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Slower rate of growth good news for commercial policyholders

We usually talk about consumers' issues with insurance companies. Flood insurance, homeowner insurance, auto insurance and life insurance -- these are topics that focus on Florida residents and their families. In this post, though, we have something for businesses: the fourth-quarter results of Towers Watson's Commercial Lines Insurance Pricing Survey.

Commercial policyholders have seen their premiums increase for 12 consecutive quarters, with the last quarter of 2013 seeing a 5 percent jump year-over-year, the same change logged for the previous quarter. Towers Watson does not anticipate that prices will go down any time soon.

The human resources and risk management consulting company does note that the rate of increase seems to be slowing overall. For example, rates were up 7 percent during fourth quarter 2012. Not every product line's rate of increase was lower, though: General/products liability coverage and excess/umbrella coverage increased at a faster pace.

Excess/umbrella liability also logged one of the largest increases year-over-year. The top spot for increases went to employment practices liability coverage; workers' compensation also reported a significant jump. Towers Watson found that commercial lines generally saw increases in the mid-single digits.

Specialty insurance increased but not as much as commercial lines. Specialty insurance covers high-risk businesses and unusual products or services. Manufacturers of explosives could be counted as specialty insurance customers. Kidnap and ransom insurance is an example of specialty coverage.

The study also found that these price increases were about equal regardless of company size. Remember, insurance rates are based on risk, and large corporations may not have the same risks or the same levels of risk as small businesses.

Loss ratios -- the percentage of premium dollars that go toward paying claims -- increased just 3 percent from last quarter 2012 to last quarter 2013. If the overall costs of claims are on the rise, insurers are covering the difference easily, Towers Watson said, with the premium increases.

Source: Insurance Journal, "Commercial Lines Price Hikes Slowing: Towers Watson," March 11, 2014

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