Steady erosion of the commercial insurance industry's pricing continued in the third quarter led by liability, while the property segment continued "nudging upwards," according to the RIMS Benchmark Survey.
The findings based on reports from corporate risk managers provide a comprehensive look at current policy renewal prices.
Increases in property coverage were driven substantially by companies in earthquake-exposed regions, according to the study. Average property premiums rose 2.1 percent in the third quarter of 2007, according to the Risk and Insurance Management Society.
"The clear thing is that the insurance industry continues to be very profitable and those profits just further fuel the competition," David Bradford, editor-in-chief of Advisen, Ltd., told National Underwriter. "That with a lack of major catastrophe activity is just going to continue to fuel these trends into the future."
Advisen collects and analyzes the data and provides the technology infrastructure for the survey's online services.
Mr. Bradford expressed some surprise to see property coverage was still "nudging upwards."
"We had heard anecdotally, and it seems to be borne out by the numbers, that in hurricane-prone areas premiums were stable to lower for the larger risks but it looks like there's still some upward pressure coming from earthquake-exposed business," he said.
This may be the case, he surmised, because models are being recalibrated "with lessons learned from the hurricanes and I think they're still being factored into the premiums."
He explained that much was learned from Hurricane Katrina, "just in the costs of a major catastrophe–the rebuilding costs and the inflation that goes with that, so that's been factored into the hurricane models as well."
Mr. Bradford noted that workers' compensation is beginning to stabilize after falling sharply for the past six quarters, "as California and a couple other states with the big reform measures were pushing the premiums down."
All this is good news for buyers, he added. "Buyers' renewals are when they are, but this is certainly the time to negotiate the best terms you can with your insurers."
According to the study, directors and officers liability (D&O) posted the largest decrease at 3.9 percent, while average general liability premiums decreased by 3.2 percent.
Workers' compensation averages, while still falling, are decreasing at a slower rate; they experienced a drop of 1.5 percent during the third quarter.
"For the most part, pricing trends continue to be very positive for commercial buyers," said John R. Phelps, member of the RIMS board of directors and director of business risk solutions for Blue Cross and Blue Shield of Florida, Inc. "All indicators point to further improvements in the fourth quarter, barring a major catastrophe."
Mr. Bradford added that the market, long referred to as "softening" can finally be termed "soft."
"I think that once we've had this persistent trend since the beginning of 2004, at some point in time we just have to call it a soft market," he said. "It's going to last for a long time if there's not a pretty monumental disaster. I don't think we're going to see the bottom of it for another year, at least."
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