Commercial Rates Increase 5% in Q4 '12

Aggregate commercial insurance price increases continued into the fourth quarter of 2013, but have slowed, according to the “Commercial Lines Insurance Pricing Survey,” from Towers Watson, global professional services company.

Commercial insurance prices have increased for three consecutive years and in Q4 2013 increased 5 percent in aggregate, compared to an average of 6 percent to 7 percent in the second half of 2012 and the first half of 2013, Towers Watson said.

“Concerns about price inflation and modest fixed-income yields are making their way into rate changes that are outpacing observed claim cost inflation,” said Tom Hettinger, sales and practice leader Towers Watson’s Property & Casualty.

By line of business, all price increases were lower than those reported in Q3 2013, with the exception of general/products liability and excess/umbrella liability, Towers Watson said. Prices for most commercial insurance showed increases in the mid-single digits and none of those surveyed declined. The largest price increase was in employment practices liability, workers compensation and excess/umbrella liability also increased substantially, Towers Watson said.

“Price increases were consistent for small, mid-market and large accounts; specialty pricing increased at a lower rate than pricing for standard lines,” Towers Watson said.

For accident-year 2013, Loss ratios improved 3 percent compared to the prior year, excluding catastrophes, and earned price increases more than offset claim-cost inflation, Towers Watson said. “This development builds on the estimated improvement of more than 2% between 2011 and 2012. Carriers projected approximately 2 percent claim cost inflation underlying the loss ratio movement for both accident-years 2012 and 2013 across the aggregate commercial industry.”

“Commercial Lines Insurance Pricing Survey” data are based on new and renewal business figures provided by the carriers underwriting the business. Participants represent a cross section of U.S. P&C insurers, including many top 10 commercial lines companies and the top 25 insurance groups in the United States. Data was contributed by 43 participating insurers representing 20 percent of the U.S. commercial insurance market, excluding state workers compensation funds, Towers Watson said.