Following a profitable year for the industry, the P&C insurance market will be stable and competitive in 2014, according to Wells Fargo's Insurance 2014 Insurance Market Outlook. The report, issued by Wells Fargo Insurance, covers a range of product segments from workers' compensation and employment practices, to property and technology and network security.
“We anticipate significant marketplace capacity, excellent coverage quality in many areas, and do not expect a lot of pricing volatility,” says Simon Hodge, head of the Professional Risk Group at Wells Fargo Insurance.
Analysts provide a positive view of what the year might hold for the workers' comp line. In the report, they project continued rate increases for the first three quarters of 2014 along with continued reduction in the combined ratio, resulting from higher prices seen over the past three years.
Other predictions for workers' comp include:
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Expected moderation in rate increases in Q4 resulting in flat to 5% increases.
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Moderate reserve releases will further increase profitability.
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Continued movement away from guaranteed cost program structures into higher deductible program structures, either because they are a more appealing alternative or a necessity.
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Insureds with guaranteed-cost program structures or poor loss experience will see 10% to 20% increases, with higher increases in problematic states, such as California and New York.
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Insureds with low deductibles will see 5% to 15% increases.
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Insureds with high deductibles will see 0% to 5% increases.
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The continued use of predictive modeling analysis to improve risk selection, proper retention levels, and pricing will result in more conservative underwriting by the insurers.
In property, the U.S. market is characterized as very stable, with abundant capacity. Property insurance carriers have been lowering prices for select accounts (particularly for those with exceptional loss history), the report says, but they have been and will likely continue to be reluctant to offer discounts across the board.
Underwriters will still try their best to get higher rates for accounts with poor claims experience, Wells Fargo adds, noting that carriers are still focused on natural catastrophe perils including flood, windstorm and, to a lesser extent, earthquake.
Despite lower reinsurance prices, the cost of property catastrophe insurance is expected to remain flat to only slightly down, says Wells Fargo, with insurers focusing on such specifics as geographic location, loss history and the overall quality of the risk.
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