The last couple of years has seen the insurance industry move from what is known as a Soft Market to a Hard Market. In the Soft Market, insurers were able to provide clients with lower premiums and flexible underwriting criteria along with broader coverage options. In contrast, in a Hard Market, we see increases in insurance premiums and less flexibility in underwriting criteria, all because insurers have had to reduce their risk capacity. The large increase in claims along with higher payouts has been a critical factor in bringing us to today’s Hard Market. The Liability and Professional Indemnity sectors have also experienced a significant rise in claims as well as an unsatisfactory financial underwriting performance.
There are several reasons why we find ourselves in today’s current Hard Market. The most significant include:
- Global economic uncertainty
- Flooding and fires on enormous scales
- Overwhelming losses due to huge payouts
- Claim costs rising well above premiums
These and other factors are requiring insurers to increase their premiums while a growing number have been placed on an insolvency watch. In order to keep themselves financially viable during a Hard Market, insurers are faced with the challenge of increasing their revenues while continuing to provide clients with sound and reliable products. Some of the considerations that insurers face to revamp in these challenging times are:
- Increasing rates and/or terms
- A reduction, or in some cases, the elimination of lines of business that have proven to be unprofitable
- Increase in the deductible for such things as water damage
For these measures to be effective, these changes have had to include both property and casualty products, which include homeowner packages, auto, marine, and business packages. While the history of business losses has been a critical factor, other aspects have also contributed to the measures insurers have had to consider when analyzing how to regain profitability. Several things can affect the rates and options you will have at renewal time, such as:
- Location of the property/assets being insured
- Age and updates of a particular building
- Type of structure and its operations
- Number of stories
- Age of all hot water tanks
Other important factors that are taken into consideration include properties that have a profitable loss history, new properties, and properties that show evidence of updates and/or risk management. Hard and Soft Market trends generally last between 2 to 3 years which means that things could change between now and the time your insurance renewal comes into play. With today’s Hard Market environment, insurers must conduct a more in-depth review of each account which may result in longer application requirements, appraisals, and more in-depth loss control.
One of the most important factors to keep in mind during a Hard Market is the relationship and loyalty that clients have with their broker and insurance company. Continued loyalty can go a long way in being able to negotiate a more positive package and options at renewal time. Your continued support throughout these challenging times will be looked at most favourably by your broker and insurance company.
SeaFirst Insurance has worked hard over the past years to provide the best products for all their clients and value the loyalty you have shown us during these challenging times. As dedicated professionals, we are constantly reviewing the situation and the current market to provide all our clients with the best products available at the lowest cost. We are always here to answer any questions or concerns you have regarding your insurance needs.