Addressing transparency between
providers and agents reduces client disillusion
[W]e must provide some data to consumers to justify
the state of the market without giving away any trade secrets or violating federal law.
By Cheryl Koch, CPCU, ARM, AAI, ACSR, AFIS, and Mary Belka, CPCU, ARM, ARe, RPLU, CIC
Memo to our insurance company partners: We’ll carry your water, but you have to help by putting something in the bucket!
So far, agents and brokers are weathering the storm brought on by the most recent hard market. In the beginning, as property rates soared, it was fairly easy to explain to policyholders that an increase in billion-dollar disasters was driving carriers to seek “more rate” when it came to insuring property. In fact, there is an abundance of data that shows several weather-related trends that have had a significant impact on the cost of property insurance:
- Between 1980 and 2025, there were 426 billion-dollar disasters. With 45 years of data, that would average about 10 events per year. But notably, 2025 alone accounted for 23 of these events.
- In the 1980s, billion-dollar disasters occurred about every 82 days. In 2025, the rate had accelerated to every 19 days.
- In terms of average losses per year during that same time period, there was an increase from an average of $22 billion in the 1980s to nearly $150 billion during the most recent five years.
Armed with information such as this, most consumers can see that, for whatever reason, something is happening that is causing more and more costly weather-related events for which insurance companies are expected to pay. Just this year to date, we’ve seen flooding in Hawaii, unprecedented spring wildfires in Nebraska, record cold—and snow—in the East, and record heat in the West.
Despite wide disagreement as to what is causing all of these events, there is little dispute about whether or not they are happening. Therefore, when asked the simple question, “Why is my property insurance renewal so much more than last year?” agents had little problem pointing to the primary culprit. At no point was the answer to that question, “Because the insurance company needs more money.”
We recently attended a conference that consisted mostly of buyers of insurance, and one of the main purposes of that event was to answer questions about the state of the insurance marketplace. Consumers are clearly concerned and they believe that they are being kept in the dark. We discussed reinsurance with them, and how the arrangement between their insurers and their reinsurance companies impacted the ultimate cost of insurance.
This concept was new to them; they had no idea. At one point, a gentleman bravely said, “I guess I never thought about it, but I should want my insurance company to make a profit.” Out of the mouths of babes. Clearly, agents must do a better job in helping the insurance-buying public to understand the basic financial components underpinning their insurance policies.
Fast forward across an overview of the past couple of years. We somewhat seamlessly slid from a hard property market into a challenging market for general and professional liability, excess and umbrella and, especially, auto liability. High double-digit price increases have been the norm, coupled with reduced ability to obtain needed limits.
When the casualty market hardens, it almost always results in a reduction in an underwriter’s (and a company’s) ability to write high limits, and whatever limits are available are going to cost more. But unlike the explanation for the need for price increases in property insurance, companies seem loathe to arm their agents with the information they need to explain this liability insurance increased-cost trend to their clients.
Companies seem to have a group of excuses at the ready as to why they can’t divulge this information to their agents:
- It’s proprietary information
- It would violate antitrust laws
- It’s part of our super-secret algorithm
- We could tell you, but then we’d have to kill you
When asked by their clients why the steep increase in their insurance renewal, often despite a good loss ratio, agents are left with, “Because the insurance company needs more money.”
Agents have always accepted their role in the insurance transaction, which often puts them squarely between the proverbial rock and the hard place. But answers like that provided to consumers just aren’t good enough, especially in the information age. If we can’t rely on companies to provide the reasoning behind skyrocketing rate increases for certain lines of business, we’ll have to create our own talking points.
We offer the following as food for thought and as a way of helping our clients make sense of the chaos we are seeing in some lines of business.
- Social inflation. Everyone is talking about it—just not out loud and in the right places. This term, while not new, has become a catch-all for everything that is ailing our civil justice system at the moment. It involves the so-called “billboard effect,” where it’s difficult to drive five miles without seeing literally dozens of advertisements for attorney representation. It involves “nuclear verdicts” that have already pierced the billion-dollar ceiling.
