Commercial insurance prices again increased in aggregate at a modest pace, increasing by 2% during the fourth quarter of 2014, according to Towers Watson's most recent Commercial Lines Insurance Pricing Survey (CLIPS). The survey compared prices charged on policies underwritten during the fourth quarter of 2014 to those charged for the same coverage during the same quarter in 2013. Price changes reported by carriers mark a continued moderation of price increases that began in the first quarter of 2013, albeit with a brief pause in the third quarter of 2014.
Price increases were more modest than reported one quarter ago for most lines, with the exception of property and general/product liability lines which are unchanged from a quarter ago.
The largest price increases reported were in the employment practices liability line, followed by commercial auto. Price increases for most lines fell in the low single digits. Commercial property data indicated no rate change for two consecutive quarters, following a slight price decrease two quarters ago. When comparing account sizes, price increases were more moderate for large and specialty accounts than for small and mid-market accounts.
Historical claim cost information reported by participating carriers points to an improvement of 3% in loss ratios in accident-year 2014 relative to the same period in 2013, as earned price increases continue to offset reported claim cost inflation for most lines. This indication builds on the estimated improvement of nearly 5% between 2012 and 2013. Carrier estimates of claim cost inflation underlying the loss ratio movement came in at 1% for accident-years 2013 and 2014 for the aggregate commercial industry. CLIPS results are intended to exclude catastrophes.