The results of Goldman Sach’s semi-annual Insurance Pricing Survey for 2013 have been released, and they indicate that US providers are continuing to charge increased prices for commercial property cover.
The survey has been in existence since 1988. It is conducted to give the firm data on industry pricing, especially what a typical business owner can expect to pay for this type of protection in the marketplace.
The current results confirm the trend that prices are currently on the rise. It also points out the following observations:
- Commercial property and casualty insurance prices are continuing their upward trend, which started in 2011. The pace of increase has slowed from prior survey results, unlike some classic “hard markets” where pricing increases were more pronounced than current results are indicating.
- Hurricane Sandy had a modest impact on pricing trends. Even though it caused $15-20 billion in damage, it was not large enough relative to current industry capital levels to have a lasting impact on rates.
- Insurance agents are not noting a significant worsening of terms and conditions. They did note “moderation in some lines of coverage”, however, and “continue to expect further increases in the standard commercial lines.”
- Higher pricing for insurance has put pressure on provider retention rates. Consumers are more likely to shop around for coverage, rather than simply renewing with their existing provider.
- Workers compensation coverage is best positioned for further increases. Ninety-one per cent of current survey respondents said they expected prices to rise, compared with 83 per cent of those who participated six months ago. Agents point to less competition in the marketplace as a factor, as carriers are moving away from offering this type of coverage.
The current environment of extremely low interest rates means that providers are under pressure to earn income when writing policies where payments would occur over multiple years, such as Workers’ Compensation, professional and general liability claims.
The good news for customers is that hard markets don’t last long. In previous years, sharp pricing increases have lasted for a few quarters, followed by a reversal.
Photo by Alan Cleaver (cc)
