For the second straight quarter, the U.S. composite rate for all personal lines placements increased 2.5% as compared to rates for the same time period a year ago.
We are just beginning hurricane season in the coastal areas so storm activity will play an important role in rates for the next two quarters. So far, this year, inland wind and hail claims have been quite significant. Also, personal auto losses are increasing. As a result, more rate increases could be coming.” said Richard Kerr, Founder and CEO of Dallas, Texas based MarketScout. Kerr also noted, “You have to keep in mind, the composite rate is an amalgamation of rates and exposures across the US. If you are in a coastal area, hail belt or benign location, your rates will vary based upon exposure and recent loss experience.”
According to this quarter’s report:
- Homeowners’ policies with coverage A under $1,000,000 value moderated slightly at up 2 percent in the second quarter as compared to up 3 percent in the first quarter of 2017.
- Automobile rates increased from the first quarter at plus 3 percent to plus 4 percent in the second quarter.
Each quarter, Dallas-based MarketScout compiles the composite rate for both the personal and commercial lines marketplace by analyzing market conditions via pricing surveys conducted by the National Alliance for Insurance Education. The personal lines rates are then calculated using both mathematical formulas and in-person market surveys.
|Homeowners under $1,000,000 value||Up 2%|
|Homeowners over $1,000,000 value||Up 4%|
|Personal Articles||Up 1%|
After first increase for the first time in almost two years in Q1, Commercial lines rates up one percent again in Q2
For the second straight quarter, the U.S. composite rate for commercial lines was up one percent.
“We now have two consecutive quarters of composite rate premium increases. Insurers are adjusting pricing as they should based upon losses incurred, expense loads and targeted returns on equity,” noted Richard Kerr, CEO and Founder of MarketScout.
More about the various coverage classes:
According to MarketScout, the following classes saw changes in rates this quarter: commercial property and inland marine adjusted from down 1 percent in the first quarter, to up 1 percent in the second quarter. Commercial auto rates increased from up 3 percent to up 4 percent. EPLI also increased from up 1 percent to up 2 percent. Fiduciary adjusted downward to flat or no increase as compared to up 1 percent in the prior quarter. All other coverage classifications were unchanged from the prior quarter.
As for accounts, MarkeScout says that that small accounts (under $25,000 premium) increased from up 1 percent to up 2 percent, medium accounts ($25,001 – $250,000) increased from flat to plus 1 percent. Large accounts ($250,001 – $1 million) were unchanged and jumbo accounts (over $1 million) were down 1 percent as compared to down 2 percent the prior quarter.
Lastly, look at rate changes by industry class, MarketScout says public entity rates moderated from up 1 percent to flat. Transportation risks experienced slightly lower rate increases with second quarter rates up 4 percent as compared to 5 percent first quarter.
By Coverage Class
|Commercial Property||Up 1%|
|Inland Marine||Up 1%|
|General Liability||Up 1%|
|Commercial Auto||Up 4%|
|Workers’ Compensation||Down 2%|
|Professional Liability||Up 2%|
|D&O Liability||Up 2%|
By Account Size
|Small Accounts||Up 2%|
|Up to $25,000|
|Medium Accounts||Up 1%|
|$25,001 – $250,000|
|Large Accounts||Down 1%|
|$250,001 – $1 million|
|Jumbo Accounts||Down 1%|
|Over $1 million|
By Industry Class
Prices in 2018 and beyond will likely be impacted by Insurtech says MarketScout
In addition to this quarter composite rates, the Dallas-based insurance exchange, MGA and forecasting company, sent out an additional notice commenting about the perceived threat of insurtech disruption on property and casualty rates.
“By utilizing new tech-enabled distribution, underwriters are ultimately going to reduce acquisition expenses, which will enable them to offer the consumer a lower premium,” explained Richard Kerr, Founder and CEO of MarketScout. “The end result will be a win-win: a net premium reduction for the insured and an increase in ROE for the insurance company.”
“The property and casualty insurance industry has the highest distribution expense of almost any financial services industry, or for that matter, any industry. With distribution expense as high as 32%, you can be assured technologically capable millennials are going to connect with some savvy grey haired insurance folks and come up with a better mousetrap. There are already many plans under way to reformat distribution. Naturally this reformation will begin with the low hanging fruit of the industry, commoditized products. Auto insurance is a great example. Large accounts and specialty insurance will ultimately be impacted, we just don’t know when or exactly how.”
As a result of these new converging market forces, MarketScout believes that for the first time in the last 20 years, “significant disruption in insurance distribution is imminent.” As to why it is making this prediction now, the firm gave the following reasons why:
- Insurer CEO’s are determined to reduce distribution costs.
- Insurance technology effectiveness is increasing exponentially.
- InsureTech is real. The number one target: distribution.