Rich Kirchen
The Business Journal of Milwaukee
January 1, 2010
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The property and casualty insurance expenses on most area businesses’ 2010 budgets will again get a break as southeast Wisconsin insurance executives predict a sixth consecutive year of flat to lower rates.
That’s certainly positive news for business owners and executives coping with continued slowness in the economy and their need to limit spending.
“Especially customers where they are looking to control costs and make more money, this is very good for them,” said Gary Burton, chief operating officer with Milwaukee insurance broker Robertson Ryan & Associates.
Insurers are in a better position to write business because of improved results in their investment portfolios and fewer catastrophic losses this year, said Dan Kwiecinski, an executive vice president with Hays Cos. of Wisconsin in Wauwatosa.
“We think 2010 is going to be great from a buyer’s perspective,” Kwiecinski said. “The market is just flooded with capacity.”
Exactly how much the rates will decline in 2010 depends on the business and its risk profile. Predictions on rates range from flat to down as much as 10 percent.
Commercial insurance prices remained nearly flat during the third quarter of 2009, according to Towers Perrin’s most recent commercial lines insurance pricing survey of 35 insurance companies. The Stamford, Conn.-based professional services firm said rates stabilized in late 2009 but are likely to remain soft.
Property and casualty insurance covers a company and its employees for damages and liability on the employers’ real estate, buildings, vehicles and equipment.
The other factor driving the lower rates is reduced demand from businesses during the recession. When companies cut staff and operations, they need less insurance, experts said.
The economic situation causes Chris Lie, president of Johnson Insurance in Racine, to predict rate declines of 5 to 10 percent. He said insurers will be forced to vie for clients with lower rates.
“It’s difficult to push rate increases into this tough of an economy,” Lie said.
The Horton Group insurance brokerage anticipates overall rate reductions of 1 to 5 percent, said Robert McIntyre, Waukesha branch president. Businesses’ costs for the insurance also will drop because of their reduced coverage needs in the weak economy, he said.
Insurers will be hesitant to raise commercial rates for fear of losing business, said Kevin Steiner, CEO of West Bend Mutual Insurance in West Bend. He said rates for personal insurance lines like home and auto will show a moderate upswing.
“I’m predicting we’re going to see a year of flat rates,” Steiner said. “Some lines will be down, some will be up.”
Burton said rates for workers’ compensation insurance also will decline as employers report a lower incidence of injuries due to fewer people working.
Two categories of insurance where rates will be flat to higher are those for two areas of the economy that still face turbulence in the new year: financial institutions, and corporate directors and officers, Lie said.
While insurers’ predictions a year ago that property and casualty rates would firm up in 2009 proved wrong, rates might finally firm up in late 2010 or early 2011, McIntyre said.
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