PropertyCasualty360

December 6, 2012

Rates in both commercial and personal lines insurance continued to increase through November, according to the electronic exchange MarketScout.

Commercial-lines accounts increased an average of 5 percent in November compared to the same period last year and personal lines increased by 4 percent, the Dallas-based company says.

In October, commercial line accounts were up 4 percent compared to the same period last year and personal lines were up 3 percent.

By coverage class for commercial lines, commercial property, general liability, umbrella—excess, commercial auto and workers’ compensation increased the most at 5 percent. Surety was up the least at 1 percent. No lines of business showing decrease.

Turning to account size, small, medium and large accounts were all up by 5 percent, while jumbo accounts (over $1 million in premium) were up 2 percent.

By industry class, manufacturing and transportation were up by 6 percent. Contracting, service, habitational and energy were up by 5 percent. Public entity was up by 4 percent.

“The manufacturing rate increase was surprising,” says Richard Kerr, CEO of MarketScout in a statement. “Normally, manufacturing is a very stable industry class absent quick pricing changes. Going from plus 4 percent [in October] to plus 6 percent was unusual.

“As for transportation, the trucking segment of this industry class is what is really driving the rate increases for the class at plus 6 percent. The losses suffered by the trucking market have been considerable over the last several years. We expect further rate increases for trucking exposures.”

Turning to personal lines, homeowners coverage under $1 million in value was up 4 percent. Coverage for values over $1 million was up 5 percent. Automobile and personal articles were up 3 percent.

“Homeowners placements for homes over $1 million, the ‘high-net-worth’ market, made a dramatic move in November,” says Kerr. “Rates moved up from plus 2 percent in October to plus 5 percent in November. That is the largest month on month rate increase we have seen in the eleven years we have been tracking rates in the U.S. It appears insurers of high value homes are adjusting rates upward to account for increased exposure to weather related events. And some of the accounts are now being forced into the non-admitted market where rates are higher and coverages are frequently restricted.”

In an analyst’s note, Meyer Shields, an analyst with Stifel Nicolaus, says that while rate increases remained steady, they should accelerate following Superstorm Sandy.

“We see insurers’ deteriorating calendar-year results as the primary catalyst for rate increases, and we expect these increases to accelerate as favorable reserve development subsides, net investment income declines and accident-year results worsen,” Shields writes.

Hello brokers. Here's an early new year's present. Rates are going one way: up up to the sky. So, the benefits are fatter commissions but the problems come with hearing your clients crying that they can't pay for these increases. Telling them that rates have gone up across the board is not going to be reassuring because they only really care about the extra money they have to come up with right now. They will consider what their options are. So as long as you're doing everything possible to keep your clients' premiums where they should be, and I mean doing everything possible, then you should be way ahead of the game.

Offering a current client or even a prospect to help them reduce their workers compensation premiums in a short period of time is beneficial for them, as well as yourself and your brokerage. It is the quickest way to give them a better underwriting profile for their renewal. When they get back money because of you, your relationship with them will be greatly enhanced. After all, when was the last time someone handed them a big check with money they would have never otherwise seen? Win your clients and prospects over today by offering them workers compensation premium recovery.