Commercial Market Easing In Q1
Average premium rate increases for commercial property-casualty customers in first-quarter 2004 were reminiscent of levels experienced just before the last soft market ended, according to a brokers' survey published last week.
In its quarterly market report, the Washington-based Council of Insurance Agents & Brokers said a survey of 113 brokers indicated there was significantly less upward pressure on premium rates in the first quarter, with rate changes falling to levels that were similar to year-end 1999.
According to the survey, across all sizes of accounts, double-digit increases are becoming rarer. While close to 20 percent of accounts in the small and medium account-size categories saw rate increases of 10 percent or more in the last quarter of 2003, the first quarter of 2004 presented a very different picture.
For example, during the first quarter of 2004, brokers said premiums rose by 10 percent or more for only 5 percent of small accounts those with commissions and fees of less than $25,000. This compared to 17 percent of small account clients seeing double-digit increases in the last quarter of 2003, when 4 percent of them actually experienced jumps of between 20-to-50 percent. None averaged higher than 20 percent in 2004.
Forty-one percent of the small account clients saw rates rise between 1 and 10 percent, compared to 43 percent in 2003. Those seeing no change rose to 34 percent in the report, compared to only 25 percent in fourth-quarter 2003.
The same trend followed medium-sized accounts those with fees and commission between $25,000 and $100,000.
Large accounts saw the most dramatic change, with 27 percent of accounts seeing increases of between 1 and 10 percent in first-quarter 2004, compared to 45 percent in fourth-quarter 2003. Only 4 percent of large accounts reported increases that ranged from 10-to-30 percent in the first quarter of this year, compared to 9 percent in the last quarter of 2003.
In fourth-quarter 2003, 3 percent of large accounts saw increases between 30 and 100 percent, while the 2004 survey showed no accounts seeing similar increases.
There was also some indication of downward rate pressures, as 41 percent of large accounts, for example, saw decreases ranging from 1-to-30 percent. This compared to only 23 percent in 2003.
"The survey still shows some trouble spots in the commercial market, where commercial coverage is hard to find and expensive when you can find it," said Ken A. Crerar, president of the CIAB. "The biggest trouble areas remain residential construction risks, umbrella coverage, workers compensation and medical malpractice."
While still difficult, the four lines still showed some moderating shifts, according to the survey.
For instance, for workers' comp in the first quarter of 2004, 26 percent of respondents said rates were unchanged, compared to 21 percent in the previous quarter; 38 percent said rates increased between 1 and 10 percent, compared to 22 percent in the last report. But 15 percent said rates rose between 10 and 30 percent, compared to 30 percent seeing increases in this range in the 2003 fourth-quarter report.
Medical malpractice saw slight pricing changes, with 3 percent reporting a 1-to-10 percent decrease, compared to zero in 2003, and 8 percent saying there was no change, compared to 3 percent in the last report. The bulk of the increases for medical malpractice were in the 10-to-30 percent range, with 22 percent seeing increases in the first three months of 2004, compared to 32 percent in the last three months of 2003.
Additional information is available at www.ciab.com.
Reproduced from National Underwriter Edition, April 23, 2004. Copyright 2004 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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