Commercial insurance prices continue to steadily rise, according to the latest Commercial Lines Insurance Pricing Survey (CLIPS) from Towers Watson. Prices rose by 6 percent in aggregate during the second quarter of 2013, marking the 10th consecutive quarter of price increases. Commercial insurance prices increased almost 7 percent during Q1 2013.
For the most recent survey, the global professional services company compared pricing data reported by carriers on policies underwritten during the second quarter of 2013 to those charged for the same coverage during the second quarter of 2012 and found that workers’ comp and employment practices liability lines experienced the largest year-over-year price increases, as has been the case since the third quarter of 2012.
Price increases for most lines of business fell in the mid- to upper-single digits, with no lines having an overall price increase of less than 4 percent. While still significant, price increases for commercial property insurance underwent a slight dip in the second quarter. All account sizes for standard commercial lines showed price increases, with larger increases in mid-market accounts. In addition, companies using predictive models in pricing or underwriting saw higher price increases.
“As we expected, pricing increases in property insurance have tempered, consistent with the abundance of capital in the market,” said Tom Hettinger, Towers Watson’s Property & Casualty sales and practice leader for the Americas. “Given midyear reinsurance renewal pricing levels, I would not be surprised to see a repeat in the third quarter, especially if we continue to see favorable windstorm experience.”
On a monthly level, the most recent month’s (August) composite rate for the commercial P&C market held steady at plus-4 percent, matching the index for July, according to MarketScout Rate Index.
Historical loss cost information reported by the 40 U.S. commercial property & casualty insurers participating in Towers Watson’s survey points to an improvement in loss ratios in accident-year 2013 relative to 2012 (excluding catastrophes), as earned price increases more than offset reported claim cost inflation for the second straight year. Carrier estimates of claim cost inflation continue to be moderate for year-to-date 2013.
“Although carrier estimates of claim cost inflation remain relatively low, the potential for greater inflation over the medium term looms, and may give the steady price increases we’ve been experiencing some additional staying power,” Hettinger said.
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