Not only do property-casualty insurance industry leaders believe the financial crisis is behind them, but they also believe rates are hardening, a new study finds.
A soft market has been in place for several years, as insurers have competed for limited business, especially in the commercial sector, by undercutting their competitors prices. A soft market hurts agent commissions.
Three-quarters of executives expect improved profits this year, according to the survey, conducted by the Insurance Information Institute (III), a nonprofit communications organization supported by the insurance industry, at its 16th annual Property/Casualty Insurance Joint Industry Forum.
A slightly smaller percentage (72%) of respondents believe the industry is on the road to recovery.
“The consensus among forecasters is for growth of the U.S. economy in 2012 at a little over a 2% annual rate, net of inflation,” said Steven Weisbart, senior vice president and an III economist.
If that forecast is correct, then demand for personal and commercial lines coverage will increase “modestly,” he said.
“The industry is well capitalized to provide this additional coverage and to pay claims under it without difficulty. Rates will be determined, as they should be, by state- and local-level market conditions, recognizing the impact of inflation on claims and the effect of lower investment income than the industry has earned in prior years,” Weisbart added.
Exactly 63% of respondents said they believe personal auto insurance rates will increase, and 67% expect an improvement in homeowners coverage. Exactly 72% of survey participants expect an improvement in commercial lines.
Meanwhile, slightly more than half of survey takers (55%) do not expect an improvement in workers compensation.
The survey also found that 67% of respondents believe that premium growth will be higher; 31% say it will remain flat, and 2% say it will decline.
In terms of capacity, as measured by policyholders’ surplus, 56% of respondents expect it to increase; 35% believe it will remain flat; and 9% say it will decrease.
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