Commercial property and casualty insurance rates have stabilized and even dropped in the last quarter of 2004, with more than 80 percent of premiums staying flat or dropping by as much as 20 percent, a new national survey by The Council of Insurance Agents & Brokers shows.
Rhode Island businesses have also benefited from the trend, major local agents say, but a smaller share have gotten rate cuts, and they’ve been less dramatic. Still, they say, that’s a big improvement from the hikes carriers had been requesting even just months before.
“I would say the Main Street business has gone from increases of 15 percent down to anywhere from a 5 percent increase to a reduction,” said Peter Gates, of Revens-Gates Insurance Inc. in North Kingstown. “It’s not by carrier – it’s more by each specific account, and their loss history and the carrier’s appetite for that particular industry.”
“I don’t think decreases up to 20 percent are by any means the norm,” said Bill Preston, of the Preston Insurance Alliance in East Greenwich. “In general we’re pretty much seeing flat (rates), and we’re seeing some small decreases on accounts with good loss experience.”
The CIAB data is based on a survey of 140 of its members, including an unspecified number in the Northeast. The council represents the “top tier” of the market, large agents and brokers who write more than 80 percent of all commercial property/casualty premiums and administer billions of dollars of employee benefit accounts annually.
Every quarter, the council sends out a detailed commercial market survey, looking for trends in small, medium and large accounts as well as over a dozen specific lines – from commercial property, to general liability, to medical malpractice, to workers’ compensation.
In the Oct. 1 to Dec. 31 survey, nationally, 30 percent of agents reported small accounts (defined as producing $25,000 or less in fees and commissions, meaning the vast majority of Rhode Island would fall under this category) had seen rates stay flat, while 42 percent had premiums down 1 to 10 percent, and 12 percent dropped 10 to 20 percent. The average small-account premium change was 4 percent.
Medium accounts ($25,000 to $100,000 in fees and commissions) saw rates drop by an average of 7 percent, the survey shows, with 53 percent getting rate cuts of 1 to 10 percent and one-quarter percent saving 10 to 20 percent.
Large accounts got the best breaks: Only 4 percent saw no change in premium rates, but 34 percent saw rates drop 10 to 20 percent. Another 44 percent got rate cuts between 1 and 10 percent, and 6 percent saved 20 to 30 percent. The average large account premium was down by 10 percent, the council reported.
There were regional differences: In the Northeast, fewer small accounts got rate cuts in the 10- to 20-percent range (9 percent), and more saw rate hikes of 1 to 10 percent (12 percent). A bigger share of medium accounts, however, 32 percent, got the larger rate cuts, and a full 12 percent of large accounts got cuts in the 20- to 30-percent range.
Looking at individual lines, the council found “virtually all” reflected the downward trend, but commercial property premiums dropped the most, the council said. Broker errors and omission policies, commercial auto rates, workers’ compensation and construction risks were the lines most likely to see premium hikes, though mostly modest ones, in the 1 to 10 percent range.
Residential construction accounts, however, are getting harder and harder to place, the survey showed, with many brokers saying carriers are just refusing to cover those risks.
In Rhode Island, both Preston and Gates reported the same problem. Builders doing new construction are a challenge, Gates said, but renovation work is even harder to insure. Preston noted that mold, lead and asbestos are big concerns here.
Asked to describe market conditions, survey respondents said carriers were being more aggressive in seeking out new business, though they were just holding the line on renewals. Locally, Preston said some of the biggest improvements he saw in the last quarter were in accounts that had already taken double-digit premium hikes before.
Will the trend continue in 2005?
Preston said he’s not sure. The market has definitely softened, he said, from the annual hikes of as much as 20 percent early in the decade, to the “mid- to upper single digits” for most of 2004. But when the numbers dropped even more in the last quarter, he said, there was “some speculation – was it just the end of the year, companies trying to be more aggressive, or is this a trend?”
“At this point, I’d be surprised if we got back to a very soft insurance marketplace,” Preston added, “because companies aren’t earning enough on the investment side.”
The full council survey is available at www.ciab.com.
