Commercial insurance prices in aggregate showed continued growth, but at a slower pace, increasing by 5% during the third quarter of 2013, according to Towers Watson's most recent Commercial Lines Insurance Pricing Survey (CLIPS). The survey compared prices charged on policies underwritten during the third quarter of 2013 to those charged for the same coverage during the same quarter in 2012.
Pricing data reported by carriers for the third quarter of 2013 is somewhat smaller in magnitude than the price increases of between 6% and 7% reported for the last five quarters. Price increases by line of business were lower than those reported in the second quarter in all lines, with the exception of employment practices liability.
The largest price increase reported was in the employment practices liability line, where price increases spiked into double digits, followed distantly by workers compensation and commercial auto. Price increases for most lines fell in the mid-single digits. No line of business reported a price decrease.
When comparing account sizes, larger increases were observed in mid-market than in large accounts and small accounts. Specialty lines prices overall increased at a lower rate than standard lines.
Historical claim cost information reported by participating carriers points to an improvement of between 3% and 6% in loss ratios in accident YTD 2013 relative to the same period in 2012, as earned price increases offset reported claim cost inflation. Carrier estimates of claim cost inflation came in flat for YTD 2013 as a mean, though the median response was just under 3%. CLIPS results are intended to exclude catastrophes. This indication builds on the estimated improvement of more than 4% between 2011 and 2012. The improvement comes from both earned price increases and lower levels of claim cost inflation than have historically been reported to CLIPS.