What to Expect In Commercial Insurance Claims, Prices for Remainder of 2013: Willis

Although a recent broker report on property/casualty pricing expectations puts some commercial casualty hikes into double-digit territory this year, the overall message of Willis’ 2013 Marketplace Realties report is that P/C insurance markets remain “largely stable.”

“While the world has suffered a string of mega disasters from Australia, Japan and Thailand to the densely populated beaches around New York City, our industry’s foresight and capitalization have been sufficient, and rates have calmly stayed within predictable and benign ranges,” says the introduction to the report, presented by Eric Joost, chief executive of Willis North America Specialties.

Joost, in the report’s introductory pages and an accompanying video presentation, notes that the stability of price trends has prompted Willis practice leaders to focus on more volatile claims trends to supplement the pricing report.

Among the claims notes are these, according to Willis experts:

• In property lines, carriers’ use of legal counsel is becoming more visible. At the same time, insurers are making noticeable efforts to issue advance property claim payments.
• In casualty lines, carrier use of technology is bringing some welcome efficiencies to the claim payment process, but at the same time, concerns are increasing that retention of talent at TPAs and carriers may have an opposite impact on the claims process.
• In workers’ compensation, claims trends are working in two directions as well. Medical costs are climbing, driven by a long tail of pharmacy treatment, obesity, an aging workforce and Medicare/Medicaid obligations under the Medicare Secondary Payer Act. Claim frequency, on the other hand, has been down, including long-term claim frequency, due, in part to ergonomic improvements.

That’s not the end of the workers’ comp claims story, however. “We are seeing indications that frequency may be starting to creep up. We have not definitively identified a driver but candidates include the impact of economic conditions on employment opportunities, hiring of new or less experienced workers, the aging work force and consideration of how changes introduced by the Affordable Care Act will impact workers’ comp,” Willis experts say later in the report.

Workers’ comp is one of the lines for which Willis indicates double-digit pricing on some accounts, with the report presenting an overall price range of +2.5 percent to +10 percent—and up to +20% in California.

For commercial casualty primary and excess coverage, the top end of Willis’ range of price hikes has now edged into double-digit territory also—coming in at 10 percent now, compared to 7.5 percent in a 2013 forecast present last fall. The low end of the range is +2 percent.

As for commercial property, “some hardening for catastrophe-prone risks has been predicted. Some hardening for cat-prone risks has occurred, with price expectations for cat-exposed programs shifting from flat renewals to slight increases.

For non-CAT risk programs, the expected price movement changed from decreases ranging from -5 percent to -10 percent in the fall forecast to rates remaining flat or falling by up to -5 percent.

The report notes, however, that property programs affected by Superstorm Sandy can expect a complicated renewal process including restructuring of the flood language in their policies.

Source: Willis