Commercial Insurance Prices Continue to Rise: Towers Watson

Commercial insurance prices in aggregate increased by nearly 5 percent during the first quarter of 2012, the fifth consecutive quarter that prices rose. In addition, commercial insurers’ loss ratios stabilized for most insurance lines and improved in lines with the largest price increases, according to the Commercial Lines Insurance Pricing Survey (CLIPS) by Towers Watson.

The survey compared prices charged on policies underwritten during the first quarter of 2012 to those charged for the same coverage during the same quarter in 2011.

The largest price increases were once again in workers’ compensation and commercial property, the survey revealed. Workers’ comp prices increased for the fifth consecutive quarter, after flat pricing in all of 2010; commercial property prices rose for the fourth consecutive quarter.

“We are seeing a continuing trend of price-level increases in the commercial insurance marketplace,” said Thomas Hettinger, property/casualty sales and practice leader for the Americas at Towers Watson. “This quarter, the industry reached a significant threshold — an aggregate price increase of nearly 5 percent — the largest quarterly increase we’ve seen since 2004.”

Price increases were observed across all account sizes for standard commercial lines, with the most significant increases in mid-market accounts. Specialty lines lagged, with much more modest increases of less than 2 percent.

Historical loss cost information reported points to a deterioration of less than 1 percent in loss ratios for accident-year 2012 compared with 2011, a more favorable indication than the estimated 3 percent deterioration between 2010 and 2011. Towers Watson said data in lines with the largest price increases — workers’ comp, commercial property and general/products liability — indicate improving loss ratios.

“We are likely to see improving loss ratios in the near future if this level of price increases and loss trends continues,” said Hettinger.