Insurer takes aim at the problem of underpricing in the commercial market
Liberty Mutual, the third largest property and casualty insurer in the U.S., expects the price of the country’s commercial insurance lines to continue to grow, but not at an adequate pace to resolve some of the problems running rampant in the insurance industry. Liberty Mutual CEO David Long notes that underpricing has been a significant problem in commercial lines for some time. Underpricing has had a particular impact on the worker’s compensation sector. There may be a solution, but it is not likely to be popular with consumers.
Liberty Mutual wants higher rates to help balance commercial lines
According to Long, the solution to the underpricing problem is to raise insurance rates in the commercial marketplace. Long suggest that the current rates for commercial lines are not where they need to be for the market to overcome underpricing. This is in spite of the continued growing trend the commercial market has experienced over the past year. Long notes that the growth in the worker’s compensation residual market is a strong sign of the problems underpricing has caused for the commercial market as a whole.
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Modest growth is not enough to combat underpricing
Regulations in some states have made it difficult to make the changes that are necessary to ensure the health of the market. Liberty Mutual notes that these regulations have kept its rate increases somewhat low, with the insurer’s worker’s compensation line growing 9% in the second quarter of 2012. While the insurer is pleased with the growth it has experienced over the past year, the problems in underpricing are still cause for concern, especially if the issue continues to go unnoticed.
Regulations and new laws may make it difficult for insurers to adapt to problems in the market
The U.S. insurance industry is currently in a state of flux. New legislations and regulations are make dramatic changes to the way the industry is able to operate. These legislations and regulations are producing trends that are having a profound impact on the market and may be limiting insurers’ abilities to adapt to these trends and maintain the health of the market as a whole.