Commercial property/casualty premiums for all size
accounts declined in the first quarter by an average of 11.3 percent, according to the Washington, D.C.-based Council of Insurance Agents & Brokers, which recently released its Commercial Property/Casualty Market Index.
The index is based on the analysis of the council’s market survey by New York-based Lehman Brothers Inc. Lehman Brothers also found that premiums of all sizes were at their lowest since the fourth quarter of 2001, when they peaked after the Sept. 11, 2001 terrorist attacks.
The survey asked council members to compare market conditions and premiums quarter to quarter. In the latest survey, which rated the first quarter of 2007 from January to March, 77 percent of respondents said their small account premiums decreased between 1 and 30 percent. Ninety-four percent of respondents said medium account premiums decreased between 1 and 30 percent and 85 percent said large account premiums had decreased between 1 and 30 percent.
Local insurance agents and brokers have acknowledged this decline and the softening market, but say that individual accounts will not necessarily see a decrease in their premiums.
“What is important to understand is that the survey incorporates information on all sizes of businesses in virtually all industries across the entire nation,” said Bret Blizzard, director of communications for Sheboygan-based Acuity.
The average number decrease does not factor in items that directly affect a premium, including operations, payrolls and sales, Blizzard said.
“Very large businesses, for example, were subject to much higher rate increases during the firm market of 2000 to 2004 and are therefore seeing the larger decreases today,” Blizzard said. “The same is true of certain industries and specific regions of the country. The Midwest wasn’t subject to major hurricanes and terrorist acts which caused much higher rate increases in the recent past in other parts of the nation.”
Brian Krimpelbein, vice president of construction for HNI Risk Services, Inc., in New Berlin, said in the case of workers’ compensation, the premium rates may have decreased but high-risk companies pay based on their history of claims.
“If it is a less risky operation, including HVAC, plumbers, electricians, they are seeing good decreases, but there are some industries that are a little bit higher risk, including roofing, iron steel workers, underground, that really aren’t seeing that type of decrease. It really comes down to a company’s operating risk,” he said
Premium increases and decreases also depend on the cycle, Krimpelbein said. For example, if a company experiences losses, hiring bad drivers or don’t have a corporate safety program in place, they will not be experiencing the decreases.
“Those decreases are coming to companies that realize they control their insurance premium more than any other company does,” Krimpelbein said.
The Council of Insurance Agents & Brokers said the first quarter of 2007 was the first time that less restrictive underwriting was reported, which could contribute to the decrease in premium.
In Wisconsin, the presence of strong regional carriers creates increased competition for national carriers, causing this exact scenario, Krimpelbein said.
“Some jump up and look at accounts they would never write before, which is putting more pressure on national carriers to get a little more creative,” Krimpelbein said.
Another factor is that it depends what industry a company is in. The decrease in premiums is most likely a result from insurance companies competing for business. If a company is in an industry where this is not prevalent, the company most likely will not experience any fluctuation.
“There is no question the commercial insurance climate today is more price competitive than a year or two ago, but the premium swings for small to mid-sized businesses in most industries have been more moderate in the past seven years,” Blizzard said. “Rate changes today vary greatly depending on the lines of coverage, the type and size of company, and specific risk characteristics. Because independent agents represent more than one insurance carrier, they are in the best position to take advantage of the current environment to the benefit of business clients.”
