P-C Rate Increases At 9% In March: MarketScout

P-C Rate Increases At 9% In March: MarketScout

NU Online News Service, April 13, 3:53 a.m. EDT?Property-casualty sector rate hikes increased nine percent in March?on the same level with the February figure and down slightly from January, when the rate increase came in at 11 percent?data from an online quote service for insurance agents showed. [@@]

According to Dallas-based Marketscout, which harvests its data from 60 insurance companies and 48,000 industry users, the March figure shows a continuing downward trend in the pace of p-c rate increases.

In 2003, the average p-c rate hike, as recorded by Marketscout's monthly "Market Barometer," was 18 percent. More tellingly, the first half of 2003 saw rate hikes at an average of 23 percent, while the latter half of 2003 showed a 12 percent rate increase.

Meanwhile, since the market is now softening and premiums are coming down, a few insurers have begun raising retail-agent commissions back to "pre-hard market levels," according to Richard Kerr, Marketscout chief executive.

He said of this shift, "An age old issue has emerged which could impact insurers profitability." He observed that usually, during the hard market, some insurers cut commissions for the retail agent, deciding that higher premiums would offset lower commissions and yield the same compensation to the retail agent.

In this softening pricing environment, insurance company executives should be careful in monitoring other carriers' decisions and in determining if the retail agent would move business if the carrier doesn't raise commissions.

"Some industry observers would argue there are certain retail agents who will direct business to whichever insurer pays the highest commission, period," according to Mr. Kerr.

Mr. Kerr suggests one solution could be for companies to embrace "profit commissions."

"Insurers and retail agents who truly partner to deliver a profitable book of business will both win," he said.