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Commercial Rates Inch Upward: Towers Perrin

After a five-year downward trend, commercial insurance prices stabilized during the third quarter of 2009, even rising by 0.3%, Towers Perrin reports.

Firming prices in specialty lines like D&O helped push rates slightly higher, marking the second consecutive quarterly increase in 2009, findings from the consultant’s Commercial Lines Insurance Pricing Survey.

However, that growth isn’t across the board. Larger accounts with premiums over $50,000 saw prices go up in the third quarter, while so-called “middle-market” accounts “remained basically flat,” according to the survey results, released December 9. The increase for larger accounts follows steep declines in 2007 and 2008, while “small -account prices continue to show modest — but continually smaller — price decreases.”

Two lines bucked the trend in price increases: workers’ compensation and commercial auto saw “minimal” decreases.

"Two quarters of flat prices underscore our belief that market conditions have changed from an environment of rampant price cutting to one where greater caution prevails," Stephen Lowe, managing director of Towers Perrin’s global property & casualty insurance consulting practice, said in a statement releasing the findings. 

“Our view is that prices have now fallen to the point where profit margins are very thin. Since most companies now have price-monitoring systems in place, they can see that they are at the edge of the precipice — and they are reticent to cut prices further. The credit crisis and recession have also helped to create a more cautious environment,” he said.

The survey findings also that accident-year 2009 loss ratios deteriorated by 5% by the second quarter, compared to 2008, noting, “improvement in claim cost increase indications and the "earning" of price stabilizations taken in 2009 both contribute to the relatively modest 2009 loss ratio deterioration.”