Why Businesses Should Prepare Now for A Hardening Insurance Market
You might not realize it, but times have been pretty good for insurance customers. For the most part, premiums have been steadily reducing for years now. In the insurance world, we call this a soft market. But all that is about to change.
The insurance market is hardening as insurance companies experience higher than expected losses. As a result, a hard insurance market is rearing its ugly head. What does a hard market mean? It means higher premiums, reduced limits, stricter coverage and tighter underwriting requirements for most lines of coverage, including; commercial property, GL, E&O, D&O, Auto and EPL.
With commercial property insurance, natural disasters are mainly to blame. The 2017 hurricane season and 2018 California wildfire season were some of the costliest on record. Insurers are citing that climate change is a ‘serious’ risk, making storms more intense and therefore more costly.
Emerging technologies such as smart features in automobiles (i.e. artificial intelligence and robotics) have created new liability and cyber exposures. The increasing costs to repair/rebuild these vehicles are another contributing factor for increased premiums.
In the child welfare sector - particularly in foster care and adoption, we continue to see significant increases in litigation costs and higher settlements and jury verdicts. As a result, carriers are reluctant to offer higher limits. Even more concerning, are the insurance companies who are exiting the social service market all together, leaving few insurance providers willing to insure the tougher risks.
In a hardening market, there are three things that can help you ride out the storm:
1. Specialized Broker: Having a broker that specializes in your line of business and knows your unique risks and exposures is imperative in positively representing your best interest to the insurance company underwriters. Their expertise fosters stronger relationships with those underwriters, greater negotiating power to lower premiums and/or enhance coverage, and access to more carriers than that of a generalist broker. Remember, an insurance broker (vs. an agent) works for YOU, not the insurance company.
2. Risk Management: A poor loss history paints a distorted picture; it tells the underwriter you are a bad risk. This can result in even higher premiums or worse yet, a non-renewal or cancellation notice. By designing and implementing a strong risk management plan, your broker can negotiate better rates, broader coverage, and higher limits with your insurance provider. A strong risk management plan shows you are proactive in helping reduce or eliminate claims.
3. Don’t Hop Around: Believe it or not, jumping from carrier to carrier every year looking for the lowest price can cost you more in the long run. In a soft market, you have plenty of options but when the market is hard, you are at the mercy of a few insurance providers. Underwriters have been known not to quote simply for the fact that the insured is not loyal buyer. Showing stability and loyalty (even if you have a loss and your premiums increase) is a positive indicator in the eyes of the insurance company underwriter.
Hawley & Associates will continue to work hard negotiating and advocating in your best interest during this turn in the market. Our solid relationships with our underwriters and access to top-rated carriers, who continue to write these hard-to-place risks, are essential in helping us all ride out the storm.