Auto Liability Market Trends: Q1 2014

Auto Liability Market Trends: Q1 2014

Primary auto rate increases are averaging +2.7% countrywide, which continues a downward trend from +3.3% last quarter and +3.9% for the previous quarter and +4.4% a year ago.

Middle market average rate increases are about +3.0% compared with +3.4% at the last report. Rate changes are down about 1.6 percentage points compared with March 2013. Approximately 23% of respondents are still reporting rate increases greater than +5%, which is down from about 30% or respondents last quarter.

Middle Market Auto Liability Market Trends: Q1 2014 National accounts reported average rate increases of about +2.3%, down from about +3.1% last quarter and down about 1.6 to 1.8 percentage points from a year ago. This is similar to what the middle market has experienced since last year but national accounts are reporting lower average rate increases due the mitigating factor of higher retentions.

Average rate increases for global accounts are up slightly from last quarter in the range of +2.0% to +2.9% but down from about +4.9% to +5.4% a year ago.

The market for both middle market and large risks showed slight improvement over December 2013, with slightly fewer placements above the mode and slightly more placements below the mode. The large account market has been fairly stable over the past 12 months, with middle market showing greater average rate change improvement than large accounts from September to December.

Industry Market Rates

For construction, average auto rate increases are running around +3.1% to +3.8%, similar to the +3.3% mark in December but with a bit more dispersion.

Real estate improved by over 1 percentage point at around +2.8 to +3.2% from about +3.9% to +4.3% in December 2013.

Other industries are experiencing average auto rate increases of about +2.3% to +2.6%, down from about +3.3% last quarter.

Auto Liability Average Market Survey Rates – by Industry

Industry Construction Real Estate Other
Mean 3.1% 2.8% 2.6%
Median 3.8% 3.2% 2.3%

Regional Rates

Regional average reported rate changes varied in a fairly tight range from a low of +2.3% to +3.9% with the South region coming in at the high end of the range. CA was actual lower at +1.9%. The Midwest region reported the highest average rate increases a year ago at +4.9% but are now reporting the lowest at +2.3%. All regions have improved since March 2013 with South showing the smallest year-over-year improvement.

West: 2.5%  (down from 4.7% in Q1 2013)

  • California: 3.2%
  • Non-California West: 2.2%

Midwest: 2.3% (down from 4.9% in Q1 2013)

South: 3.9% (down from 4.0% in Q1 2013)

New York Metro: 2.8% (down from 4.6% in Q1 2013)

Atlantic

  • Atlantic South: 2.5% (down from 4.1% in Q1 2013)
  • Atlantic North: 3.0% (down from 3.6% in Q1 2013)

Vehicle Counts

About 43% of respondents reported that vehicle counts were moderately increasing and about 55% reported they were flat. This represents a slight shift from flat exposure to increasing exposures since the last report.

More Q1 2014 Market Trends

The field reports that auto liability pricing remains volatile. Large fleets with difficult exposures such as buses or heavy trucks are most difficult and loss experience and loss control are getting much underwriting scrutiny.

Hired and non-owned auto exposures also continue to receive greater underwriting attention.

Underwriters are considering the use of modest premium credits or reduced loss picks for accounts taking advantage of black-box or other telematics technologies. However, their actuaries still seem to struggle to precisely connect the technology and the trends.

Unfortunately, the reduction in loss frequency creates “uncertainty’ or presumed volatility when it comes to pricing these layers. Regardless, the favorable results in retained losses reflect the improving trends for technologically enhanced fleets, making it is worth discussing these tools with clients if they have either large auto fleets or significant auto losses.

Auto Liability Market Rate Survey Distribution

Middle Market Accounts National Accounts Global Accounts
10% or more rate increase 1.0% 1.4% 0.0%
7.5% to 9.9% rate increase 4.0% 2.9% 0.0%
5% to 7.4% rate increase 18.2% 8.6% 10.3%
2.5% to 4.9% rate increase 32.3% 35.7% 44.8%
.01% to 2.4% rate increase 19.2% 17.1% 10.3%
Flat 19.2% 28.6% 24.1%
Down -.01% to -4.9% 6.1% 4.3% 6.9%
Down -5% to -9.9% 0.0% 1.4% 3.4%
Down -10% or more 0.0% 0.0% 0.0%
Average Rate Change Mar 2014 2.9% 2.3% 2.0%
Median Rate Change Mar 2014 3.0% 2.4% 2.9%
Average Rate Change Mar 2013 4.6% 4.1% 4.9%
Median Rate Change Mar 2013 4.6% 4.0% 5.4%
Note: Average Rate Change is calculated by the sum of the mid-point of each rate band above divided by the total number of survey respondent. The Median Rate Change is the mid-point of the most commonly selected rate band in the survey.

About Pamela Ferrandino

Pam has been with Willis since 2004 and is Executive Vice President, National Practice Leader for Casualty, Placeme…
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