The commercial insurance landscape in the United States has seen significant fluctuations over the years, with a general trend of rising rates. According to the latest data from WTW’s Commercial Lines Insurance Pricing Survey (CLIPS), the fourth quarter of 2024 continued to witness an upward trend in prices, albeit at a moderated pace of 5.6%. This survey provides a year-over-year comparative analysis, emphasizing premiums for policies underwritten during the fourth quarter of 2024 against those in the same period in 2023. While the aggregate price increase was slightly lower than the 6.1% observed in the third quarter of 2024, it signifies a continuation of the broader trend of inflation within the commercial insurance sector.
Fluctuations in Specific Coverage Lines
Yi Jing, the Senior Director of Insurance Consulting and Technology (ICT) at WTW, noted that while overall prices continue to rise, the pace has moderated compared to prior quarters. Specific coverage lines displayed varied trends. For instance, Excess/Umbrella Liability experienced its highest price increase over the past three years, highlighting its role in the broader spectrum of commercial insurance. Moreover, Commercial Auto insurance reached its highest-ever price increase, marking a consistent trend of double-digit growth. This upward trajectory presents challenges for businesses reliant on vehicle fleets, as the cost of insuring these assets becomes increasingly burdensome.
In contrast to the sharp increases in Excess/Umbrella Liability and Commercial Auto insurance, Commercial Property coverage showed a notable slowdown. The moderate price increases for this quarter were substantially lower than those observed in the previous quarter, signaling a potential stabilization in property-related claims and expenses. This deceleration in rate hikes for Commercial Property suggests that insurers may have adjusted their risk assessments and pricing models, reflecting a more balanced approach moving forward. These dynamics underline the importance of understanding the specific coverage needs and market trends for businesses operating across different sectors.
Divergence in Rate Increases Across Market Segments
The survey also highlighted varying trends in rate increases across different market segments. Mid-market accounts saw a continued deceleration in rate increases, extending a trend from previous quarters. This is likely a reflection of competitive pressures within the mid-sized business segment, where insurers are adjusting their pricing strategies to maintain market share while managing risk. For smaller accounts, the rate hikes were notably reduced compared to the prior quarter, which could be attributed to a combination of enhanced risk management practices by these businesses and competitive dynamics among insurers vying for their policies.
On the other hand, large account price increases remained largely unchanged. This stabilization indicates that insurers are maintaining their pricing strategies for the largest commercial clients, who typically have complex and substantial coverage needs. The consistency in pricing for large accounts suggests a measured approach by insurers, balancing the demands of maintaining profitable margins while catering to the intricate risk profiles of these clients. This divergence in rate increases across market segments adds another layer of complexity for businesses navigating the commercial insurance landscape.
Insights from the Industry
WTW’s Insurance Consulting and Technology division, which serves the insurance industry with both advisory services and state-of-the-art technology, emphasizes innovations that help clients better select, finance, and manage their risk and capital. The comprehensive analysis provided by CLIPS offers retrospective insights into changes in Commercial Property & Casualty (P&C) insurance prices and claims cost inflation. These insights are invaluable for businesses aiming to understand the historical context and anticipate future trends in the insurance market. More forward-looking perspectives on P&C trends, outlooks, and rate predictions can be found in WTW’s Insurance Marketplace Realities series, which provides a broader context for businesses and insurers alike.
This extensive survey saw the participation of 41 insurers, representing approximately 20% of the U.S. commercial insurance market, excluding state workers’ compensation funds. These participants included many of the top 10 commercial lines companies and the top 25 insurance groups in the nation. Such a broad representation ensures that the survey findings are reflective of the larger trends within the commercial insurance market. By offering a comprehensive view of the industry’s pricing dynamics, the survey highlights the persistent upward trend in rates, albeit at a moderated pace in the latest quarter.
Future Considerations for Businesses
The commercial insurance market in the United States has experienced notable changes over the years, with an overall trend of increasing rates. According to the latest figures from WTW’s Commercial Lines Insurance Pricing Survey (CLIPS), the fourth quarter of 2024 continued to see a rise in prices, although at a slightly reduced rate of 5.6%. This survey offers a year-over-year comparative analysis, focusing on premiums for policies issued during the fourth quarter of 2024, compared to the same timeframe in 2023. While the overall price hike was marginally less than the 6.1% seen in the third quarter of 2024, it highlights a continued pattern of rising costs within the commercial insurance sector. This trend reflects broader inflationary pressures impacting the industry, signaling a challenging environment for businesses seeking coverage. Rising rates can affect companies’ budgeting and risk management strategies, making it crucial for firms to stay informed about market conditions and potential cost implications.
