2013 Insurance Market Outlook
The trend that began in the last half of 2011 in the Commercial Property Casualty Insurance marketplace continued in
2012. After nearly a decade of yearly rate reductions, insurers responded to underwriting losses by reversing course
and increasing rates. We have now seen seven consecutive quarters of rate increases, and still the industry projects
that they will suffer losses similar to those in 2011. In both of those years, insurers paid out about $107 in claims for
every $100 they collected in premiums. Return on Equity is expected to shrink from the already low 4% in 2011 to a
new low of 3.2% in 2012.
On average, rate increases countrywide averaged about 5% for all lines of coverage, but were higher for the two lines
that are the loss leaders for insurers, Workers’ Compensation and Property. Workers’ Comp increases are averaging
about 10%, and for clients who have had higher losses, the increase may be considerably higher. Insurers’ investment
income is limited by the conservative portfolios they are required to make, so that is not expected to improve in
2013. The WC industry projection for 2012 is a claims payout of $115 for every $100 of premium collected, and that is
expected to rise to $119 in 2013, driven largely by the escalating medical cost of claims. ROE is down to 2.8% for 2012
and is expected to drop to 1.8% this year, and even further in 2014.
Several major insurers are no longer willing to write WC without the supporting lines of General Liability and
Automobile Liability, though there are a number of monoline WC writers that are still willing to do so. Those insurers
are also aggressively seeking rate increases on renewal. These increases are encouraging clients with a good loss
history to seek alternative programs, such as large deductible plans or captive programs.