Commercial insurance rates beginning to soften

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Richard Ollis is the president/CEO of Ollis and Company, an employee-owned insurance agency.|ret||ret||tab|

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It's hard to believe we're halfway through 2004. Time flies when you're having fun and lately the insurance business is starting to be more fun. The past two years have been tough. |ret||ret||tab|

Commercial insurance (property and casualty) costs had been rising at double digit rates, some policies in excess of 50 percent. "My clients used to like me" was a common quote around our shop these past two years. With the marketplace softening, insurance buyers will begin to get a break on increasing costs. |ret||ret||tab|

Beginning in 2001, the commercial property/casualty marketplace experienced dramatic price increases. It started with the increase of the severity in claims. |ret||ret||tab|

Then the investment income was impacted by the performance of the stock and bond markets. Then 9-11 came and pushed us into a hard market, with premiums soaring. Many states, including Missouri, passed laws prohibiting insurance companies from raising premiums more than 25 percent without a 60-day notice.|ret||ret||tab|

This year has been a much better year. We're starting to see the marketplace change for the better. This softening has been a welcome change for buyers and sellers. Investment income is rebounding and losses are no longer outpacing premiums. Barring a major catastrophe, most of us will start seeing costs moderate.|ret||ret||tab|

We're not going back to the 1990s, when costs were soft for virtually everyone. Insurors are being much more selective about whom and what types of business will receive preferred pricing. |ret||ret||tab|

Buyers with poor loss experience are still having a tough time finding competitive coverage. Some product lines are still firm. Environmental, fiduciary, product liability, professional liability, and directors' and officers' coverages are still on the rise. Contrary to the information being released by the Missouri Department of Insurance, workers' compensation rates are not softening a great deal. Until we get reform, Missouri will continue to lag behind other states on competitive workers' compensation rates. |ret||ret||tab|

The good news is that in May, the overall growth in premiums leveled off at 7 percent, according to Market Scout, a Dallas-based quote service. Only about 8 percent of insurance professionals and buyers surveyed by National Underwriter still rate the market as "very hard." Most (45 percent) rated the market "steady." |ret||ret||tab|

Insurance companies are now quoting and writing new accounts.|ret||ret||tab|

If your claims experience is good, and you're not in a high-hazard business, rates should level off. Last month, we were seeing zero to 10 percent increases, depending on the type of risk. In some isolated cases, we even saw a decrease or two. Tough products, workers' compensation, professional, and directors and officers were still seeing 10 percent to 15 percent average rate increases.|ret||ret||tab|

The hard market is not exactly over; it's still a fragile market. While most will see some rate relief this year, a minority of risks with poor claims experience or high hazards won't notice much difference. With the continued economic recovery and lack of catastrophes, we'll all get that much needed relief we've been looking for.|ret||ret||tab|

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