Brokers are concerned increased competition, including the growth of underwriting agencies, is leading underwriters to drop premium rates by substantial levels across most commercial lines of business.

The Market Conditions Questionnaire – which is completed by National Insurance Brokers Association (NIBA) brokers twice a year after the traditional renewals periods in January and June – shows 66% of brokers’ clients experienced rate reductions in January.

NIBA CEO Noel Pettersen told Sunrise Exchange News that while rate reductions are good in some ways for clients, it is hard to “rationalise drastic rate reductions with clients who have experienced an upsurge in their insurance costs in recent years”.

“It is also concerning given that just a year ago some insurers were saying premium rates had returned to technically correct levels,” he said.

“Slashing rates in order to achieve greater market share is not necessarily in the best interests of the public or the industry.”

31% of brokers rated the industry at five out of 10 in terms of “hardness” of the market. Another 30% rated the market at three – the softest the market has been rated since the industry returned to profitability more than two years ago.

Public liability insurance was greatly affected by rate reductions, with some 78% of respondents saying their clients had received premium rate reductions across the class. This is a substantial change on a year ago when 55% of respondents’ clients had public liability rate increases.

The majority of brokers listed increased competition and insurers’ drive to gain greater market share as the major reason for rate reductions. They also said an increase in the number of underwriting agencies had made the market more competitive.

“Some industry players say the market will never soften like it did, say four or five years ago, but the evidence is proving otherwise,” Mr Pettersen said.