For insurance it seems to be either boom or bust. We all see the softening of the insurance market. And bust in this case means dwindling commissions. Here are some stats from the Council of Insurance Agents and Brokers (CIAB) that bear the statement out.
Commission decline starts with commercial insurance pricing.
• The price drop on all commercial accounts average 2.3%
• Large accounts cut prices by 3.7% on average in the first quarter of 2015.
• Medium accounts dropped 2.7%
To compare this year with last, in the fourth quarter of 2014 prices declined a moderate 0.7%.
CIAB President and CEO Ken Crerar said the price drop is due to the growing soft market, more competition for business and from low catastrophe losses. “The trend of falling prices we saw in the fourth quarter of 2014, continued into the first quarter of this year. Last quarter, buyers gained some advantage as pricing slid across the board and across all regions for most lines of business.”
He added the relatively calm winter — other than the heavy snow experienced in the Northeast — has kept commercial property pricing down.
Crerar said carriers are now more hungry for business and the CIAB survey points out that carriers:
• Have a much broader appetite
• Are offering lower deductibles
• Are offering flexible pricing and terms
• Are offering multi-year deals
All of this is lowering agent and broker commissions. And it is likely to get worse before it gets better. SNL released a report last week on the future of commercial and personal lines insurance pricing. Three things are going to impact insurance and put pressure on underwriting margins over the next few years:
• Softer commercial lines pricing
• How lower interest rates are going to impact management strategies
• Lower levels of reserve releases
SNL predicts a steady downward trend in underwriting profits. Look for them to be at break-even levels over the next five-years.
The impact — however — depends on the line of insurance. Some commercial lines will benefit from the soon to come — or now existing — conditions. For others, Crerar said there is light at the end of the dark tunnel. Lower and more favorable rates do open up the possibility of clients purchasing coverages they’ve passed on before like cyber liability insurance.
Source links: Insurance Business America & SNL