Over the last 18 months, the professional and financial industries have experienced compounding pressure in the insurance market. An immense amount of social change occurred during 2020, and as a result, insurance rates for financial companies increased 28% from 2019. (Marsh, Global Insurance Index 2020 Q4). Let’s talk about why.

The Great Recession continues to cast a shadow

Financial institution insurance is still adjusting to more than a decade of increased risk exposures and claims activity from the financial crisis of 2008. Systemic losses, like those experienced from a severe economic downturn, can lead to continued claims across companies, geographies, and many different lines of insurance. Couple that with the challenges that 2020 presented, and we are left with a highly “tightened” insurance marketplace.

With increased complaints filed against banks and asset managers, regulatory enforcement actions have intensified for all types of financial institutions. Congress and the oversight agencies, such as the SEC and CFPB, continue to add new requirements and procedures, and their investigations have ramped up.

Social Change and the Financial Institution

The call for social progression, like what we experienced in 2020, has continued to compound since the events of 2008. This backdrop, in which wealth inequality has been a major focus, has been a driving force for change. Companies have added new compliance rules, many based on Environmental, Social, and Governance (ESG) requirements. Additionally, client legal actions and recent jury behaviors have led to sizable payouts from insurance companies across the country.  

The turbulent nature of the last 10-15 years has spawned many positive developments but also has led to an increase in financial crimes – and cyber-related attacks have led the way. In the first full month of the 2020 pandemic, the FBI reported a 300% increase in cyber-crimes. In March alone, ransomware attacks increased by 148%, and the average cost of those attacks grew to $283,000. In April 2020, Google blocked more than 18 million COVID-19 related phishing emails. (Munich RE: Cyber Insurance Risk and Trends, 1/2021)

Stay on top of an ever-changing landscape

The full economic impact of such drastic societal and economic changes in a relatively short period has yet to be fully quantified. We have, however, learned from past economic crises that insurance claims rise in times of hardship, change, and uncertainty.

Managing ever-evolving business operations will take commitment and vigilance from financial institution leaders. Leaders must be willing to review and implement updated procedures, add strengthened network security functions, keep staff apprised of changes, and rely on trusted insurance advisors to help manage the risk of new exposures. 

Insurance is a critical component to protecting your business and personnel, and having the proper coverage is non-negotiable in today’s rapidly changing market. But remember, the first step in controlling this inflationary pressure on your balance sheets begins with you.

Ryan J. Beal, CLCS is the director of financial services and commercial risk advisor for Overmyer Hall Associates. Connect with Ryan on LinkedIn here.

About Overmyer Hall Associates

Overmyer Hall Associates is one of the fastest growing agencies in the country, quickly becoming one of the largest property and casualty insurance agencies in Central Ohio. Overmyer Hall Associates provides clients with insurance and risk management, specializing in Business Insurance, Surety Bonding, and Home & Auto Insurance. Since its founding in 2011, the firm has been awarded Columbus Business First’s "Fast 50" and "Best Places to Work" awards, the IIABA’s “Best Practices Agency” recognition, Columbus CEO Magazine’s “Best Insurance Broker” and the Columbus Young Professionals Club’s “Wonderful Workplace for Young Professionals” award. www.oh-ins.com