CIAB: Premiums On The Rise
Premiums are continuing their upward spiral, prompting more risk managers to consider self-insurance, while large producers are becoming increasingly concerned about insurer solvency, a survey by the Council of Insurance Agents & Brokers has revealed.
The Washington-based Council's "Commercial Insurance Market Index" for the third quarter, released last week, found that since July 1 premium rates overall have risen between 10- and 30 percent in more than half of the accounts that insurance brokers renewed between then and the end of September.
Broken down by account size, 65 percent of small accounts (those producing commissions and fees of less than $25,000) saw increases in the 10-to-30 percent range. Sixty-seven percent of medium-size accounts (between $25,000 and $100,000) reported increases in this range, compared with 52 percent of large accounts (over $100,000).
Of the larger accounts, 21 percent saw increases between 30- and 50 percent. Thirteen percent of medium-size accounts saw price hikes in that range, while only 2 percent of the small accounts were hit with that much of an increase. The survey results were tabulated from the responses of 128 CIAB member brokers.
All classes of insurance have seen increases, the CIAB Index indicates. Some of the hardest-hit lines, according to the survey, are umbrella, commercial property and general liability.
However, the sharpest increase appeared in medical malpractice. Nineteen percent reported price increases of more than 100 percent, 11 percent cited hikes of from 50-to-100 percent, and 17 percent said their premiums rose in the 30-to-50 percent range. Directors and officers liability also saw some hefty increases, with 16 percent citing hikes from 50-to-100 percent, and 18 percent in the 30-to-50 percent range.
When asked to compare prices to a year ago, more than 90 percent of the respondents said commercial auto, commercial property, general liability and umbrella had all seen substantial increases of between 20- and more than 100 percent. The sharpest increases came in D&O and umbrella, with 32 percent reporting that rates have risen 50 percent and higher since last year.
According to the CIAB, brokers reported that "across the board" clients are taking higher deductibles, while 59 percent of responding brokers said clients are self-insuring "a portion of their risks." The association said that 51 percent reported that some clients are "going bare" and doing without insurance for risks that were previously insured.
CIAB President Ken A. Crerar said members are reporting concern over insurance company solvency, and that large member brokers are worried that state regulators are not addressing the issue quickly enough. "Solvency is a top priority, and one the industry and regulators must take very seriously," said Mr. Crerar, adding that the current regulatory system lacks the "full confidence" of top brokers and needs federal reform.
In a commentary issued independently by the William Capital Group, the New York-based research analyst said the survey reinforces their position that insurance remains "mainly a sellers market," and that commercial buyers are "more than a year from seeing any return in declining rates."
Robert P. Hartwig, vice president and chief economist for the Insurance Information Instate in New York, said that while CIAB's and other figures indicate that the hard market will continue through 2003, the pace of increase does not appear to be accelerating. Most of the increases, he noted, are coming in at 30 percent or less.
The CIAB report, he continued, might indicate "some leveling off" in price increases. Mr. Hartwig pointed out that the survey showed a "fractional" number of brokers reporting no premium rate changes in a number of lines. "What this means is that pricing has not peaked–it just merely means some plateau may have been reached in the magnitude of increases," he suggested.
When asked about broker concerns over solvency, Mr. Hartwig disputed the observation. He said there have not been a significant number of companies going insolvent since Sept. 11, 2001, and the question has not been an "issue for commercial property-casualty insurers, and there is no reason to believe it will."
The complete CIAB Index report is available at www.ciab.com.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, November 4, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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