Check out our Small Commercial Insurance Online Price (SCIOP) Index for Q4 2013 is +2.25%, again slightly lower than other industry measurements, which show price increases nearer +3%. Details in this full report.

1. SMALL COMMERCIAL INSURANCE
ONLINE PRICING INDEX: Q4 2013

2. Small Commercial Insurance Online Pricing Index: Q4 2013
Small Commercial Insurance
Online Pricing Index: Q4
2013
Overview: Q4 2013 Small Commercial
Pricing Trends by Line of Business
The following graph illustrates year over year price changes for four lines of
business: General Liability Insurance, Errors and Omissions Insurance, Workers’
Compensation Insurance, and Business Owner’s Policies.
In the fourth quarter of 2013, small businesses once again proved themselves a
key growth driver of the U.S. economy. Of the 238,000 jobs ADP reported were
added to the nation’s private sector in December, 70 percent (167,000) were at
small and medium-sized businesses. Significantly, more than 45 percent were
added at businesses with fewer than 50 employees, and more than 23 percent
at businesses with fewer than 20 employees.
As small businesses provide a major source of fuel for the ongoing economic
recovery, monitoring the fluctuating costs and challenges these businesses
grapple with offers key insight into the factors affecting the future of the
nation’s financial stability.
The Small Commercial Insurance Online Pricing (SCIOP) Index does that by
providing the price changes for the most popular commercial insurance policies
purchased online by small-business owners. Because business insurance is often
a contractual requirement for small businesses, it tends to be one of the least
flexible costs they face. In Q4 2013, the SCIOP Index was +2.25%, slightly below
other industry indices, which show price increases closer to +3%.
This report examines trends in the price changes of the small commercial
insurance policies that compose the SCIOP Index. It offers insight from industry
insiders on the forces that influence those prices and what small-business
owners – and potentially the rest of the economy – can expect in the coming
year.
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YOY POLICY PRICE CHANGES,
Q4 2012 - Q4 2014
2013 Q4 YoY
2013 Q3 YoY
5%
6%
5%
5%
5%
5%
4%
3%
2%
1%
2%
1%
2%
0%
2013 Q3 YoY
0%
GL
WC
BOP
2013 Q4 YoY
EO
© 2014 insureon, a BIN Insurance Holding Agency.
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3. Small Commercial Insurance Online Pricing Index: Q4 2013
Of note here is the five percent year-over-year increase in Workers’
Compensation policy prices, which confirms predictions made by Jayne
Minshall, Executive Training Director at Hartford School of Insurance, in late
2013. As we noted in the Q3 2013 SCIOP Index report, Minshall suggested that
Workers’ Compensation policy prices are likely to continue their steady increase
in the coming months and years, given the way they have climbed since 2003.
Read on for more analysis about the forces impacting the increases in Workers’
Comp and other policy prices.
Small Commercial Insurance Online
Pricing Trends by Industry: Q4 2013
The following three graphs show pricing fluctuations in Q4 2013 for small
commercial policies in three major industries: IT and technology businesses,
construction workers and contractors, and non-IT professionals.
POLICY PRICE CHANGES FOR SMALL TECHNOLOGY BUSINESSES
The fourth quarter of 2013 showed generally modest price increases in each
of the four policy types for small technology businesses. Of particular interest
are prices for General Liability and Errors & Omissions policies, as those are the
two that clients most often require the smallest IT businesses (i.e., freelancers
and independent contractors) to carry in order to sign contracts. General
Liability policy prices were flat year-over-year from Q4 2012, revealing no major
pricing hurdles for IT professionals interested in securing new
business. E&O prices inched up by three percent, but
industry-specialized agent Robin Gottschalk suggests
that the change is a function of increasing policy
limits (per client mandate) rather than increasing
policy costs.
