“Hardening” market continues For those who analyze insurance stocks, it will not come as a surprise that most of these companies are seeing improvement in their profits. In the case of most property and casualty lines, the loss cost trends combined with the investment environment required that rate increases be implemented to return carriers to profitability. For the first time in more than 6 years, insurance rates are continuing to rise modestly.
Unlike past, “hard markets,” these single digit increases for business insurance clients, which boast good claims experience, are not causing widespread dislocation. For strategic reasons, most of our clients are choosing to remain with their incumbent carriers. Because pricing changes have been small, the theory is that client trust and loyalty will be reciprocated by incumbent insurers if and when rates spike more drastically.
Other sectors of the insurance industry are also seeing changes. Personal insurance rates are rising in the single digit range across both direct and agency carriers. The total increase is sometimes even higher as companies use inflation factors to update replacement values. In the life and health insurance space, many companies are increasing rates and/or withdrawing certain plans to offset the adverse impact of historically low interest rates. With the Fed indicating that it intends to keep interest rates extremely low through 2015, we expect a combination of change and uncertainty to persist in both the major medical and long term care insurance markets for some time.