Navigating the Hard Insurance Market: A Simplified Approach

With over 70 years of industry experience, we have seen the patterns time and time again. The
market for insurance is cyclical. Currently, both businesses and individuals are feeling the impact of a
challenging market characterized by rising premiums and restricted coverage options—which in
insurance-speak is called a hard market. As insurers grapple with more frequent and costly claims,
navigating these turbulent waters requires a deep understanding of the underlying factors driving the
hard market phenomenon. Recently IIABA, the premier association for independent agents, shared
talking points and key insights to help navigate this climate with a little more ease. To that end, scroll
on for our favorite takeaways.

What exactly is the hard market?

In essence, a hard market signifies a period of rate hikes and capacity restrictions making insurance
coverage more expensive and harder to obtain. Insurers and reinsurers alike face heightened risks
and respond by raising prices and limiting coverage options. Specific industries such as contractors in
high-risk trades or properties in disaster-prone areas bear the brunt of these adjustments due to their
elevated risk profiles.

There are a number of challenges contributing to the current hard market conditions. Exacerbated by
global events, supply chain disruptions have led to increased costs and delays in repairing or
replacing damaged property. Moreover, larger catastrophic weather events have intensified claims
payments which has strained insurers’ financial resources. Compounding these issues is the
phenomenon of “social inflation” where juries award unexpectedly high sums in lawsuits forcing
insurers to settle claims they would traditionally take to trial.

For businesses and individuals seeking insurance coverage, the implications of a hard market are
profound. Insurers faced with reduced capital and increased risk exposure are scaling back their
underwriting appetite. This means certain classes of coverage may be harder to find, particularly in
catastrophe-prone areas or niche markets such as excess liability.

And then there are premium increases that are affecting virtually everyone. Even individuals and
businesses without a claims history aren’t immune to the broader market forces driving up insurance
costs. The gap between projected policy pricing and actual claims payouts has widened, contributing
to the current hard market conditions.

Smart strategies that can make a real difference

Understanding the dynamics of a hard market is essential for policyholders seeking to make informed
decisions about their insurance coverage. Independent insurance agents play a pivotal role in guiding
clients through these challenging times. With their expertise and industry knowledge, agents can help
navigate the complexities of the current market and identify coverage options tailored to individual
needs.

By taking a proactive approach to risk management, individuals and businesses can improve their
insurability and potentially reduce premium costs. Here are some tips to consider:

1. Think twice before jumping ship. Switching insurance companies can affect your rates and
   may cause you to lose loyalty discounts. Review your policy with your agent for a clearer
   understanding of your coverage and how the switch could affect your coverage and your risk
   profile.
2. Lower premiums with a higher deductible or self-insurance. Self-funding puts the control back
   in your hands and allows you to customize based on your needs, which has saved our clients
   an average of 24% from their previous year.
3. Install new systems for more potential discounts: A central station fire and burglary alarm
   system, backup generator, temperature monitoring system, water leak detection system,
   residential sprinkler system, or lightning protection system.
   While the duration of a hard market is difficult to predict, understanding its cyclical nature provides
   valuable insights for policyholders and insurers alike. As economic conditions evolve and market
   dynamics shift, insurance markets will eventually soften and usher in a period of increased
   competition and more favorable premium rates.

Good news: We’re here to help

In the face of adversity, collaboration and resilience are key {to navigating a hard market}. By
leveraging the expertise of our forward-thinking insurance professionals agencies, businesses and
individuals can weather the challenges of the current hard market. Together we can navigate these
turbulent waters and emerge stronger on the other side—simply contact us and we’ll get things
started.