Commercial Insurance Prices Up But Barely: Survey

September 15, 2015

Commercial insurance prices increased in aggregate at a modest pace (one percent) during the second quarter of 2015, continuing a trend of ever smaller increases.

That’s according to the latest Commercial Lines Insurance Pricing Survey (CLIPS) conducted by professional services company Towers Watson comparing prices during the second quarter of 2015 to those charged for the same coverage during the same quarter of 2014.

Price increases for most lines surveyed were in the low single digits, having moderated further during the second quarter. Directors and officers, and commercial property reported small price decreases, while workers’ compensation pricing was nearly flat; in fact, results show a very slight decrease.

Commercial auto showed the largest increases, followed by employment practice liability.

Price increases for small and mid-market accounts continued, also following a moderating trend, and prices for large accounts declined slightly.

Carriers reported an improvement of one percent in loss ratios in accident-year-to-date 2015 relative to the same period in 2014, as earned price increases offset low claim cost inflation reported for many lines. This compares to flat loss ratio movement indicated between 2013 and 2014, though loss ratios for 2015 are still developing.

“Price increases continue their downward trend, as strong underwriting results allow for some room in pricing,” said Alejandra Nolibos, a director with Towers Watson’s Property/Casualty Insurance practice. “However, there are indications that workers’ compensation pricing may have moved into negative territory for the first time since 2010 and that pricing is also down for large accounts — a segment that is typically quick to be affected by competition. Should the benign loss trends that have marked the last several years return to longer-term levels, some of the recent underwriting success in long-tailed lines may be eliminated.”

CLIPS data are based on both new and renewal business figures obtained directly from carriers underwriting the business. Data were contributed by 43 participating insurers representing approximately 20 percent of the U.S. commercial insurance market.

In its latest Global Insurance Market Quarterly Briefing, broker Marsh found commercial insurance rates continued to decline globally in the 2015 second quarter, driven by a continued abundance of global capacity and a lack of large insured loss activity.

As of Q2, there had been nine consecutive quarters of overall rate declines, Marsh said.

Globally, natural catastrophe losses are at historic lows, which is helping profitability but also reducing the drive for rate increases, according to Marsh.

Marsh said that at the same time, property/casualty insurers are increasingly looking to specialty coverages including cyber and transactional risk insurance for mergers and acquisitions (M&A) as a way to grow.

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