Is it possible that the property-casualty insurance market isn't softening as dramatically as some surveys indicate? That's the question raised because of conflicting reports of pricing activity, with agent-generated surveys showing far deeper drops than one relying on carrier-provided data, which only indicates a single-digit decline. Who is right?

(For full coverage of the conflicting surveys, click here.)

NU's Feb. 4 story, by Mark Ruquet and Dan Hays, reported that Towers Perrin–citing first-hand data from carriers–said average prices for all lines of coverage combined fell only 4-to-5 percent between 2006 and 2007.

That's quite modest in comparison with the monthly “Market Barometer” survey by MarketScout (an online insurance marketplace) which found rates overall down 13.15 percent, as well as the quarterly survey by the Council of Insurance Agents and Brokers, which reported an average price decline in the fourth quarter of 12 percent (only slightly better than the 13.3 percent drop in the third quarter).

So, who do we believe?

Towers Perrin touts its CLIPS report as a better barometer than most surveys, because the data comes out of commercial lines insurer price-monitoring systems.

A representative of the company also suggested that agent-supplied pricing data may not reflect smaller lines of business written by direct-writing companies that dont use independent agents, which, according to Towers Perrin, is less sensitive than larger accounts to price swings.

The official added that agent data might focus more on business that moves from shop to shop at renewal time, which sees more price volatility.

Towers Perrin isn't the first party to suggest that agent/broker surveys might overstate the depth of price-cutting. Back in our Nov. 16, 2006 edition, W.R. Berkley Corp. Chairman William Berkley declared that pronouncements by analysts about soft casualty insurance prices were based on inaccurate broker surveys and are overblown.

“The pricing pressure is not as severe as what's being reported,” he said, during the opening panel of the 18th Annual Executive Conference for the Property-Casualty Industry.

“I think we've got a lot of people crying wolf right now,” he added, as reported by our own Susanne Sclafane. (Click here for the complete story.)

Speculating on how the figures in producer surveys are obtained, he said that if you call a broker on a day when he just lost a piece of business to a company charging 20 percent lower rates, and ask that broker how rates are holding up, he'll say the market is “terrible,” according to Mr. Berkley.

“If they bothered to ask companies, they'd find, in general, they're not so terrible,” he said.

Well, that's exactly what Towers Perrin appears to be doing. The firm also defends the accuracy of its survey results by noting that given the minimal declines in premiums written by the industry overall, prices cannot possibly be falling in the double-digit range, as producer surveys indicate.

Given the insurance industrys aggregate reported premiums for the first nine months of 2007, it seems unlikely that price decreases were as dramatic as those reported in other surveys, according to Jeanne Hollister, managing principal and practice leader for U.S. property-casualty insurance at Towers Perrin.

What do you folks make of all this?

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