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Towers Watson: Commercial Insurance Prices Experience Biggest Jump in Eight Years

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Posted on 05 Oct 2012 by Neilson

Commercial Insurance PricingAccording to the new Commercial Lines Insurance Pricing Survey (CLIPS) conducted by Towers Watson, prices experienced the largest rise in eight years, with workers’ comp and commercial property prices up the most in the second quarter.

In aggregate, commercial lines pricing jumped by 6 percent during the second quarter of 2012, the sixth consecutive quarter that aggregate prices rose for all commercial lines, according to the survey. The survey compared prices charged on policies underwritten during the second quarter of 2012 to those charged for the same coverage during the same quarter in 2011.

Workers’ compensation and commercial property experienced the largest price adjustments, with increases in the high single digits.Directors and officers, and employment practices liability saw price increases in the mid-single digits, a change from the flat pricing of the past two quarters.

For commercial lines, price increases were observed for all account sizes. Increases for mid-market and large accounts were larger than those seen for small commercial accounts. Specialty commercial lines pricing rebounded, although increases were not as large as in standard commercial lines.

Loss cost information reported by participating carriers pointed to an improvement of more than 1 percent in loss ratios in accident-year-to-date 2012 relative to 2011, as earned price increases more than offset reported claim cost inflation. This is a reversal from the estimated 3 percent loss ratio deterioration between 2010 and 2011.

Carrier estimates of claim cost inflation improved since the prior quarter. Estimated claim cost inflation through the first half of 2012 in aggregate is 2 percent, compared to almost 4 percent in 2011.

“Improving loss ratios do not necessarily mean better results, as faltering investment income offsets improvements in underwriting outcomes,” said Thomas Hettinger, property/casualty sales and practice leader for the Americas at Towers Watson. “Insurers’ success as 2012 draws to a close will continue to depend on pricing discipline and moderate loss trends.”


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