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Commercial Insurance Prices Increase for the Ninth Straight Quarter


Posted on 11 Jun 2013 by Neilson

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Towers WatsonInsurance carriers continue to report increases in commercial insurance prices, almost 7% in aggregate during the first quarter of 2013, according to the Commercial Lines Insurance Pricing Survey (CLIPS) conducted by Towers Watson, a global professional services company. The results of the current edition of this survey mark over two years of consecutive overall price increases and the fifth quarter of increases across every one of the lines surveyed. The survey compared pricing for coverage purchased during the first quarter of 2013 to that of the same quarter in 2012 as reported by participating carriers.

Overall price changes are consistent with the results of the two prior surveys, with pricing for each line of business increasing by at least 4%. Among the survey's key takeaways:

  • Even with evidence of a slight deceleration in price gains, workers compensation and employment practices liability showed the largest price increases.
  • Pricing increases for professional liability saw a moderate acceleration, which in turn pushed similar increases in aggregate specialty line price indicators.
  • Small account pricing gains accelerated slightly, almost to the level of large accounts, for which price increases moderated during the first quarter. Mid-market account price changes remained relatively stable.
  • Insureds purchasing property coverage in the first quarter saw price increases in the mid-single digits.

"Interestingly, pricing for property grew only modestly, with less movement than might have been expected considering losses related to Hurricane Sandy," said Tom Hettinger, Towers Watson's Property & Casualty sales and practice leader for the Americas. Hettinger also noted, "That is not surprising, as there is plenty of reinsurance capacity out there."

"Capacity has definitely increased for property reinsurance, as mainstream investors are joining specialists in the search for yields, specifically through alternative investments such as catastrophe bonds and collateralized reinsurance," said Bob Betz, Florida practice leader of Towers Watson's Brokerage business. "June renewals of Florida personal lines business are an example of additional capacity significantly lowering prices on a risk-adjusted basis. We see reductions of 15% to 20%, and even more in isolated cases."

Historical loss cost information reported by participating carriers points to a very preliminary improvement in loss ratios in the first quarter relative to the same period in 2012 (excluding any identified catastrophes), as earned price increases more than offset reported claim cost inflation. This builds on the estimated improvement of more than 2% between 2011 and 2012, which comes from both the earning of price increases and lower claim cost inflation.



Comments

 
The Old Guy Jun 11 2013 1:14PM Report Abuse
It is hard to believe that the industry is staying the course for 5 quarters of price increases. If they stay with it for 3 more it will be two years. I fear, however, that someone will get greedy and decide they can increase their share of the market by increasing credits or cutting rates and the industry will again fall into the "let's give it away" scenario we have had for the last 20 years. We just can't stand prosperity.
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