I don’t know about you, but 2020 has been perhaps the most professionally and personally challenging year that I have dealt with during my lifetime. For many, the challenges stemming from COVID-related issues on the home front were only multiplied as we wrestled with pandemic-related issues associated with serving insureds and keeping business on track.
If you are like me, one of the most significant issues was concern for the health of employees and co-workers and their families. Once past that hurdle (are we past that hurdle yet?), we were faced with a list of pressing questions: How will this impact our business? How do I morph from pre-pandemic, pandemic, and then post-pandemic operations? Will insureds be able to pay their premiums? Can we afford to carry any of them? The list goes on.
We faced all of those challenges within Pennsylvania Lumbermens Mutual, and I am pleased to say that our loyal and dedicated team carried on, rising each day with the hope and desire to fulfill their commitments to their families, PLM, our customers, our claimants and our broker partners.
We were luckier than most when we and the majority of our insureds were declared “essential businesses” when many other businesses closed and sent their employees home. At PLM, we achieved record growth in 2020 with our premium rising to $287 million. Our policyholder surplus, after a dramatic drop back in March due to the pandemic, clawed its way back. Receivables soared as we made the decision to work with our customers who lost cash flow, and expenses dropped as we froze staffing, reduced travel and reacted to the cancellation of the 100 trade shows that we normally attend. Despite those cancellations, we are pleased to say that we maintained a solid level of support to the trade associations to which PLM and our policyholders have been members for years. Feedback on the claims front suggested that we met or exceeded expectations of our policyholders and claimants despite record-breaking wildfires, straight line winds (derechos), winter storms and four hurricanes that made landfall.
As most courts throughout the country were shut down, many civil trials did not proceed. However, we found a willingness by plaintiffs and their attorneys to embrace mediation or straight negotiation, or other alternative dispute methodologies that we hope will lead to mutually beneficial settlements.
While initially constricted in the early months of the COVID pandemic, loss control and field visits gained traction later in the year as we were once again out and about providing risk management and loss control services at pre-pandemic levels. We made up for lost time. We piloted and rolled out a self-service risk management and loss control program for smaller insureds known as Anytime Risk Management (ARM). So far, this tool has been met with very favorable feedback from our policyholders, and we expect to expand this service substantially.
Underwriting profitability stabilized and investment income did not slip as far as we expected as we moved to address volatility in the equity markets and dramatically falling interest rates. Unfortunately, many in the insurance world did not experience the success that we did, and 2020 caused a great deal of financial pain not only for our competitors, but for many of the reinsurers on which we depend. A number of direct competitors threw their hands up and exited the niche, non-renewing books of business. That meant we saw a tremendous surge in last minute submission activity as businesses and their brokers sought out PLM.
After enduring several difficult years, the reinsurance marketplace stiffened dramatically. Reinsurance prices surged in the property arena, due to the aforementioned weather patterns and the economic woes associated with COVID-19 which greatly impacted businesses outside the lumber niche. Double-digit increases were the norm, and frankly, those increases were a welcome relief from what is going on in the casualty reinsurance marketplace, which supports general liability, workers’ compensation, commercial auto, and umbrella business. Reinsurers worldwide have withdrawn their support or interest in the American casualty insurance marketplace, so capacity to write higher limit umbrellas has dropped and pricing has soared.
Well into the year, two of the world’s largest reinsurers indicated they were going to restrict availability in the United States and reduce their premium base, in both cases, by over $1 billion. By the end of the year, the ability to find large umbrella limits evaporated and pricing took off for coverage that remained. Insurance companies, and insureds, found themselves paying twice as much for umbrella capacity and only began to get 50 percent of the coverage limit from the prior year. Commercial auto continued to produce poor results throughout the insurance industry, and particularly in the wood segment, which depends so heavily on trucks, tough delivery locations, and too many untrained and inexperienced drivers.
So, where do we go from here? We will know better once the dust settles from December 31 and January 1 renewals, but I would speculate that pricing will be up in the property arena for insureds, and up significantly in the commercial auto and umbrella lines with capacity being reduced dramatically. The days of $10, $15 and $25 million umbrellas being provided easily and competitively are behind us. Social inflation and awards that juries are willing to give today have damaged the companies that provide these limits too easily. Further, there is a frailty in the market as it has been forced to react to unheard of and unforeseen settlements that exceed any levels the market had anticipated.
PLM will continue to focus on our business with a goal of surpassing $300 million of written premium while generating at least $28 million of new premium. We expect the number of our new accounts to exceed 600, and we expect our policyholder retention to be excellent, reflecting our commitment and dedication to providing a competitive market for wood businesses throughout the United
I want to thank the brokers and customers that we continue to do business with and invite all those that have not yet worked with us to consider PLM for their upcoming renewals.
In closing, a word about our Agency, ABM, which we launched in early 2020 in an effort to provide a workers’ compensation market for the wood niche, which will eventually expand to other lines of coverage. This first year, we were successful in securing workers’ compensation coverage for just over 100 of our insureds and just over $2 million of premium. While a little lighter than expected, we believe we have laid the groundwork for future expansion. We have noticed that submission hit ratios and bound accounts have been increasing almost monthly over the last four or five months as the concept has taken hold. We have access to the workers’ compensation market for just about any type of wood account. If you are interested in seeing a workers’ compensation quote through PLM, simply include a workers’ compensation application with your submission. You can contact our ABM team with any questions: Angelo Ganguzza – firstname.lastname@example.org or (267) 825-9046, Janice Fisher – email@example.com or (317) 875-3779 or Genevieve Ventiere – firstname.lastname@example.org or (267) 825-9254. Further, we are now actively working to expand ABM’s capabilities beyond workers compensation. You can expect a variety of announcements to flow throughout 2021 as our desire to be a sole solution for both insureds and brokers that operate in the wood niche begins to take form.