Price increases generally are good news for carriers and not so good news for customers, although most companies can tolerate modest increases as a cost of doing business.
Commercial customers will be pleased to learn that, although prices for commercial insurance increased in aggregate, the increase was only 2% during the first quarter of 2015, according to the latest Commercial Lines Insurance Pricing Survey (CLIPS) conducted by global professional services company Towers Watson. This survey compared prices charged on policies underwritten during the first quarter of 2015 to those charged for the same coverage during the first quarter of 2014.
The survey found that price increases for most insurance lines were in the low single digits, with the largest increase coming in commercial auto. The increase in employment practices liability prices remain moderate, however, as do commercial property prices, which still show small price decreases. Large account prices increased at a lower rate than small and mid-market accounts, according to the survey.
Loss ratios in accident-year-to-date 2015 relative to the same period in 2014 improved 2% as reported by the carriers, but earned price increases offset reported claim cost inflation for many lines. This continues the estimated improvement of nearly 2% between 2013 and 2014.
"Commercial insurers still report favorable loss ratio trends in aggregate, even after many quarters of slowing price increases," said Alejandra Nolibos, a director with Towers Watson's Property & Casualty Insurance practice. "However, price increases are barely offsetting loss cost inflation in some lines; we may start to see pressure on the bottom line as reserve redundancies dry up."
About the survey
CLIPS data are based on both new and renewal business figures obtained directly from carriers underwriting the business, Towers Watson explained. CLIPS participants represent a cross section of U.S. property & casualty insurers that includes many of the top 10 commercial lines companies and the top 25 insurance groups in the U.S. For the most recent survey, data were contributed by 44 participating insurers representing approximately 20% of the U.S. commercial insurance market (excluding state workers' compensation funds).
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