U.S. Commercial Insurance Rates Rise Again Q3; Showing Signs of Stability

For the second quarter in a row, U.S. commercial lines insurers enjoyed average rate hikes that neared 10% but the rocket ship rate hike trend might be moderating.

“While commercial insurance prices continued to rise this quarter at a significant rate, CLIPS data indicate the acceleration in prices observed in recent quarters stabilized somewhat,” said Yi Jing, director, Insurance Consulting and Technology, Willis Towers Watson, referring to the firm’s Commercial Lines Insurance Pricing Survey (CLIPS).

Willis Towers Watson tracked excess/umbrella and directors and officers liability insurance as generating the largest price increases. Commercial auto produced rate hikes near or above double-digit levels for the 12th consecutive quarter.

Workers’ compensation coverage continues to be the big exception, producing “modest” price reductions, but Willis Towers Watson said that the downward trend for this line has leveled off a bit in recent quarters.

According to Willis Towers Watson, price changes differed by account sizes with small accounts more muted, mid-market accounts near double digits and large accounts well into double digits.

CLIPS is a retrospective look at historical changes in commercial property/casualty insurance prices and claim cost inflation. CLIPS data are based on both new and renewal business figures obtained directly from carriers underwriting the business. For this most recent survey, 36 participating insurers representing approximately 20% the U.S. commercial insurance market (excluding state workers’ compensation funds) contributed data.

Another report by Marsh in November revealed global commercial insurance pricing coming in 20% higher on average in the third quarter of 2020, driven largely by rate hikes in three key lines. According to that Marsh market update, the jump was the largest since launching its Global Insurance Market Index in 2012. It also follows average rate increases hitting 19% in the 2020 second quarter and 14% in Q1.

Property insurance rates along with financial and professional lines drove most of the rate hike momentum, Marsh said.

Global property insurance pricing grew 21%, and global financial and professional lines saw rate increases hitting 40% on average.