The commercial insurance market in general might be heading south, but the bottom hasn't fallen out yet, a survey of National Underwriter readers reveals.
Indeed, despite a general decline in prices, a significant percentage of risk managers expect premiums to rise for selected coverage, and anticipate their overall insurance spending and risk retention levels to either remain unchanged or increase over the next 12 months, the survey of 132 of NU's risk management subscribers found.
Although 39 percent of corporate insurance buyers anticipate overall premium spending to drop between 1- and 10 percent, 12 percent expect the status quo, while 38 percent believe insurance outlays will actually rise between 1- and 10 percent, according to the survey, sponsored by Miller Insurance Services Ltd.–an independent, specialist, wholesale insurance and reinsurance broker based in London, operating internationally as well as at Lloyd's.
A small minority believe they face a sharp hike in overall premium spending–with 4 percent signaling a rise of 11-to-25 percent, and 2 percent expecting more than a 25 percent increase.
While the market might be softening overall, prices are not expected to fall off a cliff anytime soon, with only 3 percent of risk managers surveyed indicating they anticipate overall insurance spending to drop between 11- and 25 percent. No buyer surveyed predicted a spending decline deeper than 25 percent.
"Risk managers are taking more control of the insurance cycle as part of their overall risk management strategy," according to John Eltham, North American business leader with Miller Insurance Services Ltd., in London. "For example, despite the softening market, many are opting to increase or maintain retention levels and use captives to fund more of their own risks."
Indeed, despite the general availability of cheaper coverage, nearly two-thirds of risk managers surveyed said they would leave their retention levels unchanged, while 29 percent expect to take on more risk themselves. Only 5 percent said they would cut their retentions in the next 12 months.
The survey–conducted over the phone and via the Internet in February and March on behalf of NU and Miller Insurance Services Ltd. by Litchfield Research, an independent firm based in Marietta, Ga.–also found that the large majority of corporate insurance buyers don't believe their firms have benefited from the fact that major brokers stopped accepting contingency fees following probes by then New York attorney general (now governor) Eliot Spitzer and others.
Indeed, 56 percent of risk managers surveyed said the money saved by dropping contingency commissions is being retained by insurers, compared to only 7 percent who believe the savings are being passed on to them in the form of lower premiums. More than one-in-three simply "don't know" where that bonus money went.
Nonbuyers surveyed–most operating directly within the insurance industry–expressed similar doubts, with nearly two-thirds responding that the money saved was being retained by carriers, and only 4 percent seeing buyers enjoying the benefit. One-third "don't know" where those funds went.
For more details on the survey results, go to http://www.propertyandcasualtyinsurancenews.com/cms/nupc/website/State+of+the+Market.
In addition, for a more comprehensive report by Miller providing even more survey results and in-depth analysis, e-mail your contact details to: northamerican.research@miller-insurance.com.
Miller representatives will also be available to discuss the survey results in New Orleans at the Risk and Insurance Management Society's annual conference from April 30-May 3. Miller will be at the Lloyd's booth–number 2320–in the main exhibit area.
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