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Aug. P&C Rate Holds at Minus 1%; Auto, Transportation Up

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The U.S. property and casualty composite rate for August was stable at minus 1%, the same as July, MarketScout reported. By industry classification, manufacturing, habitational and energy each moderated 1% , while all otherBarometer industry classifications remained unchanged.

“While the month to month composite rate is stable, there is clear movement in commercial auto and transportation accounts with each showing a year over year rate increase of plus 3%,” said Richard Kerr, CEO of MarketScout. “Insurers have decided it is time for commercial auto and transportation accounts to start paying up.”

By coverage, commercial property, workers compensation and professional liability each moderated 1% in August—to minus 1% for property, minus 1% for workers compensation and flat for professional liability. Commercial auto rates went up to plus 3%, while all other coverages remained unchanged, MarketScout said.

Coverage class 1

By account size the only adjustment was for accounts with more than $1 million premium, which adjusted from down 3% in July to down 2% in August.

Account size 3

Industry class 2

July P&C Composite Rate Steady, Transportation Increases

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The property and casualty composite rate for July was the same as June’s rate, which was minus 1%, MarketScout reported today, adding that insurers are working to stop the downward trend.

“While insurers continue to grant minor rating concessions, many are pushing for an end to any further rate reductions,” Richard Kerr, CEO of MarketScout said in a statement. In the transportation sector, however, pricing is increasing “on all but the very best accounts. The poor loss experience in transportation has prompted underwriters to demand rate increases and restrict underwriting appetite.” Insureds that are unable to convinceBarometer underwriters they can control losses are left with few options “and ultimately end up paying a much higher rate/premium which impacts their profit margins,” he said.

Kerr continued that insurance buyers in the transportation industry are complaining about the lack of cooperation they are seeing from insurers as they try to manage their risk portfolio. “Business owners and corporate CEOs are concerned their insurance premiums will be larger than what was budgeted therefore negatively impacting net profits,” he said.

He advised these insureds to “allocate capital towards implementing loss control and companywide safety programs. That is how they will get cooperation from their insurers.”

A comparison of June 2016 to July 2016 rates by coverage classification reveals that workers compensation and property coverages were the most aggressively priced at minus 2%. Business interruption, business owners policies (BOP), fiduciary and directors & officers all moderated by moving rates from minus 1% to flat, or no increase. Professional liability rates moved from down 2% to down 1%. Rates for all other coverages were unchanged.
Rates-coverage class

There were no rate adjustments by account size from June to July.
Account size

By industry classification, rates for public entities moved up from minus 1% in June to flat or no increase in July. Transportation accounts were assessed at the largest rate increases from up 1% in June to up 3% in July, according to MarketScout.
Industry class

June Commercial Insurance Rates Up 1%

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The composite rate for commercial insurance placed in the United States rose to minus 1% in June from minus 2% in May, according to MarketScout. One of the most significant changes was rates for transportation accounts, which moved from minus 2% to plus 1%. Rates for every industry class, except habitation and transportation, moderated by 1%. Habitational rates were unchanged at minus 2%.

Industry class chart-1

Industry class list

“Insurers are getting tired of cutting rates,” said Richard Kerr, chief executive officer of MarketScout. “There are still pockets of very competitive business; however, it is beginning to look like insurers are willing to maintain the rate reductions of the past few years and not cut rates even further.

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Coverage classifications business owners policies (BOP), umbrella and professional liability all moderated by 1%, compared to the prior month. EPLI rates were up 1% and commercial auto rates moved from flat to plus 2%.

coverage class list
By account size, medium (,001 to 0,000) and large (0,001 to ,000,000) accounts moderated to minus 1% and 2% respectively.

Rates remained the same for all other account sizes.

Account size

P&C Rates Drop 2% in May

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The rate index for property and casualty risks was down 2% in May, the same as was seen in April, MarketScout reported.

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Accounts of more than $250,000 were priced more aggressively in May, at minus 3% compared to minus 2% in April.

“The market was stable in May with small movements in coverage, industry, and size classifications,” MarketScout CEO Richard Kerr said. “As we have seen in the past, larger premium accounts were priced more aggressively. Overall, the composite rate was down 2% in May, matching the rate for April.”

Acct size

According to the Insurance Information Institute:

A dominant factor in the P/C insurance cycle is intense competition within the industry. Premium rates drop as insurance companies compete vigorously to increase market share. As the market softens to the point that profits diminish or vanish completely, the capital needed to underwrite new business is depleted.

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In the up phase of the cycle, competition is less intense, underwriting standards become more stringent, the supply of insurance is limited due to the depletion of capital and, as a result, premiums rise. The prospect of higher profits draws more capital into the marketplace, leading to more competition and the inevitable down phase of the cycle.

By coverage classification, rates for property, business interruption, professional, auto, directors and officers, and surety all moderated 1% compared to April. Crime coverage increased from flat to plus 1%.

Coverage class

Industry classifications are examined to determine rate movement as measured when grouping accounts according to their SIC, or Standard Industrial Classification codes, MarketScout said.

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SIC codes are four-digit numerical codes assigned by the U.S. government to business establishments to identify their primary business, according to SICcode.com.

Industry class 3

The SIC codes are then incorporated into seven different segments. The only changes in rates in May versus April were in habitational, which moderated from minus 3% to minus 2%; and energy, which was priced slightly more aggressively at minus 3% compared to minus 2%. All other industry classifications were unchanged compared to April, MarketScout said.