Then there’s third-party litigation funding, where someone with means invests in someone else’s litigation, even though they themselves are not a party to the action. Currently, this does not even need to be disclosed to the other side in most states. Some very high-stakes cases are part of this trend. - Need for improvement of insurance industry public relations. Insurance is the industry everyone loves to hate. No one likes insurance or the companies that provide it. Sure, they love and respect their agent, but not all of those other bad actors who are a part of the industry. You know, the “fat cats” who are inflating the cost of insurance just so they can get enormous bonuses, private jets, and fancy corner offices.
Little do consumers know how little profit most insurers see in a given year from underwriting operations. Companies and agents alike must leverage all opportunities to dispel these tired—and incorrect—characterizations. - Shifting attitudes. At one time, the amount of damages awarded to a plaintiff in a civil action had some, albeit loose, relationship to the actual economic damage that was suffered. But no more. Jurors and the general public are increasingly likely to want to send messages to people that their behavior is in need of change, and they do that using special, general, and punitive damage awards that are well beyond any amount of insurance that a reasonable person or organization would have purchased.
What does that add up to? In some cases, windfalls to the plaintiff and bankruptcy court for the defendant.
In one example, the case of Georgia CVS Pharmacy LLC v. Carmichael, an appellate court in Georgia recently upheld a 2022 decision finding CVS Pharmacy 95% negligent for a shooting incident that took place in their parking lot—unrelated to the operation of their own business. A shooting victim had arranged online to meet at the parking lot as a “safe place” to sell an item.
The appellate court’s upholding of this $43 million “nuclear verdict” has had a chilling effect as insurance companies ponder the pricing and availability of a previously fairly straight-forward coverage—premises liability—for businesses in “high crime” locations. The jury sent a clear message that there is an increased burden on property owners to adhere to a higher standard of care for the security of their customers in these areas. - Capping liability settlements. Limiting settlements and/or defense costs can occur at the policy level with internal sub-limits. We are seeing this with ransomware claims under cyber liability policies. What about the recent social media addiction awards?
Capping settlements has also been done from time to time legislatively, as states attempt to maintain affordability and availability of certain types of “essential” coverage. Medical malpractice comes to mind. When juries attempt to “solve” social problems with “nuclear verdicts,” they often seem oblivious to the source of these funds—the policyholders who pay the premiums.
Nuclear verdicts are a symptom, not a cure. After a few other worldly verdicts are paid, the simplest cure becomes lack of availability—no coverage at any price. Finding ways to become part of the conversation in keeping settlements within the stratosphere is harder—but better for all parties in the long run.
Finding answers together
We understand completely why insurance companies shy away from some of these topics, even with their own agents. They worry that to advocate for a change in direction might seem self-serving, and they are probably right. But we must provide some data to consumers to justify the state of the market without giving away any trade secrets or violating federal law.
We have to involve companies and clients alike when disturbing trends emerge. Being on the forefront to help our industry to meet current and future challenges takes a village!
So once again, to our company partners—and we truly do value our relationships with you—giving agents transparency and something to offer by way of explanation and potential solutions to our mutual clients regarding price increases, benefits us all.
The authors
Cheryl Koch is the owner of Agency Management Resource Group, a California firm providing training, education and consulting to producers, account managers and owners of independent agencies. She has a BA in Economics from UCLA and an MBA from Sacramento State University. She has also earned several insurance professional designations: CPCU, CIC, ARM, AAI, AAI-M, API, AIS, AAM, AIM, ARP, AINS, ACSR, AFIS, and MLIS.
Mary M. Belka is owner and CEO of Eisenhart Consulting Group, Inc., providing management and operations consulting to the insurance industry. She also is an endorsed agency E&O auditor for Swiss Re/Westport. A graduate of the University of Nebraska, Mary holds the CPCU, ARM, ARe, RPLU, CIC, and CPIW designations.
