Commercial Property/Casualty Rates in Fourth Quarter 2003 Suggest Price
Competition Is Returning
January 2004
The Council of Insurance Agents & Brokers
has released its fourth quarter data showing competitive pricing returning for
property/casualty accounts with recent premiums holding steady or dropping.
by The Council of Insurance
Agents & Brokers
Washington, D.C.
One-third of all commercial property/casualty (p/c) accounts experienced
insurance premiums that either held steady or dropped during the last 3 months
of 2003 amid indications that carriers may be beginning to compete again on
price.
The fourth quarter commercial market index survey, released in January by
The Council of Insurance Agents & Brokers (CIAB), reflects responses from the
largest and most successful commercial property and casualty brokers in the
country. The survey showed that when commercial p/c accounts experienced increases,
those premium hikes ranged from 1 percent to 10 percent, regardless of account
size.
For small accounts, 35 percent experienced premiums that did not change or
dropped during the period, with 43 percent reporting increases of 1 percent
to 10 percent. Brokers across the country reported that 32 percent of medium
accounts experienced steady premiums or drops, while 48 percent of the accounts
had increases in the 1 percent to 10 percent range. On average, premiums for
small accounts increased by about 5 percent, and medium account premiums were
up an average of 6 percent.
And 38 percent of the large accounts, which have experienced the sharpest
increases during the hard market, held steady or decreased by up to 10 percent
or more, with 45 percent experiencing increases of up to 10 percent. The average
premium increase for large accounts was about 4 percent.
"The carriers now want business," said one broker in the Southwest.
Although most brokers said underwriting was still tight, there were some
reports that carriers were easing up on underwriting and on terms and conditions.
Several respondents also expressed the belief that as competition picks up,
underwriting standards may loosen further.
"As pricing eases, underwriting standards will also ease. Market availability
and appetite will increase as competition for the dollar sets in. Seen it before,
we’ll see it again," commented a broker from the Southeast.
"Much greater competition for larger accounts, return to focus on growing
premium writings," said a broker from the Pacific Northwest. "Much less
focus on underwriting of property risks."
Council President Ken A. Crerar noted that in open-ended responses on market
trends, a number of brokers expressed concern about insurer insolvencies and
the impact on the commercial marketplace as national carriers either merge or
exit due to solvency problems.
"Historically, as hard markets begin to soften, carriers start to compete
on price and ease up on underwriting discipline," Crerar said. "But in the
past, there were more insurers out there than there are today. If lack of
underwriting discipline exacerbates the already serious reserve problems
some carriers are facing, it could have a major impact on the marketplace."
The same overall trends of steady pricing or slight declines were reflected
in most of the specific commercial lines, but brokers reported still having
trouble placing construction risks, finding umbrella coverage, and securing
directors and officers coverage, as well as their own E & O coverage. Those
coverages, when available, were also costing more, with premium increases routinely
running anywhere from 1 percent to 20 percent. The greatest premium increases
still are found in medical malpractice insurance, the survey showed.
Asked whether, in the October-December period, they were more or less concerned
about carrier solvency than they had been in the third quarter off 2003, 50
percent of the brokers voiced increased concern, while 44 percent said their
concerns remained the same. Only 6 percent said they were less concerned about
solvency questions.
Note: The average premium increases contained in this release were calculated
by Lehman Brothers Equity Research, using data from the CIAB fourth quarter
market index survey.
For regional data charts, please visit CIAB's web site.
Commercial Property—Casualty Market Survey
Fourth Quarter 2003 Released: January 2004
Below are the survey results for: ALL REGIONS
NUMBER OF RESPONSES: 117
1. On average, how have premium rates changed over the last three months
(Oct. 1-Dec. 31) for the following accounts? Please check N/A if you don't know
or don't handle the type of account.
Table 1
2. How much have premium rates changed over the last three months (Oct. 1-
Dec. 31) 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 Chart
Insurance Rate Changes -
Small Commercial Accounts Chart
Insurance Rate Changes -
Medium Commercial Accounts Chart
Insurance Rate Changes -
Large Commercial Accounts Chart
Average Premium Rate Changes
By Line Chart
Commercial Auto Insurance
Rate Changes Chart
Workers' Compensation Insurance
Rate Changes Chart
Commercial Property Insurance
Rate Changes Chart
Commercial General Liability
Insurance Rate Changes Chart
Business Interruption Insurance
Rate Changes Chart
Indicated Overall Average 4Q03 Rate Increase Is 4.6%
| Peak |
20.8% |
31.7% |
33.0% |
28.5% |
| Date |
4Q01 |
4Q01 |
4Q01 |
|
| Low |
2.6% |
4.0% |
2.5% |
3.0% |
| Date |
4Q99 |
4Q99 |
4Q99 |
|
| 4Q03 |
4.7% |
5.4% |
3.6% |
4.6% |
| 3Q03 |
4.3% |
7.0% |
4.3% |
5.2% |
| 2Q03 |
8.0% |
9.3% |
8.1% |
8.5% |
| 1Q03 |
12.2% |
14.8% |
15.1% |
14.0% |
Source: Council of Insurance Agents & Brokers. Table prepared
by Lehman Brothers Equity Research
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. Web site: www.ciab.com.
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