What is a "Hard Insurance Market" and why it matters to you
The property/casualty insurance industry cycle is characterized by periods of soft market conditions, in which premium rates are stable or falling and insurance is readily available, and by periods of hard market conditions, where rates rise, and coverage may be more difficult to find.
- Insurers experience more frequent claims and higher claims payouts, which hurts their bottom line. Insurers attribute much of this to supply chain issues, which means it takes longer to repair or replace damaged property at much higher costs; larger catastrophic weather events, which increase claims payments; and what’s termed as “social inflation,” which is the willingness of jurors to award largely unexpected sums of money at trial, forcing insurers to settle claims they may have traditionally taken to trial.
- With less capital available, insurers reduce their underwriting appetite. This includes the amount of coverage they will write for certain classes and in what areas they will provide coverage. For example, property coverage may be harder to find in catastrophe-prone areas, or certain lines of coverage may not be readily available, such as commercial auto for transportation firms. Insurers who specialize in a niche, for example, excess liability, may reduce their footprint or leave that coverage area entirely.
- With less insurer competition, available coverage becomes more costly.
What can you do?
- Employ proper risk management practices to reduce exposures.
- Stay in regular communication with us, your trusted business partner, particularly on issues or organizational changes that could impact your policy.
- Properly document and if needed report anything that may be relevant to claims or policy disputes.
- Plan with us prior to renewal time or when seeking new coverage. In today’s market, it can take much longer to secure the right coverage than in a softer market.
- Think hard before you switch carriers. In a hard market, insurers may decline to bid on customers who “carrier hop.”
- Look for opportunities to save on costs in other ways if premium savings are not an option, such as taking a higher deductible or with more sophisticated clients, taking a self-insured retention
