US commercial brokers report market competition and price softening

The average premium decline on commercial insurance accounts in the third quarter of 2004 was almost 6%, according to the latest quarterly market index from the U.S. Council of Insurance Agents and Brokers (CIAB).
“Price competition has definitely returned to the marketplace, although more so for new business than renewal business,” says CIAB president Ken A. Crerar. “But,” he adds, “terms and conditions are still tight. Underwriters appear to be more willing to negotiate on price than on coverage.”
Meduim to large accounts saw the biggest pricing declines, with brokers reporting two-thirds of these accounts received decreases of up to 20%, and an additional 11% of large accounts seeing premium drops of 20-30%.
Small accounts also experienced the benefits of price competition, with rates decreasing 34% seeing premiums drop up to 10%, and another 11% with drops of 10-20%.
Overall, premiums for large accounts dropped an average of 8.3% during the quarter ending September 30, with medium account decreases an average 6.4% and 3.1% for small accounts.
Brokers also report rates stabilizing or dropping across lines of business, with property leading the way again this quarter. General liability, umbrella, business interruption and even directors’ and officers’ (D&O) lines experienced rate declines. Lines continuing to see trouble, however, include construction risks, workers’ compensation and medical malpractice.
Despite this pricing break for clients, brokers are concerned about the signs of competition they see in the market and their potential impact on insurer solvency. And, responding to the recent hurricane catastrophes in Florida and other southern states, brokers say they expect to see stabilization of the property market in high-risk areas.