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POLICY PRICE CHANGES FOR SMALL
TECHNOLOGY BUSINESSES
2013 Q4 YoY
2013 Q3 YoY
6%
6%
5%
5%
4%
4%
4%
3%
3%
2%
1%
2%
1%
0%
2013 Q3 YoY
0%
GL
WC
2013 Q4 YoY
BOP
EO
© 2014 insureon, a BIN Insurance Holding Agency.
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4. Small Commercial Insurance Online Pricing Index: Q4 2013
Nikki Wetzel, RPLU, a Management & Professional Liability Underwriter for
Philadelphia Insurance Companies, agrees with Gottschalk’s analysis. Wetzel
notes that the E and O pricing trends reported in the SCIOP Index are “on
par with what we’re seeing countrywide: lower and lower pricing for both IT
professionals and other miscellaneous professionals. A softened market coupled
with a demand for this type of E&O coverage are causing rates to continue
to drop, resulting in more price-conscious applicants and insureds, and more
price-competitive underwriting.”
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POLICY PRICE CHANGES FOR CONTRACTORS
& CONSTRUCTION WORKERS
2013 Q4 YoY
Wetzel also noted that more and more carriers are entering the highly
competitive, highly profitable E and O market for technology freelancers and
small businesses, offering online self-rating tools at low prices, which, she says,
continues to drive prices and rates downward.
8%
POLICY PRICE CHANGES FOR CONTRACTORS
& CONSTRUCTION WORKERS
Contractors saw premiums rise across all lines of business except Errors &
Omissions Insurance in Q4 2013. These increases follow significant year-overyear increases in Q3; both quarters’ fluctuations are likely linked to the recovery
of the housing market. Though the construction industry is recovering from
its recession-related slump and its unemployment rate is dropping, many new
contractors are entering the field and many existing contractors and small
construction businesses are branching into new specialty areas as a way of
increasing revenue. These new players are driving prices for services down as
they attempt to undercut more experienced workers, and as a result, many
skilled workers are leaving the field in hopes of finding better-paid or more
stable work elsewhere.
5%
7%
6%
7%
2013 Q3 YoY
7%
7%
6%
4%
4%
3%
3%
3%
2%
1%
0%
0%
GL
WC
BOP
2013 Q3 YoY
2013 Q4 YoY
EO
In addition to driving away some experienced contractors and construction
professionals, the influx of new businesses is affecting business insurance prices.
Insurance companies are adjusting their prices upward to accommodate the
greater risks posed by inexperienced contractors.
© 2014 insureon, a BIN Insurance Holding Agency.
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5. Small Commercial Insurance Online Pricing Index: Q4 2013
POLICY PRICE CHANGES FOR NON-IT PROFESSIONALS
Among non-IT professionals, the most notable price change in Q4 was in
Workers’ Compensation policies, which increased by six percent year over year.
This increase is not surprising, however, given industry predictions made in the
last several months. Because Workers’ Comp coverage is regulated at the state
level, however, the state-by-state analysis of Workers’ Compensation pricing
changes offers more useful insight into the price increase for Workers’ Comp
policies.
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POLICY PRICE CHANGES FOR
NON-IT PROFESSIONALS
2013 Q4 YoY
2013 Q3 YoY
16%
15%
14%
12%
10%
8%
6% 4%
6%
4%
2%
2%
0%
0%
-2%
GL
1%
0%
WC
1%
2013 Q3 YoY
2013 Q4 YoY
BOP
EO
© 2014 insureon, a BIN Insurance Holding Agency.
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6. Small Commercial Insurance Online Pricing Index: Q4 2013
Small Commercial Insurance Online
Pricing Trends by State: Q4 2013
In California, Florida, and New York, three of the four states where insureon
writes the most policies (the fourth being Texas), Workers’ Compensation
Insurance prices increased noticeably from Q4 2012 to Q4 2013. Texas, where
Workers’ Comp remains optional for most business owners, saw prices decrease
by one percent, year over year. While the overall upward trend is consistent for
the three coverage-mandatory states, the factors influencing the price increases
vary slightly.
