Insurers are finding it difficult to push through rate rises

Everywhere you look there are warning signs in UK commercial. Chartis this week pulled out of public sector.

In commercial motor, Aviva is scaling back to correct its 113% combined ratio for 2011. In mid-market, RSA shed 10% last year in this line due to heavy competition.

In 2011, insurers relied largely on personal motor rate rises to compensate for commercial, but this strategy is now a busted flush as personal lines motor rate rises are tailing off.

And as for cutting the expense base, there’s only so far you can go before the excess fat is gone and you reach the bone.

Insurers say they are still finding it difficult to push through commercial rate rises as the market refuses to budge. This begs the question: which players are helping to keep the market so soft?

Some say NIG is highly competitive at present, yet its results in commercial show its underwriting performance is improving. Its recently released loan note prospectus reveals that commercial gross written premium, which includes DirectLine for Business and bank partnerships, rose marginally to £439m (2011) from £398m (2010), and combined ratio dropped from 122% to 112%.

Perhaps the truth is that what’s really keeping down the market is insurers selectively fighting hard on lines where they believe they’ve got the edge.

In the meantime, it doesn’t look like any insurer is going to drive over the cliff and help bounce the market in commercial.

It’s likely to be one hot, sticky and exhausting summer for commercial lines insurers looking to grind out profits.

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