P-C Rate Increases At 9% In March: MarketScout

NU Online News Service, April 13, 3:53 a.m.EDT?Property-casualty sector rate hikes increased ninepercent in March?on the same level with the February figure anddown slightly from January, when the rate increase came in at 11percent?data from an online quote service for insurance agentsshowed. [@@]

According to Dallas-based Marketscout, which harvests its datafrom 60 insurance companies and 48,000 industry users, the Marchfigure shows a continuing downward trend in the pace of p-c rateincreases.

In 2003, the average p-c rate hike, as recorded by Marketscout'smonthly "Market Barometer," was 18 percent. More tellingly, thefirst half of 2003 saw rate hikes at an average of 23 percent,while the latter half of 2003 showed a 12 percent rateincrease.

Meanwhile, since the market is now softening and premiums arecoming down, a few insurers have begun raising retail-agentcommissions back to "pre-hard market levels," according to RichardKerr, Marketscout chief executive.

He said of this shift, "An age old issue has emerged which couldimpact insurers profitability." He observed that usually, duringthe hard market, some insurers cut commissions for the retailagent, deciding that higher premiums would offset lower commissionsand yield the same compensation to the retail agent.

In this softening pricing environment, insurance companyexecutives should be careful in monitoring other carriers'decisions and in determining if the retail agent would movebusiness if the carrier doesn't raise commissions.

"Some industry observers would argue there are certain retailagents who will direct business to whichever insurer pays thehighest commission, period," according to Mr. Kerr.

Mr. Kerr suggests one solution could be for companies to embrace"profit commissions."

"Insurers and retail agents who truly partner to deliver aprofitable book of business will both win," he said.