General Liability Insurance in 2024: Navigating a Complex Landscape

While some aspects of General Liability Insurance have largely turned a corner from a prolonged hard market, the outlook in other areas looks much less cheery. Overall, the market has finally improved after several challenging years, offering signs of stabilization. ?

For many industries, we’re seeing rate increases on the lower side — below 10%. Not exactly a cause for celebration, but a far cry from the steep hikes that characterized the market in recent years.?

As reported in Alera Group’s recently released 2024 Property and Casualty Market Update, “Price increases remain in the 4%-5% range. The average rate increase at the end of Q2 was 5.1% compared to 5.2% year to date. Businesses perceived as higher-risk will see higher rate increases and coverage limitations.”?

In some sectors, certain businesses might still see their rates jump by as much as 20%, depending on the insured’s area of specialization and risk profile.?

Part of the reason for this is a movement toward more litigation, often fueled by venture capital companies backing law firms that specialize in liability lawsuits.?

Nevertheless, the overall trend is positive, showing?an unmistakable shift toward more manageable conditions, including a flattening of rates.?

The hot spots: where insurance gets tougher?

Not all industries are created equal when it comes to insurance risk, and some sectors are feeling the pinch more than others. These include:?

• Affordable housing: This sector is facing what can be called a “crisis situation.” Unlike more expensive high-rises that can increase the rent to cover higher costs, affordable housing providers are in a tight spot. They’re getting higher insurance bills, but they can’t easily pass those costs on to tenants. Indeed, insurance premiums for affordable housing in New York are increasing an average of 26% annually, according to a study by the New York Housing Conference. The average cost to insure an affordable apartment in 2024 was $1,770, a 103% increase from the $869 the same apartment cost just four years earlier. ?
• Hospitality: Hotels, restaurants and other hospitality businesses are still seeing hefty rate increases in certain areas of the country. Causes include uncertainty about high-dollar verdicts, as well as natural catastrophe claims in the Property Insurance market. ?
• Construction: Parts of the construction industry are also dealing with above-average rate hikes. While the COVID-19 pandemic may largely be in the rearview mirror, the industry is still hit by persistent project delays, supply chain disruptions and soaring material costs.?Extreme weather events related to climate conditions, such as wildfires, are also having an effect; 55,571 wildfires burned 2.6 million acres across the United States in 2023, according to a study by the National Oceanic and Atmospheric Administration. These types of environmental factors have significantly influenced the rising costs of construction projects, which directly impact insurance costs.?

If you’re in one of these fields, you might be in for some tough conversations with your insurance broker.?

Living in the litigation nation?

Meanwhile, regardless of the industry a business is in, one of the biggest factors driving up insurance costs is an increasingly lawsuit-happy society.??

This increase in litigation can at least partially be attributed to a whole ecosystem of venture-capital-backed law firms that are aggressively advertising their services. You’ve probably seen the billboards and those late-night TV commercials: "Been in a wreck? Call us!"??

This isn’t just annoying background noise; it’s having a real impact on insurance rates. Why? Because more lawsuits mean more claims, and more claims mean higher costs for insurance carriers. In the end, the cost is passed on to the businesses they insure. ?

When TikTok meets torts?

The rise of social media and digital advertising also plays a role in this trend. Given the popularity of platforms like Facebook, X and TikTok, it’s easier than ever for law firms to reach potential clients, which means more people are being encouraged to file claims or lawsuits.?

This digital shift isn’t just changing how lawyers advertise — it’s changing how people think about accidents and injuries. That fender bender that people might have once resolved amicably? Now it’s a potential payday, thanks to the lawyer ad that popped up in a Facebook feed.?

Finding coverage: It’s there, but it’ll cost you?

Despite all these challenges, most businesses can still find the coverage they need. Capacity in the General Liability market is definitely in a better place than it was a year ago.? ?

As we previously reported in the section of our?2024 Property and Casualty Market Outlook?devoted to the manufacturing industry, “Many carriers are willing to provide up to $2 million in limits per risk for primary and an umbrella to complete the first $5 million of required limits.”?

But don’t expect any bargains. Insurance companies are being much more careful about who they insure and at what price.??

Which brings us to a new paradigm in underwriting. Gone are the days when insurance carriers would glance at your application and say, "Eh, looks good enough." Now, underwriters are putting every business under the microscope. which some believe is a welcome turn of events. That’s not necessarily a bad thing, as businesses with a strong risk portfolio typically receive the most favorable terms.?

What this means for your business?

So, what’s the takeaway from all this? Here are a few key points to keep in mind.?

• Budget for increases. While we’re not seeing the sky-high rate hikes of recent years, you should still plan for your insurance costs to go up. Aim for that 5%-9% range, but be prepared for more if you’re in a high-risk industry.?
• Risk management is key. With insurers scrutinizing every detail, now’s the time to double down on your risk management efforts. The safer your business, the better your chances of scoring favorable rates.?
• Shop around. With the market stabilizing, it might be worth getting quotes from multiple insurance carriers. Talk to a reliable broker to ensure you find the best option for you.?
• Stay informed. Keep an eye on trends in your industry. Are there new types of lawsuits popping up? New regulations that could affect your risk profile? The more you know, the better prepared you’ll be.?

Cautious optimism??

As we navigate the remainder of 2024, our reasons for cautious optimism could shift without notice. A major court decision, a shift in the economy — even a series of high-profile lawsuits — could shake things up again.??

In this complex landscape, knowledge really is power. The more you understand these trends and how they affect your business, the better equipped you’ll be to make smart decisions about your coverage.??

Reading Alera Group’s Market Update — a helpful bridge between distribution of the more extensive Property and Casualty Market Outlook we publish each December — is a good place to start.?

GET THE UPDATE?

About the author?

John Beauregard , CIC, LIA?| Executive Vice President?| Alera Group, Inc.

A Certified Insurance Counselor (CIC) and Licensed Insurance Adviser (LIA), John Beauregard works with clients to help them secure what they’ve invested in and built, evaluating the risks they face, developing customized policies?to protect against those risks and creating comprehensive risk-management programs designed to save them money by reducing premiums.??