Insurance Prices Down, But Not In Free Fall

The current pricing trend is "almost like a firework falling down to the ground. What you're seeing now is some of the embers the rates are coming down," added Mr. Kugler, who is also assistant treasurer, risk management, for Snap-on, Inc. a developer, manufacturer and marketer of tool and equipment solutions for professional tool users based in Kanosha, Wis.

What can't be gauged from the survey, he noted, is that some of the coverage restrictions and self-insured retentions and deductibles "relief valves" that had skyrocketed as the insurance market hardened over several years are also coming down now that premiums are falling.

However, Mr. Kugler does not see property-casualty insurance prices collapsing. Even before the multibillion-dollar losses from Hurricane Charley in Florida and the Carolinas began to be tallied, he said that insurers were strengthening their claim reserves and "don't want to go back to the crazy late-1990s of a very soft market. So I think the memory is still fresh."

He predicted that there would be slow descent rather than the "heyday of the '90s, because I think those bad dreams are still in their memory."

He said the D&O market is still shaky, property is coming down (at least it was before Hurricane Charley), and some of the casualty lines are seeing premiums fall, as well.

"I expect some moderation in pricing, better terms and a few more carriers interested in your business, whereas in the past you may have had a more restrictive market," he explained. "So all those things play into a more favorable situation for risk managers."

The survey found that property and general liability posted rate decreases, with property falling 1 percent (down for the third consecutive quarter) and general liability 2 percent lower (in the negative column for the second quarter in a row).

Workers' comp was the only major line included in the survey that recorded a discernible increase on average, coming in at 1 percent higher, RIMS said. D&O and workers' comp had been experiencing significant double-digit increases as recently as last fall, but both have seen precipitous drop-offs in the rate of increase in the last few quarters.

"The bottom has not fallen out of the market, but this is a deliberate march to a soft market," noted David Bradford, editor-in-chief at New York-based Advisen, the information services firm that performed the survey.

Advisen, a provider of information, analytic and benchmarking tools for commercial insurance professionals, analyzes the survey results continuously, "offering a dynamic and virtually real-time window into the current purchase patterns of commercial insurance buyers," RIMS said. The results represent data compiled from more than 1,100 organizations to-date.

With Advisen's survey online, Mr. Kugler said, data is fresher and provides researchers with "a better pulse, whereas the old benchmarking surveys were great, but they almost were two years old" by the time they were published.

The online version of the RIMS Benchmarking Service is now available for subscription purchase online at http://rims.advisen.com/, or go to the RIMS Store at RIMS.org for details.

Reproduced from National Underwriter Edition, August 19, 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.