Insurance underwriters want 5% to 10% more to renew their accounts, and some lines of coverage and underwriters want or need more, but they can’t get it without risking losing clients, says Jeffrey W. Cavignac, a San Diego-based broker.



“Fortunately for those who buy insurance, the industry’s robust surplus is keeping rates on preferred accounts from increasing,” he says.

The frequently mentioned prospect of a hard insurance market, characterized by higher prices and stricter underwriting, has not yet materialized.

That’s one of the main ideas conveyed by Cavignac & Associates in its
 forecast for insurance markets in 2012.



As Cavignac sees it, insurance rates in 2012 will largely depend on individual risk profiles and the specific type of coverage needed. 

Except for workers’ compensation and wind-prone areas, “prices should remain flat for general liability and excess liability,” says Cavignac, and auto rates “could actually come 
down.”

Cavignac

Cavignac’s assessment contains some predictions similar to those made by Lockton Cos. last November. 

That month, Lockton warned that the insurance market was firming in some segments and that pricing was “under pressure.”



Lockton cited the huge losses sustained in 2011 from natural
  catastrophes, such as the tornadoes in the U.S. Midwest and the 
earthquake and tsunami that struck northern Japan. 

Lockton also wrote about pressure to push up workers’ compensation rates.

 Other insurance analysts repeat those themes.

 “There’s little doubt that we’ll see prices firming in the coming months—but which markets and at what pace/percentage remains to be seen,” says the website propertycasualty360.com. As for workers’ compensation, it “is going to increasingly become an acutely painful issue for both risk managers and carriers.”

Cavignac says workers' compensation carriers are experiencing poor underwriting results, shrinking premiums from smaller payrolls and increased claims. Regulatory uncertainty in many states is another problem for carriers, he says.

The combined ratio (losses plus expenses divided by premiums) increased five points in 2010 to 115, the highest it has been in since 2001.

Despite increased investment income, the line suffered a 1% pre-tax operating loss. In California, Cavignac says, things are worse, with rates near an all-time low and pressure increasing for increases in rates.

Around the country, "We are already seeing some insurance companies withdraw from this line and we are seeing others increase rates, in come instances significantly." If your experience modification remains unchanged, he says, figure on a 10% to 15% increase.

Price Competition in Professional Liability



Rates for professional liability coverage, which Cavignac says is serviced by more than 40 companies today as compared to about 10 companies only eight years ago, are all over the board.



Many of the new companies compete mainly on price. “It is anticipated that these ‘newbies’ will not be around long,” says Cavignac.



The competition has already forced some of the experienced underwriters to withdraw from professional liability coverage, says
 Cavignac. “They are simply not willing to match the undisciplined pricing offered by the new entrants,” he says.