The Council of Insurance Agents & Brokers quarterly survey of insurance brokers finds commercial property and casualty pricing continues to be soft, but results appear to indicate some trending to smaller declines than in past quarters.
"We saw no significant change in pricing trends from the first quarter to the second quarter," said Ken A. Crerar, president of the Washington D.C.-based group, announcing the latest survey of 115 individual member brokers, representing the nation's largest insurance brokers.
"If a hard market is coming, it's up the road a bit. The pricing appears to be more a result of the weak economy than capacity," Mr. Crerar said.
Agents and brokers responding to the question of how premium rates have changed over the three months from April 1 through June 30 reported lower rates averaged out to a 4.9 percent drop overall. The average was slightly down from a negative 5.1 percent reported for CIAB's first-quarter 2009 survey.
The second-quarter survey marks the third consecutive quarter of average drops below double-digits. For the fourth quarter, survey participants reported rate drops averaging 6.4 percent overall–a sharp contrast from third-quarter 2008, when the average drop was 11 percent.
The CIAB said some brokers feel underwriters are not aiming for a hard market and are reverting to 2008 underwriting practices with fierce competition between carriers for new business. Some brokers reported differences on new business quotes and renewals, saying that while underwriters are undercutting one another in order to obtain new business, the insurers are focusing on trying to push increases on renewals.
Coverage problems are cropping up, primarily for catastrophe-prone property, according to some brokers. Other were pointing to problems in directors and officers and workers' compensation.
Broken down by size of account, small accounts saw modest changes in the magnitude of rate declines in the quarter–improving from negative 3.3 percent in the first quarter of this year to negative 2.5 percent in the second quarter.
Medium-size and larger accounts saw some rate deterioration as brokers on average actually reported bigger rate declines in the second quarter than the first. Medium-size accounts went from negative 5.6 percent in the first quarter to negative 5.7 percent in the second; large accounts went from negative 6.4 percent in the first quarter to negative 6.7 percent.
Survey results were tallied in 10 percentage point bands (such as down 1-10 percent and up 10-20 percent), and for all account sizes, most brokers said rates were unchanged or down 1-10 percent.
Brokers said 41 percent of small accounts experienced rate decreases of 1-10 percent, while 42 percent of accounts saw no change.
On the medium-size accounts (between $25,000 and $100,000 in commission and fees), 51 percent of accounts were down 1-10 percent and 23 percent saw no change. Sixteen percent of accounts were down 10-20 percent.
For large accounts, 37 percent were down 1-10 percent, while 24 percent were down 10-20 percent. Five percent were down further at 20-30 percent and 17 percent saw no change.
On the up side, only 8 percent of small and medium-size accounts experienced increases of 1-10 percent, while 7 percent of large accounts experienced the same increases.
By line of business, the CIAB said rates for directors and officers liability and surety bonds showed some upward trend, with D&O rates rising 1.1 percent on average in the second quarter and surety bonds showing an uptick of 0.5 percent.
On the down side, the medical malpractice line experienced the least downward pressure, with a 0.9 percent average drop recorded based on the survey responses.
The CIAB said when brokers were asked if they saw any improvement in the market or the economy impacting their business in a positive way, 84 percent said no.
The economy remained at the top of the list of the most critical political issues facing the United States today, followed closely by health insurance reform, CIAB said.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.