Premium Spikes, Legal Battles & ITV Gaps: What’s Roiling P&C Insurance Now
From sweeping tariffs to lawsuits shaking California’s market, April has been a turning point for commercial property and casualty insurance. Brokers are navigating a web of rising costs, legal exposure, and regulatory shifts. Here’s what you need to know—and how to prepare your clients.
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1: Tariffs Are Driving Up Commercial Insurance Costs
On April 3, 2025, the U.S. announced a 10% universal import tariff and a 25% duty on automobiles, auto parts, and key construction and manufacturing materials—a move with immediate consequences for commercial insurance lines.
“Steel, aluminum, and electrical components are up as much as 25%,” notes The MJ Companies, impacting claims severity and increasing premiums across property and auto portfolios.
Insurers are adjusting premiums and policy language to account for:
- Rising repair and rebuild costs on commercial properties
- Parts shortages leading to higher downtime and business interruption claims
- Greater exposure in logistics-heavy sectors, including manufacturing and retail
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2: Premiums Spike, Underwriting Tightens
Tariff-driven claims costs are converging with broader inflationary pressures, resulting in climbing commercial and home insurance premiums.
According to NAIC data via PropertyCasualty360,
Direct written premiums for U.S. home insurance surged to $151.95 billion in 2024, up 13.7% from the previous year.
Across commercial lines:
- Auto and property carriers are tightening underwriting, especially for clients dependent on global supply chains
- Business interruption premiums are climbing as insurers reassess how vulnerable clients are to logistics and material delays
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3: California Insurers Hit with Lawsuit Over FAIR Plan ‘Collusion’
In a major development, California property owners have filed a lawsuit against State Farm and other top carriers, alleging anti-competitive behavior that pushed homeowners into the state's last-resort FAIR Plan following the January wildfires.
The FAIR Plan is now on the hook for $4 billion in wildfire claims and has assessed $1 billion from private insurers, which could lead to surcharges on all homeowners across the state.
If regulators approve, insurers may recoup up to $500 million of that assessment via rate hikes—even for those outside fire-prone regions.
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4: Insurance-to-Value (ITV) and Underinsurance Risks Mount
One growing concern: volatile material prices are distorting property valuations, making it difficult for policyholders to accurately estimate replacement costs.
- Outdated ITV estimates can result in underinsurance, exposing clients to out-of-pocket costs during a loss.
- Brokers should initiate valuation reviews and cost updates ahead of renewals to mitigate these risks.
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5: Regulatory Activity & Surplus Lines Expansion
Several states have issued new regulatory requirements, reflecting a broader effort to tighten compliance amid increased market volatility:
- Kentucky: Expanded its definition of fraud and increased penalties across P&C lines
- Missouri: Now requires updated catastrophe coordination contacts with the Department of Insurance
- Delaware and Illinois: Issued bulletins clarifying fraud-reporting obligations
Meanwhile, non-admitted/surplus lines insurers continue to grow in importance. With traditional markets tightening, these carriers are capturing a larger share of risk.
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6: Broker Talent Wars & Industry Outlook
Brokerages are moving aggressively to build up expertise in key segments. In April:
- Allianz Commercial added five construction specialists in the U.S.
- IMA hired a former Lockton exec to lead its property practice
At the macro level, aging demographics are forecasted to reshape insurance strategy over the next 25 years:
- A projected 4.4% CAGR for commercial lines and 3.3% for personal lines through 2050
- A pivot toward prevention-driven, tech-enabled underwriting models
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What This Means for Brokers
These developments point to a few key takeaways:
- Tariff ripple effects are just beginning—prepare clients for longer claims cycles, higher BI risks, and adjusted rates
- Legal scrutiny and wildfire exposure in California could affect the entire state’s rate structure
- Underinsurance is a growing threat—encourage updated valuations and proactive coverage reviews
- Regulatory and talent shifts suggest a market realignment that rewards specialization, speed, and adaptability
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