Commercial lines insurance premiums continued to tumble during the fourth quarter of 2007, according to the RIMS Benchmark Survey, an industry survey of policy renewal prices as reported by corporate risk managers.
Despite concerns about losses arising from the continuing crisis in the subprime mortgage market, the average directors and officers liability (D&O) premium fell 11 percent in the fourth quarter, far outstripping decreases in other lines of business tracked by Advisen for the RIMS Benchmark Survey. While posting more modest decreases, the persistent soft market continued to wear away at pricing in general liability (-3.0 percent) and property (-1.3 percent).
After falling sharply in 2006, due largely to reform measures in several large states, workers’ compensation premiums continued the more moderate trend seen throughout 2007. The average workers compensation premium fell 1.4 percent during the quarter.
“Overall, 2007 was a good year for risk managers — certainly as it relates to the cost of insurance,” says John R. Phelps, ARM, CPCU, member of RIMS Board of Directors and director of business risk solutions for Blue Cross and Blue Shield of Florida Inc. “The downward pricing momentum in the fourth quarter, especially in D&O, suggests that the soft market still hasn’t hit bottom.”
“Insurance companies are still posting very good results and probably will end the year with an underwriting profit,” says David Bradford, editor-in-chief of Advisen. “That should further stimulate competition and buyers can look forward to yet lower insurance costs. But the soft market will eventually take its toll on insurer earnings — maybe starting as early as the second quarter of 2008.”
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