From a seller's perspective, the transportation insurance market is "not getting worse," according to a just-published survey, which even reveals more rate hikes than declines for certain select segments like charter buses and courier services.
The first-quarter 2011 survey from NIP Group, a Woodbridge, N.J.-based wholesale broker and program manager, known as TIPS—an acronym for Transportation Insurance Pricing Survey—tallies the responses to questions about market conditions from leading transportation insurance brokers, wholesalers and underwriters representing thousands of account placements, NIP says.
Asked to give their opinions of the overall direction of the transportation insurance market, one-quarter of respondents said it is "hardening" or "hard," with another 37.5 percent describing the market as "flat." That means some 62.5 percent of sellers believe the transportation market is no longer soft. In contrast, during first-quarter 2010, 95 percent of sellers surveyed said the market was flat or soft.
"Survey participants are optimistic that rates have stabilized and are starting to slowly move higher," says Richard Augustyn, NIP Group chief executive officer, assessing the latest quarter's TIPS results.
In the first quarter, more than 65 percent of respondents also reported that the number of insurers underwriting transportation business was the same or less—a reversal from last year, when survey results revealed capacity entering transportation classes.
Commenting on new entrants to the transportation market in August last year, Augustyn told NU that transportation tends to be a place where excess insurance capacity is allocated, but added that it's "transitory capacity" seeking opportunities for top-line growth. He suggested that future capacity withdrawals in transportation would be a leading indicator of a hardening commercial-insurance market overall.
Segment results provided in the most recent NIP survey give a few more indications of market hardening—in classes like "specialized carriers of heavy equipment and riggers," where 42.5 percent of producers and underwriters surveyed said premiums rose 1-10 percent in the first quarter. A year ago, only 5 percent of respondents reported increases, while 63 percent said specialized-rig premiums fell during first-quarter 2010.
Beyond its high-level summaries of overall opinions of market conditions and insurance capacity, NIP Group, in its reports for various quarters dating back to midyear 2008, graphically reveals bands of premiums changes indicated by survey respondents ("down 1-10 percent," "no change," "up 1-10 percent," up 10-20 percent," etc.) for 10 different segments, including specialized carriers and riggers. Other segments are:
- Trucking Operations
- Intermodal Carriers
- Bulk Transportation
- Messenger/Courier Services
- Charter/Tour Bus Operators
- School Bus Contractors
- Limousine Services
- Ambulance and Medical Transport
- Airport Ground Transportation
For these classes, the survey summarizes opinions of overall premium changes that include both rate and exposure changes together, not just price changes, Mr. Augustyn confirms.
NU's analysis of the latest results reveals that premium declines are more persistent for trucking operations and bulk haulers than other classes, where more than 10 percent of respondents still saw double-digit declines in first-quarter 2011. But even in these two segments, overall average declines fell to the 1-2 percent range, compared to overall declines of 7-8 percent a year ago (based on NU's calculation, which averages all the responses across all the premium-change bands of the NIP survey).
Based on the most recent quarter's results, the "messenger and courier services" segment and the "charter, tour and transit bus operators segment" showed the most evidence of harder market conditions.
For the messenger/courier segment, nearly 90 percent of respondents reported premiums unchanged or rising, with 5 percent indicating double-digit hikes. NU's historical records of prior NIP reports reveal that in first-quarter 2010, only 40 percent of survey participants said courier-premiums were unchanged or rising.
In the charter bus segment, 75 percent of sellers now report flat or increasing premiums, compared to less than 30 percent last year.
For ambulances and other forms of medical transport, where declines were reported by more than 70 percent of respondents during first-quarter 2010, a year later, one-third of participants are seeing hikes in the 0-10 percent range and another 60 percent view premiums as unchanged.
Looking at the business by account size, the NIP survey reveals the softest market for larger accounts. While 16 percent of survey participants saw double-digit premium drops for large accounts (those with more than $250,000 in premium) during first-quarter 2011, the comparable figure was 53 percent of survey respondent last year according to NU records of prior NIP surveys.
Twenty-one percent now report increases for large accounts, with one-third observing no change in premiums for these accounts and 47 percent reporting some decline.
In contrast, no respondents reported increases for large accounts during first-quarter 2010, when more than 91 percent reported declines and just 9 percent reported no change in premiums for these accounts.
Detailed first-quarter 2011 results for other account sizes, segments and for various coverages (auto liability, physical damage, cargo, workers' comp and umbrella) are summarized in the full report which is available for download at: http://www.nipgroup.com/corporate/tips-results-q1-2011.
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