P-C Insurance Price Declines Stabilize, But For How Long?

U.S. property and casualty insurance price declines stabilized last month, averaging the same 12 percent cut as in March, while the softening market continued to impact some lines more heavily than others, according to MarketScout's “barometer” survey.

However, the Dallas-based insurance exchange said it is far from clear whether the softening market has hit bottom. “Insurers continue to aggressively seek new business by broadening coverages and decreasing premium,” said Richard Kerr, MarketScout's chairman and chief executive officer.

“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 certain 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.”

By coverage class, workers' compensation reported the steepest drop at 13 percent. Commercial property (12 percent), general liability (12 percent), business interruption (11 percent), umbrella/excess (11 percent) and employment practices liability (11 percent) saw double-digit drops as well.

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