No gold Standard
All the surveys agree: The commercial market was steadily hardening early this year. But with that said, the surveys have their
individual strengths and weaknesses. Insurers must sift the results carefully.
MarketScout is the only one that claims to capture new business—risks that change carriers while remaining in its database.
That’s important because renewal rates can be rising while the
price charged for new risks falls. As predictive models allow
insurers to fine-tune what renewals they keep, this will be increasingly valuable.
But it’s hard to understand what value is added from a survey of agents. As the cliché goes, the data is the data. How does
opinion research improve it? MarketScout might be well served
to provide two sets of data—one that includes its market research and one that does not.
The RIMS/Advisen survey is large and has a lot of history.
But it doesn’t look at specialty lines. It focuses more on large
accounts, creating a bias, since large company rates usually rise
faster when they do rise and fall sharper as the market softens.
It seems more attuned to the needs of brokers, agents, and risk
managers than to those of actuaries.
Comparing rates with those charged in the prior quarter,
as the Council of Insurance Agents and Brokers survey does, is
quite unusual and probably not suited for traditional analysis.
And gathering data in a range, which the council’s survey also
does, and then translating the range into a point estimate lacks
the sort of precision that actuaries traditionally crave.
The Towers Watson survey appears to be the most disciplined, gathering information and norming it as actuaries
generally would. It also uses data from the insurance company,
rather than from agents or brokers. That’s a nice alignment of
interests and implies that the data have been properly scrubbed.
But there are downsides. It only appears quarterly, which
is fine if you are performing analysis but falls short if you need
a comparative for your in-house monthly survey. And unless
you submit your own data, there’s little line-of-business detail.
In the final analysis, submitting your data may be a good
idea. We work in a data-driven business in a data-driven age.
It’s getting harder and harder to turn your back on information
when you can get your hands on it.
JAMES LYNCH, a fellow of the Casualty Actuarial Society
and a member of the Academy, is an actuarial consultant and
writer in Montclair, n.J.
TABLE 1
Property/Casualty Marketplace Rates
first Quarter 2011
Annualized change from prior year (prior quarter for CIAB)
Quarter
Advisen/
RIMS
Towers
Watson
(CLIPS)
Market
Scout
CIAB
12/31/2011 1.79% 3%
09/30/2011 0.91% 2%
06/30/2011 – 1.25% 2%
03/31/2011 – 2.94% 1%
12/31/2010 – 1.13% –1%
09/30/2010 – 2.21% –1%
06/30/2010 – 3.29% –1%
03/31/2010 – 3.13% –1%
12/31/2009 – 3.01% 0%
09/30/2009 – 2.15% 0%
06/30/2009 – 1.16% 1%
03/31/2009 –0.46% –1%
12/31/2008 – 3.12% –3%
09/30/2008 – 6.41% –4%
06/30/2008 – 5.68% –5%
03/31/2008–10.18% –6%
12/31/2007 – 5.11% –6%
09/30/2007 – 3.04% –5%
06/30/2007 – 3.01% –5%
03/31/2007 – 3.22% –4%
Advisen data for large accounts only
MarketScout produces monthly reports. data taken from monthly reports
at quarter end
Source: Author
1%
0%
–3%
–4%
–5%
–4%
–3%
–4%
–4%
–4%
–6%
–7%
–9%
–10%
–11%
–12%
–16%
–15%
–14%
–12%
2.8%
0.9%
–0.1%
– 2.9%
– 5.4%
– 5.2%
– 6.4%
– 5.3%
– 5.6%
– 5.8%
– 4.9%
– 5.1%
– 6.4%
– 11.0%
– 12.9%
– 13.5%
– 12.0%
– 13.3%
– 11.8%
– 11.3%
