Prices for all standard commercial insurance lines rose for the fifth consecutive quarter, with commercial lines increasing 5 percent in aggregate, according Towers Watson’s “Commercial Lines Insurance Pricing Survey” (CLIPS), which compared the Q1 2012 prices of policies with those of the same period last year.
“We are seeing a continuing trend of price-level increases in the commercial insurance marketplace,” said Thomas Hettinger, property/casualty sales and practice leader for the Americas at Towers Watson. “This quarter, the industry reached a significant threshold — an aggregate price increase of nearly 5 percent — the largest quarterly increase we’ve seen since 2004.”
Further, loss ratios for most insurance lines stabilized. Loss ratios for those with the largest price increases, including workers’ compensation, which increased for the fifth consecutive quarter, and commercial property, which increased for the fourth, improved most.
Compared with the same period last year, historical loss cost information from survey participants points to a deterioration of less than 1 percent in loss ratios for accident-year 2012, which is more favorable than the 3 percent estimated deterioration between 2010 and 2011.
“We are likely to see improving loss ratios in the near future if this level of price increases and loss trends continues,” said Hettinger. “This would be welcome news for the insurance industry, which has been dealing with low asset returns and significant catastrophe activity for the last few years.”
While prices increased for standard commercial lines across all account sizes, the most substantial increases occurred in mid-market accounts; specialty lines experienced smaller increases of less than 2 percent.
Towers Watson’s CLIPS data are based on both new and renewal business figures obtained directly from carriers underwriting the business. For this most recent survey, data were contributed by 40 participating insurers representing approximately 20 percent of the U.S. commercial insurance market (excluding state workers’ compensation funds). Participants represent a cross section of U.S. property/casualty insurers.
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