Welcome to iLeads Insurance Market Minute, where we bring you the latest, most relevant news regarding the insurance market. Last week you were reading Business Insurance Extends Nominations for US Insurance Awards. This week we’re bringing you:
Commercial insurance rate increases moderate*
U.S. commercial insurance prices increased again in the first quarter of 2021, up by just under 8% compared with a year ago, according to Willis Towers Watson PLC’s commercial lines insurance pricing survey released Tuesday.
However, the aggregate commercial price increase moderated from a 10% increase in the fourth quarter of 2020.
The rate of price increases for nearly all lines was lower than those reported in each of the previous three quarters, Willis said.
Excess/umbrella liability and directors and officers liability insurance saw the largest price increases, but also reported the largest decrease compared with the fourth quarter of 2020, according to the survey.
Commercial auto saw near or above double-digit price increases for the 14th consecutive quarter, while property coverage price also saw double-digit increases for the eighth consecutive quarter, Willis said in the report.
The survey continued to indicate a slight price reduction for workers compensation, in contrast to nearly all other lines surveyed.
By account size, reported price changes were more muted for small commercial accounts, slightly below double digits for mid-market accounts and above double digits for large accounts and specialty lines, according to the report.
Advisors say life insurance may help combat Biden’s proposed tax increase*
President Joe Biden wants to raise taxes on inheritances to help fund his lofty infrastructure plans.
The proposals call for taxing capital gains on inherited property at death, treating the transfer like a sale. Heirs may exclude the first $1 million of gains ($2.5 million for married couples).
This new tax hike is separate from estate taxes on transfers of more than $11.7 million, unchanged since former President Donald Trump’s 2017 tax overhaul.
The administration is also calling to hike the top capital gains tax rate to 39.6%. The highest earners may pay as much as 43.4% on long-term capital gains, including the 3.8% tax for Obamacare.
“It’s flipping estate plans upside down,” said Dan Herron, a San Luis Obispo, California-based certified financial planner and certified public accountant with Elemental Wealth Advisors.
Currently, heirs defer taxes on inherited property until they sell it. They also receive a so-called step up in basis, adjusting the property’s purchase price to the value on the date of death.
But if Biden’s plans go through, heirs may soon face hefty tax bills at death.
If their inherited property growth exceeds $1 million, they may owe as much as 43.4% long-term capital gains taxes, not including state or local levies.
“It’s probably the No. 1 risk our clients are facing right now,” said Rob Hazard, an estate planning attorney and certified public accountant at Gullett Sanford Robinson & Martin in Nashville, Tennessee.
Estate planning with life insurance
As Congress wrestles over Biden’s agenda, some advisors have been proactive with clients, exploring ways to lessen the possible impact. If taxes rise, some clients may buy more life insurance to cover the bills, said Herron.
Clients with more than $11.7 million, the estate tax exemption for 2021, may buy a so-called irrevocable life insurance trust, using the policy to pay taxes at death. But those with fewer assets may have life insurance without a trust, he said.
Bill allowing workers to file stress claims advances*
The New York Senate on Monday passed legislation that would open the door for all workers who experience severe stress on the job to file a workers compensation claim for mental injuries associated with the stress.
S.B. 6373, which passed the Senate in a 44-19 vote, would modify current law to allow workers who sustain a mental injury as a result of “extraordinary work-related stress” to file a workers comp claim. The bill also states that the New York State Workers Compensation Board “may not disallow the claim upon a factual finding that the stress was not greater than that which usually occurs in the normal work environment.”
Currently, the law only applies to police officers, firefighters, emergency medical technicians and dispatchers who suffer from mental injuries due to extraordinary work stress.
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