Posted on 28 Oct 2009
Commercial insurance prices are still falling, and one insurance executive puts the blame on a competitor.
Pricing "borders on the irrational," as one big insurer "not allowed to spend taxpayer money on compensation" is instead "spending it on ridiculously low prices," in effect using its taxpayer bailout to cover the costs of underpricing, said Edmund F. Kelly, chief executive of mutual commercial insurer Liberty Mutual Group Inc.
He didn't name the company but most likely was referring to American International Group, which had its executive pay cut this week as part of a compensation overview for companies that received extraordinary government bailouts.
Mr. Kelly repeated comments that he and other insurers have made in recent quarters: that one insurer, usually unnamed but clearly referring to AIG, is setting insurance prices below the level needed to cover costs and forcing prices down industry-wide in the process.
A spokeswoman with Chartis, AIG's property/casualty insurance unit, brushed off the comments as sour grapes.
"This kind of speculation is obviously competitively driven," said spokeswoman Marie Ali in an emailed statement. "We have not changed how we underwrite or price our business. Several independent entities have reviewed our pricing in the near past and have found nothing unusual about our actions in the marketplace. In addition, a recent market survey of corporate risk managers indicated that our pricing is in line with industry trends."
A survey of risk managers conducted in October by UBS Investment Research found that most risk managers surveyed put pricing by Chartis about in line with competitors.
Commercial insurance prices have been falling for more than two years, which has also been attributed to an excess of capital in the insurance industry and more recently to the weak economy and shrinking U.S. businesses.
Liberty Mutual's Mr. Kelly compared the commercial insurance market to a bar, where customers stagger in and out.