US P&C composite rate down 4 percent in December
Insurers continue to fight for market share and, as a result, the US property and casualty (P&C) composite rate was down 4 percent in December, according to US-based insurance exchange MarketScout.
The company’s historical barometer reflects a mean average rate increase of 30 percent in calendar year 2002. For 2007, the mean average decrease was 13 percent. According to MarketScout the current environment is relatively benign in relation to these volatile years.
For December 2015, by coverage classification, property, umbrella, workers’ compensation, professional liability, fiduciary, and surety rates were all more competitive than in November 2015, said MarketScout.
According to account size, all accounts up to $1,000,000 in premium enjoyed rate reductions in December 2015, which were more aggressive than in November 2015.
Its data also showed that jumbo accounts, those over $1,000,000 in premium, were stable at a 4 percent reduction.
By industry classification, rates in all industries were down more aggressively in December 2015 than in November 2015.
The National Alliance for Insurance Education and Research conducted pricing surveys used in MarketScout's analysis of market conditions. These surveys help to further corroborate MarketScout's actual findings, mathematically driven by new and renewal placements across the United States.
Market cycles are part of our life, be it insurance, real estate, interest rates or the price of oil,” said Richard Kerr, chief executive officer of MarketScout.
“Market cycles are going to occur without question. The only questions are when, how much and how long.
“While it may seem the insurance industry has already been in a prolonged soft market cycle, we are only four months in. The market certainly feels like it has been soft for much longer, because rates bumped along at flat or plus 1 to 1.1 percent from July 2014 to September 2015.
“The technical trigger of a soft market occurs when the composite rate drops below par for three consecutive months.”
MarketScout has been tracking the US property and casualty market since July 2001. Kerr profiled the cycles.
Kerr said that the length and veracity of the market cycles has become less volatile in the last five or six years, meaning the impact of a hard or soft market in today’s environment may be 5 or 6 percent up or down.
“Can you imagine how we would react today in a market such as that of July 2002 when the composite rate was up 32 percent? Or in December 2007 when the composite rate was down 16 percent?,” he said.
“Underwriters today have better tools to price their products and forecast losses.”
Kerr said that the chances of a rogue underwriter or company are greatly reduced by the industries’ checks and balances.
“There may be less excitement but there are probably far fewer CEO heart attacks,” he said.
