Commercial-insurance rates climbed by almost 7 percent in Q4 2012 compared to the same period in 2011, a recent survey shows, although the upward-rate acceleration seen since the start of 2011 appears to have slowed.
Towers Watson's latest Commercial Lines Insurance Pricing survey (CLIPS) shows commercial-rate increases across all lines for the fourth quarter in a row in Q4 2012. It is the eighth consecutive quarter of an aggregate commercial-lines increase.
However, compared to Towers Watson's previous CLIPS survey, rates did not move much. "Although commercial insurance prices continued their year-over-year upward trend, movements from the prior survey were slight, indicating a pause in the acceleration observed since the start of 2011," Towers Watson says. "These price-change indications were generally consistent with price increases from the prior survey, except for specialty lines, where the survey indicated somewhat larger gains than were reported in the third quarter."
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Speaking to specific lines, Towers Watson says workers' compensation and employment-practices liability had the largest year-over-year rate increases, with both rising by double digits. For most commercial lines, increases were reported to be in the mid-to upper-single digits, Towers Watson continues, and all lines increased by at least 3 percent compared to 2011's fourth quarter.
"Standard commercial accounts of all sizes saw rising prices, with larger gains observed in mid-market and large accounts," Towers Watson says. Interestingly, while Towers Watson says specialty lines saw larger gains than reported in the third quarter, for year-over-year rate changes the firm says, "Specialty lines prices rose at a slower rate than standard lines prices."
Participating carriers also reported an improvement of almost 4 percent in loss ratios in accident-year 2012 relative to 2011, excluding catastrophes, Towers Watson says. The firm attributes the improvement to price increases over last year that outpaced claim-cost inflation. "This indication is a reversal from the estimated 3 percent deterioration between 2010 and 2011," Towers Watson says.
"Price increases taken in 2012 will push 2013 loss ratios down, assuming moderate loss inflation," says Tom Hettinger, Towers Watson's Property & Casualty sales and practice leader for the Americas.
The CLIPS survey is based on new and renewal business figures obtained directly from 41 participating carriers representing approximately 20 percent of the U.S. commercial-insurance market, excluding state workers' compensation funds.
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