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Soft market conditions continued for most lines of commercial insurance coverage in the third quarter of this year as premiums fell an average of 2.3%, though reductions in premiums slowed for general liability and workers compensation insurance, according to a survey released last week by the Risk & Insurance Management Society Inc.
The average property insurance premium declined about 3% in the third quarter, while the average directors and officers liability premium dropped 4%, according to the “RIMS Benchmark Survey” administered by New York-based Advisen Ltd. Meanwhile, average premiums for general liability and workers compensation fell less than 1% on average.
Despite the slowdown in reductions, general liability and workers comp insurance premiums are either at or below the level they were at the depth of the last soft market in 2000, said Dave Bradford, executive vp of Advisen.
General liability “never drops very much in a particular quarter, but it keeps going down,” Mr. Bradford said. Although workers compensation is “the most regulated line,” he said, it “is insulated a little bit from competitive pressures, there were a rash of regulatory reforms that drove premiums down.”
Mr. Bradford attributed continuing soft pricing to the weak worldwide economy, which has caused companies that either downsized or went out of business to purchase less or no insurance coverage, forcing insurers to compete for their share of a shrinking market, he said.
“If you have fewer employees, you don't buy as much workers comp; and if you have lower revenues, you don't buy as much general liability,” Mr. Bradford said.
He added that while the slowdown in premium reductions in general liability and workers comp might suggest that the commercial insurance market is poised for a turn, competition is still intense in those and other lines of coverage.
“I don't think we're quite at the bottom yet. If there had been some significant cat activity in terms of any hurricanes making landfall, it might have wrung out the rest of the excess capacity. It was an active year, but nothing hit shore (in the United States). So I am not seeing anything that will cause the market to turn,” Mr. Bradford said.
The “RIMS Benchmark Survey” is used by risk managers to compare the structure of their commercial insurance programs, retained loss costs, exposure demographics and total cost of risk against a group of peer companies.
The survey is produced by Advisen, which analyzes data submitted online either directly from risk managers and other buyers of commercial insurance or from their brokers. The results are available online or in an annually published book. Visit www.RIMS.org/bench mark for details.