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Commercial Insurance Prices Rise 3% in Second Quarter as Increases Continue to Moderate

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Commercial insurance prices increased by a modest 3% in aggregate during the second quarter of 2014, according to the latest Commercial Lines Insurance Pricing Survey (CLIPS) conducted by global professional services company Towers Watson (NYSE, NASDAQ: TW). These results confirm the moderation in price increases that started in the third quarter of 2013, following several quarters of increases over 6%. The survey compares carriers’ pricing on policies underwritten during the second quarter of 2014 to those underwritten in the same quarter of 2013.

Most lines of business showed increases in the low single digits, but prices for commercial property declined, marking the first time in three years that property prices fell and the first time since the end of 2011 that any of the surveyed lines showed a decrease. In fact, over half of commercial property respondents reported price decreases in the second quarter. For lines showing price increases, the largest was reported for employment practices liability, followed by commercial auto. Workers’ compensation, which had experienced the largest price increases a year and a half ago, reported more modest increases this quarter. In general, the moderation in price increases was more evident for large accounts than for small and mid-market accounts.

The survey noted that loss ratios improved 2% for accident-year-to-date 2014 relative to the same period in 2013 (excluding catastrophes), as earned price increases continued to offset claim cost inflation. This development builds on the estimated loss ratio improvement of nearly 6% between 2012 and 2013. In aggregate, carriers reported approximately flat claim cost inflation for 2013 and more than 2% for year-to-date 2014.

“Carriers are reporting loss ratios for 2013 and 2014 that benefit from 2012 and 2013 price levels. Now they are seeing a continuation of low loss cost trends and no lack of capital in the market, which may be leading to the slowdown in price increases,” said Alejandra Nolibos, director in Towers Watson’s property & casualty business. “In particular – and consistent with the availability of capital through abundant reinsurance capacity – property rates are dropping sharply.”


CLIPS data are based on both new and renewal business figures obtained directly from carriers underwriting the business. 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. This particular survey compared prices charged on policies underwritten during the second quarter of 2014 to the prices charged for the same coverage during the same quarter in 2013. For the most recent survey, data were contributed by 44 participating insurers representing approximately 20% of the U.S. commercial insurance market (excluding state workers compensation funds).

About Towers Watson

Towers Watson (NYSE, NASDAQ: TW) is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. The company offers consulting, technology and solutions in the areas of benefits, talent management, rewards, and risk and capital management. Towers Watson has more than 14,000 associates around the world and is located on the web at

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