HARD MARKET
If you ’ ve had conversations about insurance in recent months , you ’ ve likely heard the terms “ hard market ” or “ market hardening .” Many policyholders are experiencing dramatic rate increases that pinch budgets . Here ’ s a description of some root causes and what you can do to mitigate them as much as possible :
WHAT IS A HARD INSURANCE MARKET ?
A hard market is defined as an “ upswing in a market cycle when premiums increase and capacity ( the supply of insurance available to meet demand ) for most types of insurance decreases .” That means insurance is more expensive and harder to obtain . In contrast , during a “ soft market ,” buyers benefit from attractive rates , bigger capacity , and flexible policy terms and conditions . Insurance is available and affordable .
WHAT CAUSES A HARD INSURANCE MARKET ?
Market hardening begins when carriers take corrective action to shore up their profitability . Many events can trigger hardening of the markets .
For example :
• Increases in costs , the biggest being building / labor costs and vechicle prices .
• Increases in the frequency or severity of losses and the payout of losses .
• Decreases in insurers ’ investment returns caused by stock market declines .
Carriers may discontinue or reduce their risk appetite ( the risk an insurance company will take on ) and adhere to strict underwriting discipline .
HOW OFTEN DO HARD INSURANCE MARKETS OCCUR ?
Since 1985 , the insurance industry has experienced three hard markets : 1985 – 1987 , 2001 – 2004 , and the current one starting in 2019 .
In 1985 , extensive liability lawsuits almost collapsed the insurance industry and contributed to the hardening of the market .
In 2001 , the events of 9 / 11 triggered a hard market that took several years to work through .
Many factors have contributed to the current hard market , which began forming in 2019 and stubbornly persists . While the COVID-19 pandemic did not initially cause the hard market , it ’ s one of several factors prolonging it .
THE INCREASE IN CATASTROPHIC EVENTS , SOCIAL AND PRICE INFLATION ARE THE MAJOR FACTORS THAT ARE DRIVING UP INSURANCE COSTS AND LEADING TO PREMIUM INCREASES .
As time passes , insurance carriers are finding their business to be increasingly unprofitable and unsustainable .
WHAT STRATEGIES HELP IN A HARD INSURANCE MARKET ?
Eventually , the hard market will subside and things will become more stable for buyers . But until that happens , here are some strategies to soften the impact on you and your budget :
• Research and compare . An independent insurance agency can use resources and tools to compare your policy , coverage limits , and premiums with multiple carriers .
• Assess your risk and coverage . Tailoring your coverage to your specific circumstances will help you avoid paying for what you don ’ t need while protecting yourself adequately .
• Implement risk management strategies . What actions can you take to improve your risk profile and what does your risk health look like ? For example , do you have protections like temperature monitoring , a backup generator , automatic water shutoff or water alarms , lightning protection , or a security system ? There could be discount options available .
• Explore your claims options with a specialist before filing .
• Review your deductibles .
• Maintain a great insurance score .
• Consider carriers that offer discounts to bundle your policies together .
Navigating a tough insurance market requires patience , diligence , and informed decision making . A hard market can be very frustrating , but these tips can help you position yourself to get the best possible coverage at a competitive rate . To brainstorm options for your unique situation , I invite you to schedule a time to sit down with me and discuss these issues further . +
Chris Mueller was born in Southwest Michigan and raised in Northwest Indiana . He graduated from Portage High School in 2012 . Chris enjoys volunteering his time with the Youth Group in which he and his wife Jerica lead as Youth Pastors . Chris and Jerica have two beautiful children , Harper Jo and Christopher Beckham . Chris ’ parents David and Christine instilled in him the love for Faith , Family , and Community which are the values of which Chris continues to live by today .
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