NU Online News Service, Dec. 13, 11:14 a.m.EST
|For the second straight quarter, all standard commercial linesshowed an increase in pricing, but it isn't enough to keep up withloss costs.
|According to Towers Watson's Commercial Lines Insurance PricingSurvey (CLIPS), commercial insurance prices rose 2 percent duringthe 2011 third quarter—especially for mid-market and largeaccounts—but loss costs have increased 4 percent to date this year,compared to 2010.
|Bruce Fell, managing director of Towers Watsons' property andcasualty practice in the Americas, says “we will not be in a marketwhere insurance company results can improve, and we start toen
ter a real hard market” until rate increases exceedloss-cost inflation.
Results are backed up by a recent survey Towers Watson did ofchief financial officers. Close to two-thirds of surveyed CFOs sayproperty market prices are at the bottom of the cycle and turning upward.
|The results were mixed in specialty lines, according to TowersWatson. For instance directors' and officers' liability, for theseventh straight quarter, saw price reductions.
|Workers' compensation and commercial property led the way withprice insurances. Price hikes in workers' compensation are drivenby actuarially unsound pricing for some time. Commercial priceincreases have been influenced by global catastrophes thisyear.
|According to CLIPS, predictive modeling is playing a large rolein pricing and risk selection. Companies thatuse modeling achieve greater results than those that do not,the survey found. More than 50 pecent of premium volume correspondsto the use of predicting modeling for pricing and more than 30percent can be attributed to insurers use of the tool for riskselection, says Towers Watson.
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