Today in P/C rates

Today’s rate roundup:

The Council of Insurance Agents and Brokers shows a 0.9% rate increase for Q3, with workers’ comp up 4.1%, property up 3% and GL up 0.2%. Business Insurance quotes, and laments:

“We really didn’t see any significant trend last quarter, though rates appear to be edging towards positive territory,” CIAB President Ken A. Crerar said in a statement accompanying the study. “There’s still plenty of capacity in the market to dampen prices.”

But if rates are flat, don’t tell Travelers shareholders. TRV’s stock price jumped more than $3 a share during the day Wednesday. Investors were apparently stoked about the investor presentation, which appeared to show rates increasing. Quoth Bloomberg News:

Travelers Cos. posted the largest gain in the Dow Jones Industrial Average after the insurer reported an increase in third-quarter policy sales and said it was raising rates for clients.

The insurer advanced $2.86, or 5.6 percent, to $54.32 at 10:05 a.m. in New York Stock Exchange composite trading, the biggest jump since August.

Chief Executive Officer Jay Fishman is charging more for coverage as the insurer copes with higher catastrophe costs and near record-low interest rates crimp investment income. Net income slipped to $333 million, or 79 cents a share, from $1.01 billion, or $2.11, a year earlier, the New York-based insurer said today in a statement.

“It is all about rate,” Fishman said on a conference call with analysts today.

Slides like this one (available at this quarter’s Link-o-rama) got the party started:

Rates are rising! (To be fair though, Travelers CEO Jay Fishman doesn’t push that line as hard as Bloomberg makes it sound.)

Meanwhile, the cynicism oozes from Sector & Sovereign Research’s blog. Todd Bault plugged Travelers increases on renewal business into some fairly straightforward formulas and concluded that new business prices must be down on the order of 20%. (Plugging and chugging the math gets him -40%, but he backs away from that.)

After the last soft market, the C-suite instituted rigorous monitors on renewal pricing, and most indices show that metric holding firm.

But in the same way that mice hide where you don’t look (of course they do! otherwise they aren’t hiding!), it’s likely that the current soft market is playing out in new business.

It’s harder to monitor rate on new business. (You don’t know how much the insured paid last year – it was with another company.) And Todd’s 20% isn’t far-fetched. The Gecko, the bubbly checkout girl and the baritone with good hands each promises to undercut competitors 15% to win new business. And that’s in personal lines, where rates are more stable.

And a year from now, that $1 of risk that you took on for 60 cents probably won’t mind if next year it pays 65 cents – an 8% increase.

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One thought on “Today in P/C rates

  1. […] Travelers commented on rate increases, now Chubb. From Thursday’s conference call transcript, Paul Krump, […]

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