February 3, 2017 – It’s been a well-known fact the last few years in the insurance industry have been very good from a buyer’s perspective. More carriers have entered previously uncharted waters, coverage has broadened, and premiums have become extremely competitive. Carriers have been buying business at a level not seen for some time. Much of this was the result of very profitable underwriting results, which compensated for slower growth in carrier investment portfolios.
But 2016 was different. For the first time since 2012, the industry is estimated to end the year with a net underwriting loss. While not a significant loss (estimated combined ratio of 100.7), it is still the first time in several years that the pendulum has shifted past the break-even point in underwriting. There are many factors that have contributed to this result – relaxed underwriting standards, increase in catastrophic claims, lower pricing, etc. – but we won’t dive into those today.
The most important thing to know is how this shift will impact your rates. In the near future, I believe it’s safe to assume we’ll see minimal, if any, impact on overall net rates in the marketplace. The hardest hit areas seem to be in the commercial auto arena. We can expect to see a slight uptick in rates there. Otherwise, positive investment results as a whole should be able to off-set the underwriting loss in 2016. That’s a very good thing, especially as carriers have been continuing to add to their net surplus the last few years.
I would anticipate the current state of the market will continue for the upcoming year. There is still a lot of capacity for growth in the industry, so expect to see the insurance marketplace continue to be very good from a buyer’s perspective.
Andy Bertram, CPCU, CIC
Risk Advisor, North Risk Partners – C.O. Brown Division
Information on industry loss results was retrieved from: