Commercial insurance prices rose by 6% in aggregate during the second quarter of 2013, marking the 10th consecutive quarter of price increases, according to the latest Commercial Lines Insurance Pricing Survey (CLIPS) conducted by global professional services company Towers Watson (NYSE, NASDAQ: TW). The survey 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.
Workers compensation and employment practices liability lines experienced the largest price increases year over year, 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%. 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. 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,” said Tom Hettinger, Towers Watson’s Property & Casualty sales and practice leader for the Americas.
Historical loss cost information reported by participating carriers 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,” said Hettinger.
CLIPS data are based on both new and renewal business figures obtained directly from carriers underwriting the business. CLIPS participants represent a cross section of U.S. property & casualty insurers that includes many of both the top 10 commercial lines companies and the top 25 insurance groups in the U.S. This particular survey compared prices charged on policies underwritten during the second quarter of 2013 to the prices charged for the same coverage during the same quarter in 2012. For the most recent survey, data were contributed by 40 participating insurers representing approximately 20% of the U.S. commercial insurance market (excluding state workers compensation funds).
About Towers Watson
Towers Watson (NYSE, NASDAQ: TW) is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. The company offers solutions in the areas of benefits, talent management, rewards, and risk and capital management. Towers Watson has 14,000 associates around the world and is located on the web at towerswatson.com.
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