Tag Archives: Commercial Insurance

Industry Financials, Market Conditions

Commercial Insurance Rate Declines Continue

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The soft market may be limited in length and severity, though that would be surprising, according to the latest analysis of commercial insurance pricing from online insurance exchange MarketScout.

The comments came as MarketScout reported that the composite rate for U.S. commercial property/casualty insurance declined by 2 percent in April, compared to a 3 percent decline in March and minus 4 percent in January and February 2016.

Richard Kerr, CEO of MarketScout observed:

“It seems we may have a reversal of sentiment. Rates are moderating. We are only seven months into a soft market that has so far yielded a maximum composite rate decrease of minus 4 percent.”

Kerr also noted:

“A limited soft market would be a bit surprising noting the current ample market capacity; however, more sophisticated underwriting tools seem to be limiting market swings.”

Rates changed in most coverage classifications with property, business interruption, BOP, inland marine, workers’ compensation, general liability, and fiduciary all moderating by 1 percent as compared to March.

Umbrella, auto, D&O, EPLI, crime, professional and surety were unchanged, according to MarketScout.

By account size, rates for small accounts (under $25,000) were down 1 percent from March to April. All other account sizes were down 2 percent in April 2016, compared to minus 4 percent in March 2016.

By coverage classification, transportation accounts adjusted more than any other industry classification from minus 4 percent in March 2016 to minus 2 percent in April 2016. Manufacturing, habitational, public entity and energy accounts all moderated 1 percent in April, while contracting and service accounts remained unchanged.

Here’s the visual by coverage classification:

Screen Shot 2016-05-11 at 10.43.28 AM

Check out this post over at Artemis blog for more on why the moderation in commercial insurance rates is unlikely to persist.

The Insurance Information Institute has further information with financial results and commentary on the p/c insurance industry here.

Business Risk, Disaster Preparedness

Spreading Awareness of Insurance to Small Businesses

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A couple of new studies appear to shed light on the continuing need to communicate the importance of insurance for small business owners.

First, a Nationwide-sponsored survey found that 66 percent of small businesses do not have business interruption insurance (hat tip to Insurance Journal for its report here). This is despite the fact that an estimated 25 percent of businesses do not reopen following a major disaster.

Most small business owners are at risk of disaster, Nationwide noted. Some 75 percent of small businesses do not have a disaster recovery plan in place, even while 52 percent say it would take at least three months to recover from disaster.

Nationwide commissioned the survey from Harris Interactive, which polled 500 U.S. small business owners with fewer than 300 employees from June 8-19, 2015.

In a press release, Mark Pizzi, president and chief operating officer of Nationwide Direct and Member Solutions, said:

Small businesses are least likely to have disaster recovery insurance. And yet they are the ones most affected by a disaster. That’s why it’s essential for small businesses to have a disaster recovery plan.”

Meanwhile, a J.D. Power study found that many small business owners are unaware that insurers even provide commercial insurance.

Less than one-fourth of small business owners said they were aware that nine of the 17 insurance providers included in the study offer insurance for business customers.

Only six insurers had awareness rates above 40 percent for their commercial insurance offerings, and five of these are among the largest personal lines insurers, J.D. Power said.

While advertising is important to spread brand awareness, the study suggested that commercial insurers have better success when they develop awareness through agents/brokers, trade groups and word of mouth from other businesses.

The proportion of customers who considered/shopped an insurer among all potential prospects is 61 percent when awareness comes from an agent/broker or trade group, compared with just 38 percent when awareness is attributed solely to advertising.

Still, the study–now in its third year–found that small business customers are increasingly satisfied with their insurance providers. Overall satisfaction was up 10 points at 793 on a 1,000-point scale in 2015, due primarily to improvements in price and policy offerings.

The 2015 U.S. Small Business Commercial Insurance study is based on 3,292 responses from insurance decision-makers in businesses with 50 or fewer employees that purchase general liability and/or property insurance and was fielded from April through June 2015.

The Insurance Information Institute’s excellent online resource for business insurance is available here.

Industry Financials, Market Conditions

MarketScout: P/C Rate Reductions Coming

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The more than two-year upward trajectory in rates for commercial insurance in the U.S. is in jeopardy as U.S. insurers, supported by reinsurers, catastrophe bonds and insurance linked securities are finding ample reasons to start fighting over business, according to online insurance exchange MarketScout.

