Rates and Terms: Flat is the New Up
It’s a tough search to fi nd lines of business where pricing either held or went up. The bright spot may be specialization.
“Last year they paid $1 million and they just came to us and said we don’t care what the market is doing, we only have $800,000 in our budget. So just get us whatever is available for $800,000. So you can do whatever you want to with your rate.”
Neal Abernathy, Swett & Crawford
Carriers and distributors say the business case may be there in some sectors to raise rates for coverage, but the overarching issue remains insureds’ inability to absorb higher rates and more- restrictive terms, panelists said.
“It’s tough to pitch rate, price increases. You’re paying $1 million as an insured today. It’s going to be tough for us to walk in to charge you $1.1 million or $1.2 million,” Steven DeCarlo said. “So they want $900,000. They want $850,000. Insurance companies don’t want to hear that, but they’re willing to give up terms, conditions, attachment points because they’re under such economic stress.”
Regardless of what the broker or carrier estimates underwriting a particular risk should cost, insureds seem to be holding fast to their amounts budgeted for insurance, panelists said. Those budgets are lower than in previous years.
Some groups that track rate, such as the Council of Insurance Agents and Brokers, report that average rates fell more than 6% in 2010.
Don’t expect markets to move on their own to more-profi table pricing, panelists said.
It will likely take a shock event such as a megastorm or sizable earthquake to shake the market and draw out excess capital, Matthew Power said.
Copyright © 2010 by A.M. Best Company, Inc. All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14