Tag Archives: Willis Towers Watson

Eye on commercial insurance prices

Despite ample capital and benign claim cost trends, insurers have held the line on trading profitability for volume, while still responding as needed to emerging trends, according to Willis Towers Watson.

Its most recent Commercial Lines Insurance Pricing Survey (CLIPS) shows that commercial insurance prices in the U.S. were nearly flat in the first quarter of 2017.

Price changes reported by carriers averaged less than 1 percent for the sixth consecutive quarter.

Four lines (workers compensation, commercial property, directors and officers, and surety) showed modest price decreases.

Commercial auto remains the outlier with meaningful price increases reported.

Stable And Buyer-Friendly Commercial Insurance Marketplace

As hundreds of risk professionals gather in Philadelphia, the birthplace of insurance, for the annual RIMS (Risk and Insurance Management Society) conference, here’s the latest take on corporate risk costs:

  • Businesses saw a 5 percent decline in the total cost of risk (TCOR) in 2016—the third year in a row that corporates have benefited from lower prices, according to the latest RIMS benchmark survey. The study defines TCOR as the cost of insurance, plus the costs of the losses that are retained and the administrative costs of the risk management department. CFO.com has more on the findings.
  • The commercial insurance marketplace remains buyer-friendly and stable for North American insurance buyers, even as it braces for potential changes from Washington D.C. That’s the outlook from Willis Towers Watson in its 2017 Marketplace Realities report which points to the fluidity of capital as a key driver of current market conditions. The report’s line-by-line commercial insurance price predictions for the remainder of 2017 show a mix of increases, decreases and flat rates, as follows:

 

Eye On Commercial Insurance Prices

Two broker surveys give insight on where U.S. commercial insurance prices are at.

Willis Towers Watson’s most recent Commercial Lines Pricing Survey (CLIPS) shows commercial insurance prices were again nearly flat during the fourth quarter of 2016:

As you can see above, price changes reported by carriers were less than 1 percent for the fifth consecutive quarter, following a moderating trend in price increases that began in the first quarter of 2013.

The outlier in the results? Commercial auto, where meaningful price increases continue to be reported. Price changes for most other lines fell in the low single digits, according to the CLIPS survey.

Meanwhile, the Marsh Global Insurance Market Index Q4 2016 found that U.S. composite insurance rates were down 3 percent in the fourth quarter of 2016, in line with the global rate:

Marsh said the continuing decline in U.S. commercial insurance prices was driven largely by decreases in property insurance pricing.

However, U.S. cyber liability rates continued to increase for the sixth consecutive quarter, albeit at a moderating rate, Marsh noted.

Cyber price increases don’t appear to be deterring businesses from buying this essential coverage.

The number of Marsh clients purchasing cyber insurance increased by 25 percent from 2015 to 2016 across all industries, with the greatest overall uptake in healthcare, communications, media and technology.

See more on the importance of cyber insurance to businesses in this Insurance Information Institute (I.I.I.) white paper.

Significant trends shaping the property/casualty insurance business are discussed in this I.I.I. presentation.

Diverse Strategies As Insurers Embrace Digital Innovation

The routes to a digital future are many and varied, but for insurers the question is how to get there?

A new survey by Willis Towers Watson of 200 senior-level insurance executives offers some insight into the way forward.

The findings suggest that M&A and partnerships are likely to trump internal investment as insurers look to deliver digital transformation.

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Almost half (45 percent) of respondents to the survey signaled a clear preference for acquisitions as the way forward to gain digital capabilities.

By contrast, fewer than one in five insurers (17 percent) said they have a preference for internal development.

That’s not to say that internal innovation efforts have no place at these insurers, according to Willis Towers Watson, it’s more about getting the balance right between organic and inorganic growth.

Well over one-third (38 percent) of survey respondents say they have no preference between the two routes. In other words, they will use both acquisitions and internal innovation as the circumstances suit.

As insurers embrace a more outwards-looking approach to innovation, the survey suggests that traditional M&A deals are not the only option.

As Willis Towers Watson says:

“Many insurers are investing in a disparate range of technologies via venture capital funds – either through their own in-house venture capital arms, or third-party funds. This may be an attractive way to make a number of small bets on nascent innovations, rather than betting the house on an as-yet unproven technology.”

The survey found that one-third (31 percent) of respondents from the property/casualty insurance sector have set up a corporate venture arm already, while another third (32 percent) are considering doing so.

Innovation was a key topic of discussion at the Insurance Information Institute Property/Casualty Insurance Joint Industry Forum held yesterday in New York. For coverage of the forum go to the I.I.I. website.