GT Insurance Blog

Insurance problems and cures

Commercial Insurance prices up for the 5th consecutive quarter…

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We are in the beginning of a hard market for business insurance. It looks like this market turn is starting with small rate increases for the average account, large increases if you have had losses, carriers dropping things they should not have written in the first place, and restrictions in coverage. 

Commercial insurance market cycles tend to run through long periods of decreasing rates.  Carriers make money and pursue growth while stating they won’t compromise their standards.  Then they compromise their standards and, since insurance losses take a long while to mature, the carriers still make money.  But they store up future losses, make too many assumptions based on current results, and think they can make small changes to improve results when things begin to deteriorate.

Per Towers Watson, gathering data across the industry, rate increases of 5% annually are the highest since 2004.  Loss ratios in many lines of insurance have stabilized, though they are not making much if any money for the insurance companies.  And remember that the companies have little chance to make money with investments, so they have little choice but to raise prices until they are making money on their basic business.

Could be worse; it hasn’t reached double digit increases on average, yet.  We’ve lived through 20% average increases, and worse, in changing markets decades ago.  Talk to us if you have questions.  1-800-548-2329  or contact us by clicking here.

Here’s a link to a  Towers Watson article reviewing the state of commercial insurance pricing.

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