Insurers believe the market is set to turn and are preparing to put rates up across many lines of business. But with fierce competition in some areas timing is vital. Tom Flack explains why

Last week’s discovery that insurers are poised to implement rate increases across a range of commercial lines business may have come as a something of a shock, but it is far from being a bolt from the blue.

In fact it seems as though many senior figures have been waiting (and hoping) for some time to say it.

“Property rates have been going backwards and claims inflation has been going up. This needs to be addressed. AXA will be putting in rates increases of up to 10% for most household and commercial property customers

Peter Hubbard, chief executive, AXA

Despite the slowly swelling degree of consensus, dissent remains. It is brokers who have been the most forthcoming, and a great deal more unanimous, with their predictions.

On the one hand some insurers, including Norwich Union and AXA have used the floods as a pretext to return rates to levels that more broadly reflect risk. Others, such as Royal & SunAlliance (R&SA) and Groupama, have used the occasion instead to demonstrate the integrity of their underwriting and the efficacy of their business models.

“Flooding shouldn't be an excuse to put rates up. We don't give prediction rates. We will take action where required

Bridget McIntyre, chief executive, Royal&SunAlliance

Most commentators are unsurprisingly reluctant to lay out a timetable for any changes in rates, but it is clear that the next six months will see a considerable shift of between 3% and 7% in many lines of commercial business. What will happen over the next 12 months will depend on the market’s reaction, but further hikes are likely, especially in the SME and motor trade sectors.

What commentators will not discuss is the perennial question of the particularly prolonged soft market at last coming to an end.

“We are at the point when we are starting to hurt. But no one has said so. The change can be quite swift

Grant Ellis, chief executive, Broker Network

Though the floods have played havoc with insurers’ property books, the prevailing opinion is that it takes more than a single catastrophic event (in this case, even two) to turn the market. That being the case, some say, the plunge in the stock market might just tip the balance.

Indeed, it will be most interesting to see what will happen in the commercial property sector, characteristically (and in this case, ironically) the last bastion in the shift towards a harder market.

Though household rates are set to soar, the fierce competition, sustained growth and healthy returns that characterise commercial property could make pushing through rate increases much more difficult.

Nonetheless, it is clear that a change in outlook has very much already taken place. A change in rates will not be far behind, even if some players end up playing catch-up, or continue to sacrifice profit for the sake of volume.

Are commercial rates on the rise?

Insurers will move from growth to profit mode. With no shrinkage in capacity, we can expect to see substantial and continued increases in commercial rates of around 5%.
Grant Ellis, chief executive, Broker Network

Undoubtedly we will all suffer a huge loss but not on a scale that would immediately hit our rates. But some companies haven't applied quite as disciplined flood underwriting, and their commercial rates will come under pressure.
Philip Bird, director of non-motor and SME, Groupama

We will see an increase of between 3% and 7% across all lines of business. It's about time. What we have to ask is why have we gone so low?
Stuart Reid, chief executive, Stuart Alexander