This latest data points to a stabilization of the soft market where companies are showing pricing discipline — consistent with the observations during the first three quarters of 2009 — and follows almost 5 years of price decreases. Data for most lines indicate small increases in prices, offset by price reductions in Workers Compensation and Employment Practices Liability. For Workers Compensation, the latest quarterly data indicate a reduction in year over year loss costs that may be holding down pressure to increase prices.
CLIPS indicates that accident year 2009 loss ratios deteriorated 3% relative to 2008. However, this deterioration comes on top of an estimated deterioration for accident year 2008 of 9% over 2007. Flat aggregate loss cost changes indicate an improvement in claim cost inflation which combined with stabilizing prices contributes to the relatively modest 2009 change.
While the data is immature, the Workers Compensation loss cost trend indications seem to highlight the downward pressure on claim frequency. This pressure may be linked to current weak economic conditions, as fear of job loss or reductions in income deter claim reporting and encourage return to work, and the work force is on average more experienced given lower tier job reductions.
Aggregate price change indications showed little differentiation by account size, as all were nearly flat.