Overall commercial insurance prices were flat for the seventh consecutive quarter, a new study from New York-based Towers Watson finds.
The Commercial Lines Insurance Pricing Survey (CLIPS) noted that prices, in aggregate, declined by less than 1% during the third quarter of 2010 compared to same period a year ago. Despite rising slightly in 2009, commercial property, directors and officers liability (D&O), and employment practices liability (EPL) prices, also declined for the fourth straight quarter.
"The lack of large-scale, market-moving catastrophes in the past couple of years—both natural and man-made—has led to excess capacity and price declines, and we expect to see similar results in the near term," said Bruce Fell, director of Towers Watson's property/casualty practice in the Americas. "Further, prices for management liability lines appear to be stabilizing after the increases that followed the onset of the economic crisis in late 2007 and 2008."
CLIPS, which queries a cross section of U.S. property/casualty insurers, also found increasingly pervasive use of predictive modeling to price risk, with about half of respondents acknowledging using predictive modeling for one or more lines of business.
"Although the findings are preliminary, they provide further evidence that the use of predictive modeling can help companies achieve bottom-line results," Fell said. "Many carriers also see predictive modeling as having tremendous potential beyond pricing, including marketing and claims; early identification of claims with a propensity for high severity, complexity or litigation; potential claim fraud identification; and claim severity valuation for either settlement or reserving purposes."
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