Hard Market Ain't Dead Yet
The Consumer Federation of America has declared the hard market dead or at least dying. Based on quarterly market surveys by the Council of Insurance Agents and Brokers, CFA notes that "while rates are still increasing, they continue to drop in magnitude."
In addition, CFA cites data showing that commercial insurance loss ratios have dropped sharply in the past year, concluding that "these two trends indicate the end of the 'hard' market in commercial insurance."
"The combination of lower losses and continued sluggish rate increases in most commercial lines is a double whammy the hard market can't take," gushed J. Robert Hunter, CFA's director of insurance. "Most businesses should see their insurance costs level off and then start to drop in the next few months."
For the sake of corporate insurance buyers, we hope CFA is correct. However, we have our doubts. There's a very big difference between price increases slowing down and rates actually falling, especially when you're talking about the skyrocketing premium hikes of the past two years.
Indeed, even the optimistic Mr. Hunter hedged his bet. "While there may be some increases yet ahead for some specific commercial insurance buyers, the end of the hard market is clearly at hand for most business consumers," he opined.
Still, buyers should not begin partying quite yet. As long as the reinsurance market remains in a shambles, and as long as the stock market offers–at best–an unreliable source of investment gains to make up for any potential underwriting losses, the commercial market is going to remain, if not hard, then very firm for the next couple of years.
Therefore, insurance buyers should think carefully before running to their CFOs to tell them to budget in a big drop in coverage costs anytime soon.
Reproduced from National Underwriter Edition, May 5, 2003. Copyright 2003 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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