Business Insurance

December 12, 2012

Modest rate increases but little improvement in underlying underwriting profitability are likely to continue for the property/casualty insurance industry in 2013, according to an analysis released Wednesday by Keefe Bruyette & Woods Inc.

The industry remains overcapitalized despite increased shareholder dividends, share repurchases and increased catastrophe losses, said KBW in “2013 Outlook: More of the Same, Slow Firming Continues.” The report added that KBW expects investment results to be under pressure for the foreseeable future, and “while underlying underwriting results may slowly improve going forward due to modest rate increases that are in excess of loss costs trends, we expect favorable prior-year reserve development to wane.”

The report says the “long-sought-after hard market will remain elusive” until excess capital is eliminated and insurers face balance sheet pressure. While the current firming “should keep things heading in the right direction,” the industry would have to experience significant balance sheet erosion before the market truly hardens.

The report also says underwriting is key to insurers' success in the current environment. “Strong underwriters are able to generate good results regardless of where we are in the underwriting cycle,” said KBW.

Whether or not rates are firming or hardening, or increases slowly or rapidly, the fact of the matter is that your clients are seeing increases in their workers compensation premiums, especially this time of year when so many of them are renewing. Although as the broker, you are blameless in your clients' rates increasing, you are always the first to be blamed and your clients are likely to keep their options open. Offer your clients workers compensation premium recovery to show them that you are doing everything possible to get them refunds on prior years' policies, as well as provide them a better underwriting profile to enter the renewal market with. This program has no upfront costs for you or your clients. We only get paid based on results and we offer first-year and renewal commissions.

To summarize, you maintain your current clients, win new business, and generate a new revenue stream for yourself and your brokerage.