With inflation up and premiums down, the industry is under pressure. But is there cause for optimism?

The year 2010 was not a good one for average premiums in commercial lines, as these figures from insurance technology?firm Acturis show.

Acturis co-chief executive Theo Duchen commented: “There is no class of business that the indices cover where 2010 average premiums are higher than 2007 average premiums, with most classes 3%-5% off their 2007 benchmark values.

“When one considers that cost inflation in the same period amounted to some 11%, it underlines the pressures facing brokers and insurers alike.” Both parties will be hoping that the next 12 months fare better.

Commercial combined

The Acturis commercial combined index ended 2010 some 5% below its 2007 average, and 3% below its 2009 average. This fall was largely driven by new business premiums falling from 98% of the 2007 value to 87%, with renewal premiums only falling from 101% to 99%.

comm 1

Indexed average premium rose 2.2 percentage points from Q3 to Q4, displaying a similar trend to corresponding times of year in 2007 and 2008. This brings the commercial combined average premium to 94.1% of the Q2 2007 value in Q4, representing a 1.7% decrease relative to Q4 2009.

comm 2

The trend of negative year-on-year by quarter growth since Q3 2009 continues. However, the decrease in year-on-year indexed average premium for Q4 2010 is the smallest of the year (1.7% compared to over 4% in Q2 and Q3), which may be cause for optimism that it could stabilise in 2011.

comm 3

Motor fleet

The Acturis motor fleet index continues to be stable. The overall year-on-year comparative shows little movement – a slight fall from 99.8% of the 2007 value in 2009 to 98.5% in 2010. This fall was a result of new business premiums falling from 102% of the 2007 value to 99%, while renewal premiums stayed steady over the last two years.

fleet 1

Motor fleet premiums remained stable in 2010, with an extremely small drop in average premium between Q3 and Q4, from 95.2% to 94.5% of the Q2 2007 value.

fleet 2

This is almost the same as the Q4 2009 value of 94.4%, which results in the 0% figure displayed by the year-on-year comparatives by quarter analysis.

fleet 3

Property owners

Property owners average premium rose to 97.8% of the 2007 value, driven by a strong increase in new business premiums, but tempered by a fall in renewal premiums.

property 1

Looking at the indexed average premim by quarter, we see that from a cyclical Q3 drop in 2010, the index has risen to 99.4% of the 2007 value in Q4.

property 2

Encouragingly, this represents a 2% increase on Q4 2009, as displayed on the year-on-year comparatives by quarter graph above. This paints a largely positive picture of 2010 for the index.

property 3


Average premiums in 2010 were 93% of their 2007 value, down some four percentage points from 2009. This fall in 2010 was due to a large decrease in new business premiums. Increases in renewal premium (97% of the 2007 value in 2009 to 100% in 2010) could not prevent an overall slide.

packages 1

There was a significant increase from Q3 to Q4 in 2010, from 93.2% to 98% in Q4. But there was a 4% drop in average premium compared to Q4 2009.

packages 2

Year-on-year comparatives show negative growth each quarter in 2010, underlining the competitive nature of this product class.

packages 3

Combined liability

The combined liability index was introduced last quarter. Again, the story for this class of business is not good. The year-on-year comparative index shows average premium fell slightly from 96% of the 2007 value in 2009 to 95% in 2010. This was a result of a fall in new business premiums, counteracted by increases in renewal premiums.

liab 1

Average indexed premium by quarter recovered strongly in Q4 2010, rising from 83% of the Q2 2007 value in Q3 to 89% in Q4.

liab 2

The year-on-year comparatives shows a second consecutive decrease. While the Q4 2010 fall of 4% relative to Q4 2009 is troubling, it must be noted that this figure is mainly due to the fall in average premium from Q2 to Q3 in 2010.

liab 3

Basis of Calculation for Indices

All renewal and new business trades on Acturis System in a particular class for 2007 (Q2 onwards), 2008, 2009 & 2010 with extreme values removed:

Commercial combined £500-£65,000 premiums;

Packages £50-£4,000 premiums;

Property owners £125-£60,000 premiums;

Motor fleet £500 – £60,000 premiums;

Combined liability £125-£60,000 premiums.

Property owners includes commercial, residential and mixed business.