April Insurance Price Declines Up to 12%

NU Online News Service

U.S. property and casualty insurance price declines averaged 12 percent last month and continued across all lines, falling from 12 percent to 4 percent depending on category, MarketScout insurance exchange reported.

The Dallas-based firm said its barometer showed property, business interruption, workers' compensation, employment practices liability and small account premiums all softened further, as compared to March 2007.

Jumbo accounts had a 1 percent premium increase from last month, when the decline was down 13 percent. This April it was down 12 percent, The same numbers applied to general liability. Excess liability was down only 11 percent in April compared with 12 percent for March placements, MarketScout found.

Richard Kerr, MarketScout chairman and chief executive officer, said, "Insurers continue to aggressively seek new business by broadening coverages and decreasing premium.

"Only the most disciplined, mature companies are maintaining a moderate approach," he said. "Many new insurers don't have that luxury because they raised capital based upon pro forma business models, which assumed certain levels of premium to amortize the expenses related to staffing, automation, rating and claims systems."

Mr. Kerr said the firms that counted on those premium levels "are forced to price aggressively in order to write enough business to justify their fixed processing and administration expenses. If they don't write the business, they will certainly make a loss."

Those companies, he said, "justify their low rates by assuming the premium volume will at least help amortize their expenses and perhaps they will even get lucky and generate a profit--a very dangerous game indeed."

The decreases for April 2007, broken down by coverage class, industry class and account size, were as follows:

By Coverage Class

Commercial Property--12 percent

Business Interruption--11 percent

Inland Marine--8 percent

General Liability--12 percent

Umbrella/Excess--11 percent

Commercial Auto--7 percent

Workers' Compensation--13 percent

Professional Liability--8 percent

Directors and Officers liability--7 percent

Employment Practices Liability--11 percent

Fiduciary--5 percent

Crime--5 percent

Surety--4percent

By Account Size

Small accounts, up to $25,000--10 percent

Medium accounts, $25,001-$250,000--10 percent

Large accounts, $250,000-$1,000,000--12 percent

Jumbo accounts, over $1,000,000--12 percent

By Industry Class

Manufacturing--13 percent

Contracting--9 percent

Service--12 percent

Habitational--10 percent

Public entity--10 percent

Transportation--7 percent

Energy--11 percent

MarketScout compiles its barometer with data from an electronic insurance exchange which underwrites and distributes hundreds of product lines to its 58,000-member agency network across the U.S.

Its findings are also supported by surveys conducted by The National Alliance for Insurance Education and Research. These surveys were conducted during institutes held in April.

MarketScout exchange platform is online at http://www.marketscout.com.