November 11, 2022

Travelers Quarter and Rising Commercial Insurance Prices

Our take on Travelers latest quarter and how price pressure could help commercial insurance agencies in the year ahead.

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Travelers Reports, Commercial Insurance Rates Up

When a major carrier like Travelers announces quarterly results, it sets a tone for the industry and provides some guidance for independent commercial insurance agencies. 

So let’s dig into what Travelers just reported.

Social Inflation? 

Does that have something to do with Instagram?  No, the financials at Travelers didn’t have anything to report on the rise of social media influencers. Thank goodness—the Kardashians get enough coverage. 

When the company mentioned Social Inflation, it was talking about costs. More specifically, they’re referring to, “ upward creep in jury awards, lawsuits, and other pressures that it says are leading to higher claims and losses.” — (Wall Street Journal, 1/23/20) The trucking industry has been hit especially hard by larger jury awards. 

The company pointed to these outcomes as part of their problem on the cost side. Travelers business insurance group reported a core loss ratio of 66.2% in the quarter—about one-and-a-half percentage points worse than Wall Street expected. The share price took a hit on that news—TRV fell nearly 5% in the afternoon that followed the quarterly report and the talking heads on CNBC and other business networks led their stories with the news of those losses.  

But it’s not all doom and gloom on the carrier side. Catastrophe losses for Travelers were actually below what industry analysts were predicting, and that boosted their earnings-per-share forecast. In fact, on a global scale, catastrophe losses across the industry were considerably lower.

Higher prices can boost profits. 

Still, it seems ominous when a major carrier misses expectations, has a slumping share price, and is reckoning with something it’s calling Social Inflation. In an industry built on managing risk as efficiently as possible, it definitely raises some red flags. 

That said, the impact on commercial insurance agencies could be positive. Rising costs put pressure on premium costs, and a bump in prices can help independent agencies grow as they renew commercial insurance policies or write new ones at higher rates.

How much can it help? Consider these numbers. During the last quarter of 2019, commercial insurance policies were 5.1% higher than they were during the same quarter in 2018.  For comparison, in 2018, rates in Q4 climbed just 1.5% over the same quarter in 2017. What’s more, Travelers reports that their customer retention rate remained high, indicating that the carrier is not alone—what companies are paying for insurance protection is going up across the board. So whether your agency writes a lot of business with Travelers or not, chances are it will benefit from rising premiums. Other major carriers, including Chubb and AIG, have also indicated that their prices are moving in a northward direction. 

Commercial insurance and the customer experience. 

The news from Travelers and other major carriers serves to remind us that share prices of major carriers aren’t really an indicator of the current health or future prospects of independent agencies. At first glance, the Travelers quarterly report could be interpreted as negative for the industry. But with more consideration, one sees that price pressure can be a positive development for commercial insurance agencies.    

Those price jumps will, however, need to be managed. And that should make commercial insurance agencies make an honest assessment about the quality of the customer experience they provide. Fact is, no company likes to hear their premiums are going up—don’t expect an applause break when you deliver the news—but a seamless process can go a long way towards keeping a client from looking elsewhere. 

So while rising prices can benefit the bottom line, agencies will need to manage the reactions of their clients. One way to do that, of course, is to provide an enhanced customer experience. Our intuitive, interactive, online smart forms—Ding! Ding! Ding!—will not only reduce the amount of time agents devote to renewals, they will help clients get through the renewal process with a lot less painful back-and-forth. By making the experience seamless, you can take the sting out of a price increase. 

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