U.S. commercial insurance premiums rose again in the fourth quarter of 2023, according to WTW's latest Commercial Insurance Pricing Study (CLIPS). The study compared prices for policies underwritten in the fourth quarter of 2023 with prices charged for the same coverage in the same quarter of 2022. Overall variability in commercial prices reported by insurers spiked to nearly 10% from the second to fourth quarter of 2020. Price variability then began to decline, dropping to just below 5% in the fourth quarter of 2022, before rising again to above 5% in the first quarter of 2023 and now exceeding 6% in the fourth quarter of 2023.
Price changes by business sector
Data for nearly all lines continues to show moderate to significant price increases in the fourth quarter, with the exception of workers' compensation, directors and officers liability, and cyber. CLIPS continues to show slight price declines for workers' compensation. Directors and officers liability saw another quarter of price declines, but again lower than the previous quarter. The largest price increase was for commercial auto liability, which reported a near or greater double-digit increase for the 25th consecutive quarter. The second largest price increase was for commercial real estate, which continued to see double-digit increases, though slightly lower than the previous quarter. Excess/umbrella liability, which has seen significant price acceleration over the past 18 quarters, continued to see price increases slightly higher than the previous quarter. Cyber continues to show slower price movement with price declines similar to the previous quarter, after reporting significant rate increases from 2021 through 3Q2022.
Account Size Pricing Change
Comparing account size, reported price increases for small, midsize and large accounts were all higher than in the previous quarter. Specialties were essentially flat rate changes, with professional liability and employment practices liability generally experiencing rate increases, offset by rate decreases seen in directors and officers liability.
CLIPS data indicates that loss ratios are expected to remain stable in 2022, followed by a modest 2% improvement in 2023. Insurers expect claims costs to rise 2% in 2023, which is lower than the realized price increase of just over 6% for the year.