Commercial Insurance Prices Increase for the Eighth Straight Quarter

  Commercial Insurance Prices Increase for the Eighth Straight Quarter

Workers compensation and employment practices liability lines show highest
price change

Business Wire

NEW YORK -- March 11, 2013

Commercial insurance prices rose by almost 7% in aggregate during the fourth
quarter of 2012, marking the eighth consecutive quarter of price increases and
the fourth showing increases across every line surveyed, according to the
latest Commercial Lines Insurance Pricing Survey (CLIPS) conducted by Towers
Watson (NYSE, NASDAQ: TW), a global professional services company. The survey
compared pricing data reported by carriers on policies underwritten during the
fourth quarter of 2012 to those charged for the same coverage during the
fourth quarter of 2011.

Although commercial insurance prices continued their year-over-year upward
trend, movements from the prior survey were slight, indicating a pause in the
acceleration observed since the start of 2011. These price change indications
were generally consistent with price increases from the prior survey, except
for specialty lines, where the survey indicated somewhat larger gains than
were reported in the third quarter.

Workers compensation and employment practices liability had the largest price
increases year over year, both approaching double digits. For most commercial
lines, increases were reported to be in the mid-to upper-single digits, with
all lines of business surveyed showing increases of at least 3%. Standard
commercial accounts of all sizes saw rising prices, with larger gains observed
in mid-market and large accounts. Specialty lines prices rose at a slower rate
than standard lines prices.

Historical loss cost changes reported by participating carriers pointed to an
improvement of almost 4% in loss ratios in accident-year 2012 relative to 2011
(excluding catastrophes), as earned price increases continued to more than
offset reported claim cost inflation. This indication is a reversal from the
estimated 3% deterioration between 2010 and 2011. Carriers reported claim cost
inflation estimates of 1% for 2012, which is the second-lowest inflation
estimate reported since the launch of CLIPS in the summer of 2005.

“Price increases taken in 2012 will push 2013 loss ratios down, assuming
moderate loss inflation,” said Tom Hettinger, Towers Watson’s Property &
Casualty sales and practice leader for the Americas.

About CLIPS

CLIPS data are based on both new and renewal business figures obtained
directly from carriers underwriting the business. This particular survey
compared prices charged on policies underwritten during the fourth quarter of
2012 to the prices charged for the same coverage during the same quarter in
2011. For the most recent survey, data were contributed by 41 participating
insurers representing approximately 20% of the U.S. commercial insurance
market (excluding state workers compensation funds).

CLIPS participants represent a cross section of U.S. property & casualty
insurers that includes many of both the top 10 commercial lines companies and
the top 25 insurance groups in the U.S. Measurement of both pricing changes
and loss ratio changes also sets CLIPS apart from other studies. Participation
in CLIPS has been strong, as carriers believe it provides a more accurate
picture of price changes, and find it useful in setting assumptions for
product pricing and estimating claim liabilities.

About Towers Watson

Towers Watson (NYSE, NASDAQ: TW) is a leading global professional services
company that helps organizations improve performance through effective people,
risk and financial management. The company offers solutions in the areas of
benefits, talent management, rewards, and risk and capital management. Towers
Watson has 14,000 associates around the world and is located on the web at
towerswatson.com.

Contact:

Towers Watson
Josh Wozman, +1 703-258-7670
josh.wozman@towerswatson.com
or
Binoli Savani, +1 703-258-7648
binoli.savani@towerswatson.com