Flattening Premiums Signal a Shift in P/C Insurance Market

Latest Results From CIAB Q1-2024 Survey

The first quarter of 2024 has seen a notable moderation in premium increases across the property and casualty (P/C) insurance sector, according to the latest market survey by the Council of Insurance Agents & Brokers (CIAB). This trend marks a slight uptick in the overall rate of increase to 7.7%, from 7.0% in the previous quarter, yet reveals a significant slowing compared to past growth, continuing a streak now into its 26th consecutive quarter.

The quarter’s findings underscore a particularly varied landscape across different lines of commercial insurance, with most experiencing either flat or reduced premium increases, and some lines facing unique challenges that make them exceptions to the broader trend.

Diverse Trends Across Commercial Lines

In the realm of commercial insurance lines, workers’ compensation and Directors and Officers (D&O) insurance saw average decreases in premiums of -1.8% and -0.8% respectively. These declines indicate significant shifts within these markets. Particularly for D&O insurance, the drop in premiums is attributed to an excess of capacity and a notable decrease in demand. This change is further backed by data from AM Best and S&P, which highlight a general slowdown in court activities and a sharp decline in mergers, acquisitions, and initial public offerings (IPOs) — from 906 in 2021 to a mere 102 in 2023.

On the other hand, commercial property insurance tells a different story. Despite an overall trend toward moderation, premiums for commercial property rose by an average of 10.1%, a slight decrease from 11.8% in the last quarter of 2023. The sector continues to face significant underwriting challenges, with one survey respondent describing the task of placing commercial property lines as “almost impossible.” Stricter underwriting standards, increased detail in submissions, and pressures to raise property values are among the main hurdles cited by industry professionals.

Commercial auto insurance saw the most substantial increase, with premiums up by 9.8% compared to 7.3% in the previous quarter. This line’s challenges are compounded by high vehicle repair costs, which have been exacerbated by inflation and ongoing supply chain difficulties. Additionally, an increase in nuclear verdicts related to auto accidents and a shortage of experienced truck drivers contribute to rising premiums. According to the CIAB survey, there has also been a steady increase in the number of respondents reporting a rise in commercial auto claims, influencing premium pricing further.

Market Dynamics and Industry Implications

The variations in premium trends across different lines of commercial insurance reflect a complex interplay of market forces and sector-specific challenges. While the moderation in premium increases suggests a stabilizing market, the distinct issues faced by different lines indicate ongoing volatility in specific areas.

For insurers and policyholders alike, understanding these dynamics is crucial. Insurers must navigate the fine balance between risk management and competitive pricing, particularly in lines facing upward pressure on premiums. Policyholders, meanwhile, need to stay informed about these trends as they could impact their business operations and insurance costs significantly.

At a Crossroads

As we move further into 2024, the P/C insurance market appears to be at a crossroads. The general trend towards moderation offers a breather to policyholders who have faced steep increases in previous years. However, the challenges noted in commercial property and auto lines, alongside the evolving landscape in workers’ compensation and D&O insurance, suggest that insurers and insureds must remain vigilant.