A new industry pricing survey confirms what most insurance professionals already know firsthand: increases in commercial insurance rates are moderating as the market enters a soft period.
Prices increased in aggregate at a modest 1% pace during the second quarter of 2015, according to Towers Watson’s Commercial Lines Insurance Pricing Survey (CLIPS), continuing a trend of moderation also observed in Q1.
For most lines, rate increases were in the low single digit, though some – including directors and officers policies and commercial property – actually reported small decreases. Workers’ compensation was nearly flat.
Commercial auto showed the largest increases in pricing, followed by employment practice liability. Among account size, increases for small and mid-market accounts continued to moderate while rates for large accounts declined slightly.
In the softening environment, carriers reported an improvement of 1% in loss ratios in accident-year-to-date 2015 as compared to the same period in 2014 thanks to earned price increases offsetting low claim cost inflation in most lines. That compares to a flat loss ratio between 2013 and 2014.
Commenting on results overall, Towers Watson Property & Casualty Insurance Practice Director Alejandra Nolibos noted that an increase in competition is continuing to affect commercial pricing.
“Price increases continue their downward trend, as strong underwriting results allow for some room in pricing,” Nolibos said. “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 is based on data contributed by 43 insurers who together represent approximately 20% of the US commercial insurance market. They include many of the top 10 commercial lines companies and the top 25 insurance groups in the US.
