YOUR BUSINESS AND A HARDENING INSURANCE MARKET: GET THE FACTS

Prepare Your Business for Changes

From an insurance buyer’s perspective, it can feel like premium costs change spontaneously. However, in all actuality the insurance market is seasonal in nature, fluctuating among soft and hard markets over the course of years. But what is a soft and hard market?

1. Soft Market. A soft market in the insurance industry or “a buyer’s market”, is characterized by stable premiums, increased capacity, broader terms of coverage, higher available limits and competition among insurance carriers for new business.
2. Hard Markets. A hard market in the insurance industry, or a “seller’s market”, is characterized by increased premiums, restricted coverage, diminished underwriting appetite and capacity, and less competition among insurance carriers for new business.

Insurance buyers have enjoyed a soft marketplace for years, but unfortunately, the market is hardening. Due to this change, business leadership now faces tough choices regarding their insurance, making it all the more important for them to know what to expect during a hardening market and the way to respond effectively.

Why Is The Insurance Market Hardening?

There are many factors contributing to the hardening insurance market today, from increased events like natural disasters causing losses for insurers to increased claim costs in both frequency and severity year over year. In recent years, we have experienced one of the longest soft insurance markets – companies across several lines of insurance enjoyed stable premium costs and increased coverage for many years. However, that is about to change as the market is firming, resulting in increased premiums and reduced capacity.

How to Respond to a Hardening Insurance Market.

Even the most prepared businesses will need to adapt to the hard insurance market. Businesses can expect to face higher premiums, lengthier and more scrutinizing underwriting process, increased coverage restrictions, and conditional or non-renewal notices. The following are some business strategies to consider to help navigate through the hard market:

1. Review Your Insurance Program. To prepare for changes, check that your policies account for your business’s greatest exposures. A thorough understanding of your insurance coverage ensures you’re not overlooking any exclusions which will help secure the right policy for your business operations.
2. Increase Your Risk Management Efforts. By increasing your risk management efforts, your business becomes more attractive to insurers. Your insurance broker can help review existing policies and procedures, and provide suggestions on ways to secure quotes.
3. Know Your Loss History. Underwriters will be critical when reviewing loss trends, in a hard market, so be prepared to explain the factors contributing to a specific loss and the steps you’ve taken to mitigate future losses.
4. Budget For Unavoidable Increases. Organizations should be prepared to handle increased premiums as in some cases they might be unavoidable. Businesses should take insurance costs into account when budgeting alongside their other normal expenses.
5. Work With The Right Insurance Broker. During a hard insurance market, it’s crucial to have an insurance broker who is competent for advising your specific business, from having strong insurance carrier relationships to having knowledge and experience in your industry.
6. Communicate With Your Insurance Broker Early And Often. Starting the renewal process early can give your broker more time to secure the best coverage for your business.

In conclusion, during a hard market, insurance buyers should plan to face difficult decisions regarding their insurance coverage. Thankfully, businesses are not without recourse in the face of a hard market. Business owners who proactively address risk, control losses and manage exposures will be better prepared for a hardening insurance market than those who do not. Work with your insurance broker now to prepare your business for changes coming your way. Contact INSURICA today to get started.