Commercial insurance prices in U.S. rise 3% in 2014 Q2: Towers Watson

Commercial insurance prices in the United States rose 3% in aggregate during 2014 Q2, confirming the moderation in price increases that began last year, note findings in Towers Watson’s latest Commercial Lines Insurance Pricing Survey (CLIPS).

Survey results issued this week – which compare carriers’ pricing on policies underwritten during the second quarter of 2014 to those underwritten in the same quarter of 2013 – “confirm the moderation in price increases that started in the third quarter of 2013, following several quarters of increases over 6%,” notes a statement from global professional services company Towers Watson.

Survey data were contributed by 44 U.S. property and casualty insurers, representing about 20% of the U.S. commercial insurance market, excluding state workers compensation funds. Data are based on both new and renewal business figures obtained directly from carriers underwriting the business.

Most lines of business showed increases in the low single digits, Towers Watson reports, and in general, the moderation in price increases was more evident for large accounts than for small and mid-market accounts.

However, the survey further reveals that commercial property prices declined for the first time in three years and it was the first time since the end of 2011 that any of the surveyed lines showed a decrease.

More than half of polled commercial property respondents reported price decreases in 2014 Q2, Towers Watson notes, while for lines showing price increases, the largest were reported for employment practices liability, followed by commercial auto.

Towers Watson reports that loss ratios improved 2% for accident-year-to-date 2014 relative to the same period in 2013 (excluding catastrophes), as earned price increases continued to offset claim cost inflation. “This development builds on the estimated loss ratio improvement of nearly 6% between 2012 and 2013,” the statement points out.

“Carriers are reporting loss ratios for 2013 and 2014 that benefit from 2012 and 2013 price levels. Now they are seeing a continuation of low loss cost trends and no lack of capital in the market, which may be leading to the slowdown in price increases,” explains Alejandra Nolibos, director in Towers Watson’s property & casualty business.

In particular, “property rates are dropping sharply,” Nolibos continues.

In aggregate, notes Towers Watson, carriers reported approximately flat claim cost inflation for 2013 and more than 2% for year-to-date 2014.