Analysis by MarketScout reveals that year-on-year, commercial U.S. property and casualty (P&C) rates increased by 2% in the first-quarter of 2018, while personal lines insurers are tweaking pricing by line of coverage.
MarketScout’s first-quarter 2018 commercial insurance rate barometer shows an overall 2% P&C rate increase, which is in line with the fourth-quarter of last year, and up 100 bps year-on-year.
The only coverage class that failed to record a year-on-year rate increase during the quarter was workers’ compensation, which fell by 2%.
Commercial auto increased by an average of 5% in the period, while commercial property and business interruption increased by 3%. BOP, inland marine, general liability, umbrella/excess, and professional indemnity all increased by 2%, and D&O liability, EPLI, fiduciary, crime, and surety all increased by an average of 1%.
Chief Executive Officer (CEO) of MarketScout, Richard Kerr, commented: “Automobile and transportation exposures continued to experience the greatest rate increases due to increasing expenses and adverse claim development. Insurers are struggling with this segment of our industry. Part of the problem is actual underwriting results, part is expense ratios, and in our view, a larger part is the uncertainty of the long-term prospects for the auto insurance industry,” said Kerr.
By account size, MarketScout shows that both small accounts (up to $25,000) and large accounts ($250,001 – $1 million) were up by an average of 2% in Q1. Medium sized accounts ($25,001 – $250,000) increased by 3%, and jumbo accounts (over $1 million) increased by 1% in the quarter.
MarketScout also provides information on personal lines, and states that the composite rate for the quarter remains at 3%, with personal lines insurers making some “pricing tweaks by line of coverage”.
“Homeowners insurers are focusing on geography and claims history. If you live in Miami and have experienced claims, your rate increase could be as high as 15 percent. Conversely, if you are a long-term customer with no claims and you live in Denver, you might see rate decreases of 5 percent,” said Kerr.
With insurers eager to push up pricing, those in loss-affected regions could experience some steep rate increases, something that could be exacerbated as reinsurers also look to secure higher rates.
MarketScout explains that for personal lines homeowners under $1 million value rates increased by an average of 3%, which was also the case for homeowners over $1 million value. Automobile lines increased by an average of 4%, while personal articles increased by an average of 2% in the quarter.
Analysts at Keefe, Bruyette & Woods (KBW) commented on MarketScout’s commercial insurance barometer: “We think most insurers will face a much lighter rate-driven margin headwind in 2018 as recent quarters’ rate trends earn in.
“We expect Commercial rates to improve modestly in 2018, which should benefit both Commercial insurers and brokers relative to 2017.”