Commercial Insurance Prices Continue To Rise, Carriers’ Loss Ratios Improve

Commercial Insurance Prices Continue to Rise, Carriers’ Loss Ratios Improve

Towers Watson survey shows Q3 commercial insurance price acceleration

NEW YORK, December 10, 2012— Commercial insurance prices in aggregate increased by 6% during the third quarter of 2012. This marked the seventh consecutive quarter that aggregate prices for all commercial lines rose, according to the new Commercial Lines Insurance Pricing Survey (CLIPS). The survey, conducted by Towers Watson (NYSE, NASDAQ: TW), a global professional services company, compared price levels on policies underwritten during the third quarter of 2012 to those charged for the same coverage during the third quarter of 2011.

The largest price increases year over year included workers compensation, now approaching double digits, and employment practices liability, followed closely by commercial property, where price increases have moderated somewhat since last quarter. Increases have accelerated for each of the remaining surveyed standard commercial lines since the second quarter. Within standard commercial lines, midmarket and large accounts saw the largest increases this quarter. Specialty lines prices also continue to increase, but not as rapidly.

“In the current environment, underpricing of current business could seriously harm net income,” said Tom Hettinger, Property & Casualty sales and practice leader for the Americas, Towers Watson. “Declining reserve releases, combined with insufficient investment income, have put enormous pressure on earnings. Pricing discipline, as a result, is even more important — and underwriting results really need to perform well for the foreseeable future.”

Loss costs reported by participating carriers pointed to an improvement of more than 3% in loss ratios to date for accident-year 2012, relative to the same period in 2011, as earned price increases more than offset reported claim cost inflation. If this level is maintained through year-end and as losses develop, it will indicate a reversal from the estimated 4% deterioration between 2010 and 2011.



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About CLIPS

CLIPS data are based on both new and renewal business figures obtained directly from carriers underwriting the business. This particular survey compared prices charged on policies underwritten during the third quarter of 2012 to the prices charged for the same coverage during the same quarter in 2011. For the most recent survey, data were contributed by 39 participating insurers representing approximately 20% of the U.S. commercial insurance market (excluding state workers compensation funds).

CLIPS participants represent a cross section of U.S. property & casualty insurers that includes many of both the top 10 commercial lines companies and the top 25 insurance groups in the U.S. Measurement of both pricing changes and loss ratio changes also sets CLIPS apart from other studies. Participation in CLIPS has been strong, as carriers believe it provides a more accurate picture of price changes, and find it useful in setting assumptions for product pricing and estimating claim liabilities.

___________________________________

Binoli Savani

External Communications & Media Relations Coordinator

Towers Watson

901 North Glebe Road | Arlington, VA 22203

T +1 703 258 7648

F +1 703 258 7593

binoli.savani@towerswatson.com



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