Council Market Index Shows Continued Softening for Commercial P/C Insurance
Market in Second Quarter
July 2004
The commercial property/casualty insurance
market showed signs of continued softening in the second quarter of 2004, with
one-third of the small accounts and more than half the medium and large accounts
experiencing significant premium decreases.
by The Council of Insurance
Agents & Brokers
Washington, D.C.
The latest commercial market index, conducted by The Council of Insurance
Agents & Brokers, showed 36 percent of small accounts, 57 percent of medium
accounts and 53 percent of large accounts experienced premium rate decreases
ranging from a slight decrease to a drop of as much as 20 percent during the
last quarter. Brokers from across the country said most of their commercial
accounts held steady or experienced premium decreases during the period.
For the small number of commercial clients whose premiums increased, the
hike was usually in the 1-10 percent range.
The Council's survey data showed the average small commercial account experienced
about a 1 percent premium decline. For medium commercial accounts, the average
premium declined by 3 percent, and for large accounts, the premium decrease
averaged 6 percent.
The Council represents the nation's largest commercial insurance brokers
who collectively write 80 percent of all property/casualty premiums and administer
billions of dollars in employee benefits accounts each year.
"Terms and conditions are still tight, but we are seeing accelerated decreases
in premium rates and a return of competition to the market," said Ken A. Crerar,
president of The Council. "The questions now are how far and how fast will those
rates come down. There are some mitigating factors such as reserve levels and
the overall economic recovery that could serve as brakes on the market."
Brokers responding to the survey said even the most difficult-to-place lines
of commercial business—directors and officers insurance, general liability,
umbrella, commercial auto, employment practices and workers' compensation—seemed
to be stabilizing, with more than 50 percent of accounts experiencing no change
or increases of 1-10 percent in premium rates between April and June. Some brokers
reported premium decreases for those lines.
Construction risks also appeared to be stabilizing, but to a lesser extent
than the other troublesome lines.
The brokers responding to the survey said a return of price competition remained
their biggest market concern, with nearly 90 percent of the respondents saying
the developments of the past quarter have renewed or bolstered their concerns
about carrier solvency.
"Starting to give away the store!" observed a broker from the Northeast.
"The market share demon is being let loose again," agreed a broker from the
Southwest.
One Midwestern broker said he had two major carriers come in with quotes
that were 40 percent less than what one retail furniture business had been paying.
The insurer seeking to renew the account initially was willing to reduce premiums
only by 14.5 percent, but agreed to the 40 percent drop to meet the competition
and keep the account.
Interestingly, the broker said, it was the first time in the last 2 years
that any other carrier had been willing to quote competitively on that account.
"I would say the soft market has returned," he said.
Other market concerns cited by the brokers in the latest market index were
economic conditions, the need for tort reform and the loss of competitors due
to market consolidation.
The analysis of Council survey data to get the average rate increases and
the attached charts based on The Council survey data were prepared by Lehman
Brothers.
Commercial Property—Casualty Market Survey
Second Quarter 2004 Released: July 2004
Below are the survey results for: All Regions
Number of Responses: 157
1. On average, how have premium rates changed over
the last three months 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 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
Insurance
Rate Changes, Small Commercial Accounts
Insurance
Rate Changes, Medium Commercial Accounts
Insurance
Rate Changes - Large Commercial Accounts Chart
Average
Premium Rate Changes by Line
Commercial
Auto Insurance Rate Changes
Workers'
Compensation Insurance Rate Changes
Commerical
Property Insurance Rate Changes
Commercial
General Liability Insurance Rate Changes
Umbrella
Insurance Rate Changes
Business
Interruption Insurance Rate Changes
Figure
1
Figure
2
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, DC—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.
Opinions expressed in Expert Commentary articles are those of the author and are
not necessarily held by the author's employer or IRMI. Expert Commentary articles
and other IRMI Online content do not purport to provide legal, accounting, or other
professional advice or opinion. If such advice is needed, consult with your attorney,
accountant, or other qualified adviser.