More Signs Of Premium Moderation
The Council of Insurance Agents & Brokers quarterly survey of brokers indicates that premium increases are beginning to moderate, but indicators are not pointing to a softening market, according to CIABs president.
"Leveling does not mean a soft market is returning," said Ken A. Crerar, president of the Washington, D.C.-based association, in a statement. "Industry analysts say the hard market is likely to last another 18 months, and brokers expect modest increases to continue in most lines with no great decline in rates."
The survey, based on the responses from 125 of the largest brokers in the United States, says that most accounts of all sizes experienced premium increases between 1 and 20 percent. In the same period last year, most clients were seeing increases in the 10 to 30 percent range, according to brokers surveyed. And many more saw no change in rates compared to last year.
For small accounts, with commissions and fees of $25,000 or less, 38 percent of the clients experienced increases of between 1 to 10 percent, while 28 percent saw increases ranging between 10 and 20 percent. Fifteen percent saw no change.
This compares to last year when 40 percent of clients saw increases ranging between 10 and 20 percent, and 35 percent saw increases ranging between 20 and 30 percent. Only two percent of small account clients saw increases between 20 and 30 percent in this quarters report.
For medium-size accounts, with commissions and fees ranging between $25,000 to $100,000, 35 percent of accounts saw increases between 1 and 10 percent, and 35 percent saw increases in the 10 to 20 percent range. In 2002, only 4 percent saw increases in the 1 to 10 percent range, while 19 percent were hit with 10 to 20 percent increases, and 43 percent saw increases between 20 and 30 percent. Eleven percent saw no increase in rates in 2003, compared to 1 percent for the same period of 2002.
Large accounts, with over $100,000 in commissions and fees, also benefited from the moderating market. Only 7 percent were hit with increases in the 20 to 30 percent range, the survey said, compared to 31 percent for the same period last year. Twenty-eight percent of these accounts saw increases ranging between 10 and 20 percent, compared to 10 percent in 2002. Thirty percent had increases ranging between 1 and 10 percent. Only 4 percent of large accounts saw increases in that single-digit range for the same period last year. Eight percent had no change this quarter, compared to 1 percent in 2002.
The survey report also gives results for 13 individual lines of business, revealing significant moderation in premium increases for several lines when compared to last years results.
For commercial property, 55 percent of premium increases ranged between 1 and 20 percent in 2003, compared to only 20 percent in 2002.
The pattern of property hikes showed even more significant changes when compared to 2002 in the higher percentage ranges. Brokers reported that only 5 percent of property accounts saw increases ranging between 20 and 30 percent, compared to 30 percent in 2002. And 2 percent of property accounts rose 30 to 50 percent in 2003, compared to 31 percent for the second-quarter 2002.
In umbrella, 49 percent of the brokers said rates increased between 1 and 20 percent, compared to only 14 percent of brokers reporting that percentage change in 2002. Six percent said rates rose between 30 and 50 percent, which is a dramatic drop from the 27 percent who said rates rose that much in 2002.
Even in what some agents and brokers are calling one of the toughest lines, workers compensation, there appears to be some notable moderation. Eleven percent of brokers in the 2003 survey said they saw no change in rates, compared to 5 percent in the second quarter report for 2002. Moving higher, 15 percent said workers comp rates rose 20 to 30 percent, while 32 percent put increases in that range in 2002.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, July 28, 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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