Lingering Soft P&C Market Creates 'Pain For Everyone'

Rates for U.S. property and casualty commercial insurance policies were down an average of 4 percent during September–the same as the month before–with the most competitive pricing for accounts over $1 million in premium, according to MarketScout.

The lengthy soft market and recession are “creating a lot of pain for everyone,” including insurers, reinsurers, agents and brokers, according to Richard Kerr, chief executive officer of MarketScout, which produces the monthly “Market Barometer.”

“Everyone is fighting and scratching for market share,” Mr. Kerr noted. “If rates don't go up soon and the economy remains in the doldrums, the fighting will only get worse.”

However, in the end some insureds could lose out, as smaller agents looking to take business from larger firms might be faced with intermediaries or insurers unwilling to accept accounts because of “market pressure,” according to Mr. Kerr.

“In this market, he or she who controls the most premium sometimes makes the rules,” Mr. Kerr observed. “If the agent losing the business does $50 million with the intermediary or insurer, and the new agent does $1 million, the agent with the bigger stick might be able to exert pressure that would force the market to carefully weigh the results of accepting the account from the new retailer.”

He added that “we don't feel that is good practice because it isn't in the best interest of the insured. However, it does happen.”

“Jumbo accounts,” or those of more than $1 million in premium, saw rates fall 5 percent, MarketScout found. Large ($250,001-to-$1 million) and medium-sized ($25,001-to-$250,000) accounts each saw decreases of 4 percent.

By coverage class, general liability was down 5 percent, while commercial liability and inland marine were down 4 percent. Commercial auto and workers' compensation were down 3 percent.

As in August, the service industry saw the greatest rate reductions at 5 percent. Rates in the contracting industry were down 4 percent.

The National Alliance for Insurance Education and Research conducted pricing surveys used in MarketScout's analysis. “These surveys help to further corroborate MarketScout's actual findings, which are mathematically driven by new and renewal placements across the United States,” the firm noted.

The barometer is compiled by MarketScout, a Dallas-based electronic insurance exchange that “underwrites and distributes hundreds of product lines to its over 35,000-member agency network across the United States.” For more information, go to www.marketscout.com.