Insurance Rates for the Tech Industry: 2022 Trends Report | woodruff sawyer

In this report, we identify emerging trends that are impacting insurance for the technology sector, with a specific examination of the areas of coverage for property, general liability and workers’ compensation ( WC). The big takeaway? Property damage rates and WC rates remained stable, while general liability rates fell slightly over the last 12 months.

The pricing environment in 2021

In the first nine months of 2021, policyholders received rate reductions on general liability and workers’ compensation renewals. For real estate, on the other hand, rate hikes remain the norm.

As we have noted in previous reports, general market conditions for technology insureds remain much better than in other industries. The main reason is that the technology industry is still very profitable for insurers. Most tech companies have very few losses, so insurers can continue to offer them discounted rates.

Now let’s continue the discussion of market conditions broken down by major lines of coverage.

Property Insurance: The Tale of Two Markets Continues

Renewal data shows rates continue to rise, but we see a different story when property insurance is bundled with other coverage versus a monoline policy.

Let’s first look at trends in real estate rates as a whole. In Q3 2021, the median real estate rate remained the same at 5% in Q4 2020. This is a continuation of the direction we have seen since 2019. This trend started with a few years of poor claims experience due to to natural disasters and continued in 2021 with losses related to COVID-19 as well as damages due to civil unrest.

As in 2020, there is still a dichotomy in market conditions between mid-sized companies bundling ownership and liability programs and large companies buying ownership coverage as a stand-alone investment.

For example, we find that the median increase for all technology policyholders is 5%, but for those valued over $200 million, the median increase was much larger at 10%. Companies that have more than $200 million in total insured values ​​are more likely to have a self-ownership program.

When bundled, insurers can assess a company’s risks in a portfolio (essentially by spreading the risk) and rates are generally lower. The table below illustrates the difference in rates between policyholders with ownership schedules of different sizes (i.e. values).

Monoline programs have the advantage of offering wider coverage, but this usually comes with higher rates. This is also partly due to the fact that insurance companies have increased their monitoring of property risks associated with monoline coverage.

General civil liability: the soft market is back

About a year ago, we started seeing insurers get rate increases on general liability programs. This new trend follows years of very soft markets. Unlike property rate increases which were primarily driven by losses, here insurers were simply pushing for market-based rate increases and were able to get them.

We are happy to report that this trend appears to have been short-lived. Beginning in the first quarter of 2021, general liability rates trended from modest increases to modest declines and remained there for the first nine months of 2021. Rates also fell for all other income categories and seem to be holding -numerically.

We are convinced that this new rate trend has been carried by a few insurers who had not previously been very aggressive or interested in the technological business. Their push to write new tech business has helped drive down rates as incumbent insurers have had to lower their rates to stay competitive. We expect this trend to continue in 2022.

Workmen’s compensation: very stable market

In recent years, the WC market has been one of the most stable for policyholders in all sectors. This stability also applies to tech policyholders. As you can see from the chart below, since the start of 2020 there has only been one quarter where the median rate change was NOT a reduction, and even that was only a slight increase.

Given the competition from insurers for this business and the very favorable loss ratio for most technology insureds on Workers’ Compensation, we expect the trend of low to mid-single digit rate reductions to continue. .

The outlook for insurance rates in technology

In 2022, it is likely that we will continue to see property and general liability rates remain the same as those that have occurred throughout 2021, at least in the first half of the year. Beyond that, it is too early to tell whether the market will continue to stabilize or continue to rise. For WC rates, once we move forward into 2022, we’ll have a clearer picture of how the computer programming and software development payroll cap has affected rates. We anticipate that there will continue to be low single-digit rate cuts.

In 2022, tech companies are in a prime position to negotiate lower rates. Insurers are under pressure to offer better rates in order to compete with new entrants. With historically low rates, you’re in control during the renewal period. Consider negotiating multi-year deals at a pace that works for you.

About data

Our data reflects information on more than 100 technology company renewals for which Woodruff Sawyer is the broker. The vast majority of survey respondents are “medium-sized” or commercial, and their P&C insurance programs are written on a global basis.

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