Commercial insurance prices in U.S. increase 5% in 2013 Q4: Towers Watson

Commercial insurance prices increased by 5% in aggregate during the fourth quarter of 2013 and 6% on average for the entire year, note survey results released Monday by global professional services company Towers Watson.

The 2013 increase marks the third consecutive year of price increases, reports Towers Watson’s latest Commercial Lines Insurance Pricing Survey (CLIPS).

Participants in CLIPS – data for which is based on both new and renewal business figures obtained directly from carriers underwriting the business – represent a cross section of U.S. property and casualty insurers.

For the latest results – prices charged on policies underwritten during 2013 Q4 and those charged on the same coverage during 2012 Q4 – data was contributed by 43 participating insurers representing approximately 20% of the U.S. commercial insurance market (excluding state workers compensation funds).

“Commercial insurance prices are still on the rise and have now been increasing for three full years, but we are beginning to see a moderation in that trend,” Tom Hettinger, Towers Watson’s property and casualty sales and practice leader for the Americas, notes in a company statement.

“Concerns about price inflation and modest fixed-income yields are making their way into rate changes that are outpacing observed claim cost inflation,” Hettinger points out.

Survey results show that price changes reported by carriers between the third and fourth quarters of 2013 indicate increases, although they are somewhat smaller in magnitude than the 6% to 7% increases reported in the second half of 2012 and first half of 2013.

Price increases by line of business were lower than those reported in the third quarter in all lines, with the exception of general/products liability and excess/umbrella liability, the statement notes. Prices for most lines of commercial insurance showed gains in the mid-single digits, while none of the classes surveyed reported a price drop.

Looking at the entire year, carriers report loss ratios improved 3% for accident-year 2013 relative to the same period in 2012 (excluding catastrophes), as earned price increases more than offset claim cost inflation.

“Carriers projected approximately 2% claim cost inflation underlying the loss ratio movement for both accident-years 2012 and 2013 across the aggregate commercial industry,” Towers Watson adds.