CALIFORNIA
In California, for example, where Workers’ Comp Insurance prices increased
12 percent, 2013 saw the implementation of new Workers’ Compensation
legislation (Senate Bill 863) that increased benefits paid to injured workers.
Sources indicate that, since the implementation of the law, more than 95% of
medical treatments for workplace injuries are now approved. Last year also saw
rate hikes on Workers’ Comp policies by several insurance providers, according
to SNL data. In some cases, those hikes were as much as 15 percent.
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POLICY PRICING TRENDS
IN CALIFORNIA
2013 Q4 YoY
14%
2013 Q3 YoY
12%
12%
10%
6%
8%
6%
4%
4%
7%
4%
3%
4%
5%
2%
2013 Q3 YoY
0%
GL
WC
2013 Q4 YoY
BOP
EO
© 2014 insureon, a BIN Insurance Holding Agency.
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7. Small Commercial Insurance Online Pricing Index: Q4 2013
FLORIDA
In Florida, Workers’ Compensation policy prices increased 15 percent
between Q4 2012 and Q4 2013. One factor that contributed to the jump was
an adjustment of the state’s maximum allowable weekly compensation for
workplace injuries, to $827. The new figure was announced during the summer
and the change set to take effect January 1, 2014.
NEW YORK
In New York, Workers’ Compensation prices increased five percent year over year,
which can be attributed to the increases in weekly minimum and maximum
payments introduced in May 2013. These adjustments also likely contributed
to the year-over-year increase in Workers’ Comp prices reported in the Q3 2013
SCIOP Index.
POLICY PRICING TRENDS IN FLORIDA
2013 Q4 YoY
16%
POLICY PRICING TRENDS IN NEW YORK
2013 Q3 YoY
2013 Q4 YoY
2013 Q3 YoY
15%
14%
6%
12%
5%
10%
4%
8%
7%
6%
4%
3%
1%
1%
3%
0%
GL
1%
1%
2%
-1%
4% 4%
3%
2%
4%
-2%
5%
2%
6%
0%
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WC
2013 Q3 YoY
2013 Q4 YoY
BOP
EO
2013 Q3 YoY
2013 Q4 YoY
0%
-1%
-2%
-3%
GL
WC
BOP
EO
-2%
© 2014 insureon, a BIN Insurance Holding Agency.
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8. Small Commercial Insurance Online Pricing Index: Q4 2013
TEXAS
In 2013’s third quarter, the prices of Business Owner’s Policies (BOPs) in Texas
increased sharply, by 14 percent, largely because of extreme weather events
that triggered increases to the Property Insurance portion of Texas BOPs. In Q4,
BOP prices increased by four percent, also likely because of property costs, as
General Liability policy prices (which constitute the other piece of the bundled
BOP coverage) remained unchanged from Q4 2012 to Q4 2013.
POLICY PRICING TRENDS IN TEXAS
2013 Q4 YoY
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On the Horizon: Cyber Liability Insurance
in 2014
While Cyber Liability Insurance is today not among the most popular policies
purchased by small businesses, 2014 may be the year that starts to change.
With data breaches at Target, Neiman Marcus, Michaels, Coke, and other
major retailers sparking commentary and discussion across a variety of media
outlets, consumers and business owners alike are more invested than ever
in establishing and preserving the security of their data. Various insurance
providers have started rolling out new Cyber Liability products, and business
owners reluctant to shoulder the costs of a major leak will likely clamor to add
the coverage to their existing policies in 2014.
2013 Q3 YoY
14%
14%
12%
10%
8%
6%
4%
2%
4%
4%
0%
3%
0%
2013 Q3 YoY
2013 Q4 YoY
0%
-2%
-4%
-6%
GL
WC
-1%
-6%
BOP
EO
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© 2014 insureon, a BIN Insurance Holding Agency.
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