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Travelers Reports More Rate Gains, Seeks Higher Homeowners Deductibles

By | July 20, 2012

The Travelers Companies, which reported its second-quarter results yesterday, said renewal rates are continuing to trend up across its business segments.

Company executives emphasized, however, that rate hikes are a granular process and are dependent on characteristics of each account. Currently, regarding Travelers’ commercial accounts, about 35 percent of the renewals get an increase of 10 percent or higher. But about 15 percent of renewals see no rate changes or even get rate decreases, executives said.

Travelers also said that in personal lines, it is seeking higher deductibles and tighter terms and conditions in homeowners insurance .

“We continue to be very pleased with pricing trends across our businesses,” CEO Jay Fishman said during Thursday’s conference call to discuss earnings results. “In business insurance, renewal rate change exceeded 7 percent, with stable retentions, which demonstrates the success of our active pricing strategy and our continued focus on improving profitability.”

CEO Fishman also said that in financial, professional and international insurance segment, renewal rate change continued to improve from recent quarters. Notably, renewal rate change in management liability segment not only improved from recent quarters but also accelerated within the quarter, he said. Rates rose in both management liability businesses and international businesses, 5 percent and 4 percent, respectively.

In personal insurance, renewal premium change — which includes changes in exposure — rose 6 percent in agency auto segment and 11 percent in “agency homeowners and other” segment and also accelerated within the quarter.

“The continued high level of weather losses, along with the continuing decline in interest rates, validates our strategy to drive improved rate, terms and conditions and therefore lift underwriting results,” he said.

CEO Fishman said his company does not have an aggregate target for a pure rate number and that there is no broad-brush approach, noting that the company has got about a million accounts every year. The goal is to get the right rate increases on the right accounts and improve profitability.

“We have underwriters who are looking at all these individual accounts everyday,” the CEO said.

“We got almost a million business accounts over the course of the year. We have underwriters evaluating individual accounts and individual classes of business and they suggest pricing. We have accounts that produce very attractive returns but we also have accounts that produce much less attractive returns. How the mix actually shows up, which accounts are coming due, are they weather exposed, have they been consistent with our loss expectations, will determine what the individual underwriter decides.”

The range of pricing changes in the company’s account base is remarkable, he added. “It ranges from accounts that are getting 10 percent or more of rate reductions, all the way up to accounts that are getting 10 percent or more of rate gains. It’s really left up to the underwriters. But what I will say is that we are not hearing anything anecdotally from our field organization that would make us think that continuing to improve profitability is becoming meaningfully more challenging.”

The company also noted that in homeowners insurance it is pushing more aggressively for higher deductibles, though the emphasis is mostly on new accounts. The effort is now underway in about 40 states.

The company also said it is reevaluating how it covers roof hail losses and a potential change to coverage around covering roof losses, and doing a better job of selection regarding the age of roof, the quality and the type of roof.

One measure under consideration is modifying the underwriting process to exclude homes that have roofs that are of a particular age, according to the company.

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