Third Quarter Marks Return to Competition for Some Commercial Insurance
Lines, Flattening of Premiums for Commercial Property Accounts
October 2003
The Council of Insurance Agents & Brokers
has released its third quarter data showing competitive pricing returning, and
premiums flattening for commercial property accounts.
by The Council of Insurance
Agents & Brokers
Washington, D.C.
The commercial insurance marketplace witnessed a return to competitive pricing
for a number of lines during the third quarter of 2003 and flattening or decreasing
premiums for commercial property coverage, according to the latest commercial
market index released today by The Council of Insurance Agents & Brokers.
"Although it is not surprising that rates are softening somewhat, there are
a number of factors still present in the marketplace that make it unlikely that
we will be seeing any rapid decline or a retreat to soft market conditions in
the near future," said Ken A. Crerar, president of The Council.
Among the factors likely to moderate any declines in the general commercial
market are a still-weak economy, low yields on investments and the continuing
need for insurers to build reserves and strengthen their overall financial condition,
Mr. Crerar said.
Nevertheless, the third quarter survey showed a marked easing of prices for
all sizes of accounts in all sections of the country. Nearly one-third of the
small and large accounts and 27 percent of the medium-sized accounts experienced
no change in premiums or a drop of up to 10 percent for renewals and new business
in the third quarter.
The survey also showed that premiums for more than 40 percent of all sizes
of accounts increased only marginally—between 1-10 percent. Although 12 percent
of small accounts, 20 percent of medium accounts, and 17 percent of large accounts
still experienced premium increases of 10-20 percent, only a handful of brokers
reported premium increases exceeding 20 percent for the survey period.
The Council represents the nation's top insurance brokers who write 80 percent
of the commercial premiums and administer billions of dollars of employee benefits
accounts each year.
Fifty percent of the brokers responding to the survey reported that commercial
property premiums have either held steady or decreased by up to 10 percent in
the August-September period, a drop-off in costs equaled only by 54 percent
of the terrorism coverage accounts.
Although the survey showed that premiums for business interruption insurance
(44 percent), general liability (30 percent), surety bonds (28 percent), umbrella
coverage (23 percent), and workers compensation (27 percent) either held steady
or retreated slightly during the third quarter, those lines were not softening
as consistently as commercial property.
For example, 42 percent of business interruption accounts, 63 percent of
general liability accounts, 52 percent of workers compensation accounts, and
60 percent of umbrella accounts experienced premium increases in the 1-20 percent
range. And for some lines, including broker errors and omission policies, construction
risks, directors and officers insurance, medical malpractice, and general liability
coverage, premiums were still up sharply.
In general, while premiums may be flattening, and competition may be increasing
somewhat for new business, the brokers said insurance underwriters are still
insisting on tighter terms and conditions when writing renewals.
"Although lines are profitable, underwriters state they are under pressure
to continue raising rates. Interestingly, they are charging more for renewals
than on new business so that they can meet their charge to raise renewal rates,"
said a broker in the Pacific Northwest.
In an open-ended question about challenges in the marketplace, the brokers
most often listed consistency in capacity and pricing and carrier solvency as
their greatest concerns.
"Maintaining consistent, stable prices," said one broker from the Northeast.
"Carrier solvency," replied another broker. "We've lost several this year
due to downgrades and expect several more to fall before things improve."
"Determining which carriers will be left standing 3-to-5 years from now,"
said a broker from the Northeast.
Commercial Property—Casualty Market Survey
Third Quarter 2003 Released: October 2003
Total Responses: 132 (Represents independent
insurance agents + brokers across the United States). Below are the survey results
for: All Regions of the United States.
- On average, how have premium rates changed over
the last 3 months (since July 1 - Sept. 30 renewals) for the following accounts? Please check N/A if you don't know or don't handle the type of account.
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- How much have premium rates changed over the
last 3 months (since July 1 - Sept. 30 renewals) for the following lines? Please check N/A if you don't know or don't handle the line.
Table
2
Average Commercial Premium Rate Changes by Account Size
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Average Premium Rate Changes by Line
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The Council of Insurance Agents &
Brokers is the voice of the market leaders and the premier association
for commercial insurance and employee benefits intermediaries in the United
States and abroad. From its headquarters in Washington, D.C.—with programs conducted
throughout the nation and world—The Council represents the largest, most productive,
and most profitable of all commercial insurance agencies and brokerage firms.
Only the top one percent of all agents and brokers qualify. The Council's members
in more than 3,000 locations, place 80 percent—well over $90 billion—of all
U.S. insurance products and services protecting business, industry, government
and the public at-large, and they administer billions of dollars in employee
benefits.
Since 1913, The Council of Insurance Agents & Brokers has
worked in the best interests of its members, securing innovative solutions and
creating new market opportunities at home and abroad. website: www.ciab.com.
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