse. But, he says, "over the last year we are starting to see reductions."

Price declines may be most visible in personal automobile insurance where, agents say, many carriers are filing for rate decreases. However, for those buying insurance for their businesses, agents say the situation is mixed.

Robert K. Wallace, senior vice president and head of the commercial department for Eastern Shore Associates in Fulton, says that while in the past the market "went hard across the board," this time, "it's very specific on the hard and soft."

He points to those seeking to insure medical-office buildings as enjoying a soft market. Such buildings "are seeing decreases of 10 to 15 percent over last year," he says.

Meanwhile, contractors in the state continue to face insurance difficulties that agents blame on the state's unique liability laws. Under Section 240/241, contractors, site owners, and builders face absolute liability when an employee is injured on the job. This inability to deflect even part of the responsibility when a worker is injured has driven up insurance costs and caused many insurance companies to stop serving the market, agents say.

Connor notes that there have been "no new entries" by insurance companies seeking to serve the contractor market. "It is still a limited market, especially for small builders, residential builders in New York State," he says.

"It's a real problem," Connor says, "that market has not loosened up." Prices for insurance remain high or "more importantly [coverage is] not available."

But for the largest contractors, the news is getting better, says Wallace. "The real large ones are no longer seeing doubledigit increases," he says.

Agents agree that insurance companies are now focused on certain sectors where experience has been good. "They are picking classes where there's very little exposure," says Wallace, whose agency has offices from the shores of Lake Ontario to Camden. "Unfortunately, we've got a lot of carriers looking for the same thing."

"These things go in cycles," says Richard Villari, president of RMSCO in Liverpool.

"For the most part we do self-insurance," he explains. Some clients choose to get "stop-loss or excess-loss" coverage to augment their self-insurance because, he says, while they may be "very comfortable with self funding," they "want to be more comfortable."

"We have not seen any difficulty in placing that," says Villari.

One area that remains in a hard market, according to Wallace, is "nonfranchise automobile dealers," better known as used-car dealers. Wallace says that insurance losses ranging from those tied to cars with dealer plates to "slips and falls" have made insuring such dealers more difficult. He notes that he knows of a "very good, legitimate nonfranchise dealer" that is having trouble in the current insurance market. "As a class," he says, "it has become unprofitable.

Additionally, Wallace says high-rise type buildings are "slipping into the harder market more than before." And, he says, convenience stores are not seeing the market soften. Indeed, as with contractors, "the prices are actually still going up."

Wallace ads that the 240/241 issue doesn't just affect contractors, but only business owners who may be doing simple modifications.

Connor says that loss experience plays a big part in insurance right now. If a business has had "adverse loss experience, we're still not seeing reductions," he says. He notes that as premiums go up, as they have for the past few years, the ratios of claims to premiums can shift, even when losses are experienced. As that happens customers should see premiums "starting to give a little bit."

Wallace says now might not be a bad time to ask your insurance agent if "maybe this is a good year for us to look around a little bit?"

"It is certainly worth asking, is this a good time to shop?" says Wallace.