Commercial rates fell in December 2014 -- sending out warning signs for the return of a soft market -- while personal rates moderated during the same period, according to a recent report from MarketScout.

"We are on a cusp of a soft market," says Richard Kerr, CEO of MarketScout. "Throughout 2014, the composite P&C rate slowly drifted towards renewing as expiring, and in December we finally hit that mark."

By coverage classification, rates for all commercial coverages were down 1% in December with the exception of employment practices liability insurance (EPLI), which remained at +2%, and commercial property and auto, which were down 2%.

(See chart on the right for December 2014 commercial rates by coverage.)

According to Kerr, the insurance industry entered a hard market in November 2011 and, after 37 months, "the rate increases appear to be over." Kerr expects the next soft market cycle to begin early this year.

"It's coming -- and soon," says Kerr. "We don't expect the aggressive pricing that occured in the last soft market cycle; however, smart companies will be prepared for a changing rate environment."

Meanwhile, premiums for homeowners and auto policies moderated in December 2014.

Homeowners and auto policies were 1% less expensive in December than in November. Homes valued up to $1,000,000 were up 3%, while those over $1,000,001 were up 2%.

Auto insurance rates were up 2% and personal articles rates were up 1%.

"The personal insurance market has been relatively stable in 2014 with rate increases ranging from 2% to 4%," says Kerr. "We expect continued pricing stability in 2015 absent cataclysmic events."

Special Reports /

P&C rates: Commercial market 'on the cusp of soft market,' as personal lines stabilize

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