Despite pledges from the industry that it would never again cut rates to the inequitable levels prior to the collapse of HIH, premiums are dropping and the old dreaded insurance cycle is showing signs of re-emerging.

The National Insurance Brokers Association's (NIBA) latest Market Conditions Questionnaire shows more than half the clients serviced by brokers experienced significant rate deductions during the June renewals period, with the most substantial reductions coming from the traditionally hard to place public liability market.

Most respondents listed market competition as the major reason for the deductions and many raised concerns that underwriters are not maintaining proper pricing discipline.

“Insurers are going to any length to get their own slice of the market,” one broker commented. “I have been surprised how fierce the competition has been.”

NIBA CEO Noel Pettersen says the latest six-monthly survey shows the majority of brokers are rating the market at three out of 10 in terms of hardness. He says the hardness of the market has even changed in the six months since the previous survey was completed. “In January brokers were rating the market at six out of 10.”

“In previous years it hasn’t been uncommon for brokers to rate the commercial lines market at an eight or nine out of 10, so this result certainly shows premium rates are dropping and there is far more capacity in the market,” he said.

33% of respondents said public liability rates – which have traditionally been a nightmare to place – have dropped by between 10-19%. Other said clients experienced minimal increases, however they were at a much lower intensity to previous years.

Even analysts are taking back their rate predictions from six months ago, saying there has been much more competitive pricing going on in the market over the past couple of months.

“There’s plenty of pressure on commercial rates at the moment, and that certainly came through during the renewals,” one analyst told Sunrise Exchange News.

Most brokers said business interruption and directors’ and officers’ premiums rose by up to 9%.  

“Aggressive competition in the market has led to the levelling out of many premium rates, and in some cases led to quite sharp reductions,” Mr Pettersen said. “Now it is important for insurers to maintain their underwriting discipline to ensure the market remains profitable. No one wants a return to volatility.”