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CIAB Survey: Soft Market Continues


Posted on 20 Jan 2011

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The soft market malaise lingered over fourth quarter 2010 pricing as insurers continued to pursue market share, according to The Council of Insurance Agents & Brokers’ Fourth Quarter Commercial P/C Market Index Survey. Overall, commercial lines renewal pricing on average declined 5.4 percent in the fourth quarter, compared with 5.2 percent the previous quarter.

“We didn’t see any strong resolve by insurers to hold the line on pricing last quarter,” said Council President Ken A. Crerar. “The fundamentals don’t add up, but competition still rules the day. Buyers still have opportunities to get more coverage at competitive prices.”

The Council has been tracking commercial property/casualty rates since 1999. The survey represents a cross-section of commercial insurance brokers across the country.

The rate of decline for commercial renewal pricing for small, medium and large business accounts remained roughly the same in the fourth quarter as in the third quarter. Pricing remained soft across business lines.

Brokers across the country reported that pricing was still very competitive last quarter, particularly for new business.
“[Carriers are] very aggressive on new business,” a broker from the Northeast reported. In the Southeast, “the market remains soft for new business.”

Brokers had a similar experience on the West Coast and in the heartland. “With competition, the market remains soft. Carriers will do what it takes to retain business,” said one respondent from the Pacific Northwest. “Seems there is more flexibility than there has been – more competition among carriers – better pricing and terms,” said a Midwest broker.

Many brokers reported that carriers tried to hold pricing at renewal or introduce a small increase, but increases didn’t hold where competition was strong. “Carriers seem much more aggressive on new business opportunities than on pricing renewals.” One broker said, “Renewals are flat by the incumbent [carrier] unless there is competition, then they will lower rates.” Another commented that “carriers are trying to hold the rates, but competition is causing them to give moderate decreases.”

A few brokers saw signs of firming. “Key change is acceptability. Underwriting is tighter than the previous quarter.” According to one respondent, “underwriting is tightening up.” Another observed that “slight[ly] more attention [is] being paid to loss results.”

“Tendency [is] not to match rates. Let the business go if someone is much lower.”

In good news for the industry, demand for insurance appears to be picking up a little stream. Forty-seven percent of brokers responding to the survey said they saw an increase in demand, compared with 34 percent last quarter and only 24 percent a year ago.

Brokers’ concerns haven’t changed. The economy and health care reform continue to top the list.