Commercial Insurance Pricing Inched Up in Q1: Willis Towers Watson
Commercial insurance prices increased only a bit in aggregate (less than 1 percent) during the first quarter of 2016, according to the latest Commercial Lines Insurance Pricing Survey (CLIPS).
While price changes in the first quarter for most lines of business were generally consistent with changes in the fourth quarter of 2015, commercial auto reported the largest increase of all lines.
At the same time, three lines of business – workers’ compensation, commercial property, and directors and officers liability – continued to report modest price decreases.
Most other lines reported price changes in the low single digits, according to the survey by global insurance brokerage and advisory firm Willis Towers Watson.
The survey compared prices charged on policies underwritten during the first quarter of 2016 to those charged for the same coverage during the same quarter of 2015.
Large and mid-market accounts continue to experience an ongoing trend of mostly flat increases, as small accounts moderated to levels consistent with these larger accounts.
“The overall results in the first quarter were generally flat and about what we expected,” said Sean McDermott, director in Willis Towers Watson’s Americas Property & Casualty Insurance practice. “Despite ample capacity, price increases, albeit small, are still holding as claim cost inflation remains modest. The one outlier, commercial auto, where poor claim results have driven meaningful price increases over the past three quarters, is the line where pricing corrections continue.”
According to the firm, CLIPS data are based on both new and renewal business figures obtained directly from carriers underwriting the business. Data were contributed by 40 top insurers representing approximately 20 percent of the U.S. commercial insurance market (excluding state workers’ compensation funds).
In a separate report in April, Willis Towers Watson Willis predicted that some buyers might begin seeing price increases in various commercial lines of insurance this year.
Other Surveys
While no surveys show big pricing changes, the CLIPS report veers slightly from other surveys that found most commercial lines prices were still decreasing in the first quarter, albeit only moderately.
The Council of Insurance Agents & Brokers (CIAB) reported in its first quarter survey of its members, who are commercial lines agents and brokers, that commercial property/casualty rates were still decreasing across all size accounts in the first quarter of 2016, as has been the case since the first quarter of 2015. This year, first quarter rates decreased by an average of 3.7 percent, according to CIAB.
According to the Commercial P/C Market Index Survey by CIAB, rate decreases in Q1 were the largest seen since the trend began, with the exception of large accounts.
While CIAB said the decline in rates was consistent across most lines, CIAB did agree with CLIPS on commercial auto, which the brokers said increased 3.6 percent in the first quarter and has been increasing steadily since the third quarter of 2011.
MarketScout’s monthly index for January through May of this year also showed rates continuing to fall, although decreases have been shrinking. MarketScout reported that commercial insurance prices fell 2 percent for May and April as compared to 3 percent in March and 4 percent in January and February 2016.
MarketScout CEO Richard Kerr said the market was stable in May with small movements in coverage, industry, and size classifications. Larger premium accounts were priced more aggressively.
MarketScout, a national managing general agent and wholesale broker, owns the MarketScout Exchange used by retail agents to find specialty markets. For its market barometers, MarketScout uses information from its own Exchange database of actual renewal rates quoted on risks from across the country along with in-person surveys conducted by the National Alliance for Insurance Education and Research with as many as 2,000 agents and brokers a month.
The surveys agree that commercial auto rates are going up. The commercial auto market as a whole reported a combined ratio of 109 and an underwriting loss for the fifth consecutive year in 2015, although some individual carriers have done well, according to Fitch Ratings. Fitch says that rates for this “chronically underperforming product segment” are expected to continue rising but an underwriting profit for the segment may still be years away.