Arlington, VA – Commercial insurance prices increased by a modest 2% in aggregate during the fourth quarter of 2014, according to the latest Commercial Lines Insurance Pricing Survey (CLIPS) conducted by global professional services company Towers Watson (NASDAQ: TW). The price changes reported by carriers indicate a continued moderation of price increases that began in the first quarter of 2013, albeit with a brief pause in the third quarter of 2014. This survey compared prices charged on policies underwritten during the fourth quarter of 2014 to those charged for the same coverage during the same quarter in 2013.
For most lines, carriers reported that price increases fell in the low single digits and were smaller than in the last quarter. Commercial property held steady for the second consecutive quarter following a slight price decrease in the second quarter of 2014. Workers compensation price increases continued a sharp downward trend, similarly to directors and officers liability, where prices were reported as flat.
The continued moderation in price increases is reflected in the tapering of improvement in loss ratios: Survey data showed that loss ratios improved by 3% during 2014 (excluding catastrophes), compared to an estimated improvement of nearly 5% between 2012 and 2013.
“The trend of moderation in price increases over the last 12 to 18 months is most significant for workers compensation, for which increases had peaked in late 2012 at almost 10%, and is consistent with the lingering benign loss environment,” said Alejandra Nolibos, a director with Towers Watson’s Property & Casualty Insurance practice. “The industry continues to report favorable loss ratio trends, and the perception is that prices are adequate. For long-tailed lines, though, much of the final underwriting result of the business being put in the books today will hinge on the long-term behavior of inflation,” added Nolibos.
Click here for the March 2015 Commercial Lines Insurance Pricing Survey (CLIPS)
Source: Towers Watson