Commercial Insurance State of the Marketplace

It was not long ago graphed commercial insurance pricing looked like a rollercoaster. A “hard market” was pricing going up and a “soft market” was going down. There were many variables influencing this up-and-down behavior and the good news is we are in the most sustained, essentially flat pricing trend in the history of the insurance markets.

The gist of this period of calm is data feeding AI modeling and usage. We simply have better information in which to make decisions. We also have a very good economy which provides increasing premiums paid simply because payroll and sales are up. This we call “exposure-based changes”. Collectively, this all equates to a very healthy insurance marketplace as insurance companies record losses at a level that is enough for them to make money.

These numbers represent what was left of $1.00 after all claims and expenses. Companies add Investment Income to this, which is why being near 100% is not a problem. The fact is, 5 of the last 6 years have been below $1.00, and very close to that in 2017. Compared to 2008-2012, this is a very big difference! Hence my positive comments about the industry (this is not Health Insurance inclusive data).

Combined Ratio from 2008 to 2018

I simply wanted to share the underbelly of our industry, if you will. In lieu of these results, stability is as much in the future as it has been lately. Enjoy a good outcome of an industry that certainly takes its commentary shots and yet is a life saver when called upon.

Happy Summer of 2019!!