Liability Insurance Rate Increases Coming?

Liability insurance companies make money in two major ways.  First, they make money on the insurance product – doing good underwriting, setting appropriate rates, and properly managing claims.  Second, insurance companies make money holding today’s premiums to pay tomorrow’s claims (and claim expenses).  That money is invested, and the investment income and capital gains on the investments are a big part of the net income of insurance companies.

Now, the stock market is in the toilet and the bond market is more complicated than ever.  Short-term cash yields virtually no interest, and Treasuries have a very reduced yield.  It is reasonable to assume that investment income is down, way down.

So, will rates be increasing?  Yes.  Will lawyers and juries be blamed?  Of course.

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