N PROPERTY/CASUALTY INSURANCE, perhaps nothing is more
important than knowing what marketplace rates are. Sure, risks have
to be carefully selected and claims managed competently. But those
are constants—a good organization keeps those strong at all times.
A company’s rates, however, follow the market.
When rates are high, it’s a hard market—a good time
to write profitable risks. When rates are low, it’s a
soft market; turning a profit is tough.
Even internally, monitoring rates is maddeningly
difficult. Until about a decade ago, relatively few insurers did it on a companywide, systematic basis. It
gets even trickier when you try to do it nationally.
There are currently four organizations that
monitor rates and make all or part of their results
■ ■ A monthly survey of its membership by the
Council of Insurance Agents and Brokers;
■ ■ A monthly survey of insurance agents by
MarketScout, a Dallas-based insurance
distribution and underwriting company;
■ ■ A quarterly survey of risk managers, conducted
for the Risk and Insurance Management Society
(RIMS) by Advisen;
■ ■ A quarterly survey of commercial insurers
by Towers Watson.
The results often disagree. Table 1 (see page 29), which
shows results through year-end 2011, is not unusual. At
year-end, all four surveys showed slight rate increases,
between 1 percent and 3 percent. But a year earlier,
the surveys indicated rate decreases ranging between
1 percent and 5 percent.
Each survey is conducted differently. Each polls
a different group. Each has a distinct methodol-
ogy. And none looks at exactly the same lines of
business. So it’s no surprise that results vary, some-
times by large amounts.
MarketScout operates an insurance exchange and
taps information on the risks it handles to develop
its rate monitor. Every month, thousands of policies
renew through the exchange, and MarketScout’s survey captures change in premium, then adjusts it for
change in exposure.
It supplements this information with material
from 1,500 or so agents and underwriters attending
continuing education programs for certified insurance counselors conducted by the National Alliance
for Insurance Education & Research in Austin, Texas.
The resulting rate change is a weighted average of
information from the database and the agent survey.
MarketScout believes blending the surveys
strengthens the result, said CEO Richard Kerr.
“If you catch an agent on a bad day, he might say the
market’s down 20 percent because he lost a big account,”
Kerr said. “Add in the real numbers [from surveying
MarketScout renewals] and you get a better result.”
The survey covers new and renewal policies
across 14 lines of business, from commercial prop-
erty to surety. It also shows results by account size,
from small (less than $25,000) to jumbo ($1 million
and up). There is also information on rate change
by industry class, such as manufacturing or con-
tracting. Data stretch back to July 2001. Early this