SOFT MARKET AHEAD?

Rough Notes, Sep 2004

The Council of Insurance Agents and Brokers (CIAB) and the Risk and Insurance Management Society (RIMS) both released membership surveys that indicate the market continued to soften in the second quarter. CIAB said brokers reported that 36% of small accounts, 57% of medium accounts, and 53% of large accounts experienced premium rate decreases ranging from a slight decrease to a drop of as much as 20% during the second quarter. RIMS members reported that most commercial insurance buyers renewed their policies at the same or lower premiums in the second quarter. Data from the RIMS survey show that premiums declined by 18% on average and as high as 52% for up to half of the D&O liability, property, and general liability policies renewed in the quarter.

The RIMS survey indicates that price declines outpaced price gains in every major category except workers compensation, where 50% of all renewals were priced an average of 14% higher and an additional 7% remained at the same level. More than 61% of D&O renewals were either less expensive or flat compared to last year. More than 65% of renewals of domestic property insurance were priced lower or flat.

The CIAB survey data showed that the average small commercial account experienced about a 1% decline; medium commercial accounts saw an average decline of 3%; and large accounts enjoyed an average decrease of 6%.

Ken A. Crerar, CIAB president, said, "Terms and conditions are still tight, but we are seeing accelerated decreases in premium rates and a return of competition to the market. The questions now are how far and how fast will those rates come down. There are still some mitigating factors such as reserve levels and the overall economic recovery that could serve as breaks on the market."

Daniel H. Kugler, RIMS vice president, membership, said, "Clearly, when 100 risk managers go into the market and 50 come back with a significantly better priced deal than the one they had last year, that means we are starting to experience a turn in the market from the past several years of large price increases. The continued decline in D&O prices affirms that even the highest flier in the past few years is now coming back to earth. We anticipate that the market will continue to soften at least through the end of the year."

CIAB said brokers indicated concern about the softening market, noting that it has renewed or bolstered concerns about carrier solvency. One northeast broker commented that the companies are "starting to give away the store!" A southeast broker said, "The market share demon is being let loose again."

The Hartford offers new homeowners policy

The Hartford Financial Service Group, Inc., introduced a homeowners insurance program designed to meet the changing coverage needs of families over their lifetime. Like the companion auto product, the Dimensions homeowners program is open to a wider range of risks, including home owners with no prior insurance, all insurance scores, and most roofs. Coverage is available for many kinds of homes: for all types of homes, including apartments, rentals, condos, single-family homes, and homes valued up to $750,000.

A multi-tiered rating plan tailors pricing more closely to an individual's risk, and new optional higher deductibles are available in the amounts of $1,000, $2,000, $2,500, $3,000, $4,000, and $5,000.

New optional endorsements include identity fraud expense; scheduled personal property with agreed value; property and liability coverage for loved ones living in assisted living care facilities; property and liability coverage for students living away from school; and replacement cost of non-building structures, such as patios and walkways.

Customers can save up to 10% on their auto premium and an additional 10% on their homeowners premium when they buy both insurance plans.

The Dimensions homeowners plan is expected to be available in most states by the end of 2004.

For more information, visit the insurer's Web site (www.thehartford.com).

The Hartford enhances motor truck cargo coverage

The Hartford Financial Services Group, Inc., has broadened and simplified its carrier-for-hire cargo coverage.

Cargo recovery extra expense coverage is now automatically included in every policy and provides up to $25,000 of coverage to pay for the release of cargo after loss or damage occurs. New optional coverages are: substitution of vehicles, which provides the same level of coverage for a replacement vehicle if an incident prevents the original vehicle from fulfilling its delivery obligation; and mechanical breakdown, which provides custom limits for mechanical breakdown of refrigeration or heating units that could damage cargo.

Limits were increased for earned freight, which covers up to $5,000 in uncollectible charges for freight if a loss occurs during transit; reusable packing containers, which provides up to $5,000 per occurrence for loss to packaging material; and debris removal expenses.

Exclusions were eliminated for wetness, poor or insufficient packing, unexplained disappearance, and shortage found upon taking inventory, among others.