Richard Kerr, CEO of MarketScout noted that the composite rate for U.S. commercial insurance remained in positive territory increasing an average of 2 percent in April 2014, but warned that rate reductions are likely by year end if the current trend continues.

If you are in the market on a daily basis, you can almost feel a change in the wind. No reasonable insurer wants rate reductions. However, everyone seems to feel they are coming.†

By line of coverage, Kerr noted that catastrophic property rates will probably hold steady in the next four months with hurricane season about to start:

If the wind doesn’t blow, get ready for a solid round of rate reductions at year-end.†

On workers’ compensation, Kerr noted that it is and always has been a tough class of business with an extremely long tail:

In the last six months, several major workers’ compensation insurers have exited the market. Many others have dramatically cut back their writings. We expect workers’ compensation insurers to hold steady with small rate increases continuing.†

In its April market analysis MarketScout noted that rates for property, business interruption, BOP, umbrella, auto, workers’ compensation, and D&O all moderated one percent.

By account size, medium accounts ($25,001 to $250,000 premium) were down from plus 3 percent to plus 2 percent. Large accounts ($1 million plus premium) adjusted from plus 3 percent to plus 1 percent.

By industry class, rates for manufacturing, contracting, and public entities all moderated one percent.

Business Insurance reports on this story here.

Industry Financials, Market Conditions

Survey: Commercial Lines Price Gains Tapering Off

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Another day, another commercial lines pricing survey. This one via Towers Watson.

Commercial insurance prices increased by 5 percent in aggregate during the third quarter of 2013, according to Towers Watson’s latest Commercial Lines Insurance Pricing Survey (CLIPS),

While this marked the 11th consecutive quarter of price increases, the gains appear to be tapering off, dropping a point since the CLIPS edition a year ago, Towers Watson said.

The survey compares carriers’ pricing on policies underwritten during the third quarter of 2013 to those underwritten in the same quarter of 2012.

Price increases by line of business were lower than those reported in the second quarter in all lines, with the exception of employment practices liability.

Employment practices liability experienced the largest price increase year over year, with price increases spiking into double digits, followed distantly by workers compensation and commercial auto.

Prices for most lines of commercial insurance showed gains in the mid-single digits, while none of the classes surveyed reported a price drop, according to Towers Watson.

A press release quotes Tom Hettinger, Towers Watson’s Property & Casualty sales and practice leader for the Americas:

This hard market is somewhat different from hard markets we have experienced before. Carriers are taking rate, which is logical, as they focus on measuring the capital required to support the business rigorously and realistically, and adjust their return expectations accordingly.†

Hettinger added that loss cost trends are benign – in fact, carriers are reporting flat loss costs.

Yet the explicit recognition of risk, whether in the form of investment yield, inflation risk or catastrophe exposure, seems to be leading to much more disciplined pricing decisions.†

Survey respondents reported that loss ratios have improved between 3 percent and 6 percent for accident-year 2013 relative to 2012 (excluding catastrophes), as earned price increases more than offset stagnant reported claim cost inflation.

For the most recent survey, data were contributed by 43 participating insurers representing approximately 20% of the U.S. commercial insurance market (excluding state workers compensation funds).

Check out I.I.I. facts and statistics on commercial lines.

Industry Financials, Market Conditions

MarketScout: U.S. Commercial Rate Index Up 4%

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Online insurance exchange MarketScout just reported that the commercial insurance rate index for the United States rose 4 percent in February 2013.

Commercial property insurance led the pack with a rate increase of 6 percent, followed by commercial auto and umbrella/excess with increases of 5 percent.

General liability rates were considerably more competitive with rates up 4 percent, compared to up to 6 percent the previous month.

Richard Kerr, CEO of MarketScout noted:

Over the last year, transportation and energy have led rate increases most of the time. However, for February, transportation was up 4 percent and energy was up 3 percent. The only industry with a lesser rate increase was public entities.

Manufacturing, service and habitational companies led the February industry rate increases at plus 6 percent.†

By account size, rates continue to be more competitive the larger the account, according to MarketScout. Small accounts (premiums up to $25,000) were up 6 percent and jumbo accounts (over $1 million) were up 2 percent.

Check out latest I.I.I. information on financial and market conditions.