We are currently in what is known as a hard market, which impacts insurance companies and consumers in a variety of ways. While insurers fight to offset growing costs, policyholders across the country are experiencing higher insurance premiums and deductibles, more stringent underwriting criteria, and are even receiving nonrenewal notices due to factors outside of their control. While a hard insurance market presents a unique set of challenges, it is important to remember that you do not have to face them alone.
- Why are we in a hard market?
Supply chain issues are a leading cause as it takes longer to repair or replace damaged property, and the costs for materials continue to increase, driving the pricing even higher. Plus, larger catastrophic weather events put additional pressure on insurers, as we see an increase in both the quantity and cost of claims. Finally, social inflation, which is the willingness of jurors to award largely unexpected sums of money at trial is forcing insurers to settle claims they may have traditionally taken to trial. All of these factors have caused insurance rates to increase.
- I have not filed any claims through my insurance. Why are my premiums increasing?
Premium increases are not just tied to a specific customer’s coverage, but to the overall insurance market. As a result of rapidly increasing catastrophic losses and larger jury awards, the cost of claims for insurers has risen. Also, there is less competition as several insurance companies have withdrawn from the market, limiting consumers’ ability to shop around. These factors contribute to rising insurance premiums.
- How long will this hard market last?
Hard markets are cyclical, though we do not know how long they will last. They vary in length and severity, depending on prevailing economic challenges, inflation rates, and the types of insurance affected. A hard market will begin to “soften” as premiums rise and bring more capital back to the insurance market.
- How can my insurance advisor help me in a hard market?
The advisors at South Carolina Federal Insurance Solutions are experienced professionals. We strive to be a valuable, trusted resource, and can help you navigate the current market conditions. We have long-standing relationships with insurers and are well-positioned to help you select the right coverage for your unique situation. We can provide information on available coverage options and recommend risk management resources that may help mitigate your exposure.
- How can I get a better rate on my policy?
It is always a good idea to review your policy with your advisor to better understand your coverage limits and deductible amounts. Sometimes, another insurance carrier may offer the same or better coverage for a more affordable rate. If you want to change insurers, be sure to ask your advisor how the switch may affect your ability to be fully covered in case of a large claim.
Investing in risk management strategies can reduce your exposure and make you more attractive to insurers. There are a variety of protection devices you could put into place to help mitigate claim exposures such as a central fire and home security system, a permanently installed backup generator, a temperature monitoring system, and/or a water leak detection system. Installing these systems could garner additional discounts to your policy.
Source: Trusted Choice Agent Toolkit: Navigating Client Communications in a Hard Market
