If you own a business, you may have noticed that your insurance premiums have gone up significantly in the past year or so. You may also have faced challenges in finding or renewing your coverage, or in getting the same level of protection as before. You are not alone. Many businesses across different sectors and regions are experiencing the effects of a hard market in the insurance industry.
What is a hard market?
A hard market is a term used to describe a situation in the insurance industry where the demand for coverage exceeds the supply of available policies. This means that insurers are more selective about who they insure, charge higher premiums, offer less coverage, and impose stricter terms and conditions. A hard market can make it difficult for business owners to find adequate and affordable insurance for their needs.
What is driving the hard market?
There are several factors that contribute to the current hard market, such as:
Inflation: The rising cost of living and the devaluation of money make it more expensive for insurers to pay claims and operate their businesses. Inflation also erodes the value of the assets that insurers invest in to generate income and reserves.
Nuclear Verdicts: These are large and unpredictable jury awards that exceed the policy limits of the defendants. Nuclear verdicts can result from lawsuits involving personal injury, product liability, medical malpractice, or environmental damage. They can have a significant impact on the profitability and solvency of insurers, especially in the commercial liability market.
Increased Claims from Massive Storms: The frequency and severity of natural disasters, such as hurricanes, floods, wildfires, and hailstorms, have increased in recent years due to climate change and other factors. These events cause extensive property damage and business interruption, which strain the capacity and resources of insurers.
How is the hard market affecting different lines of insurance?
The hard market affects different types of insurance in different ways, depending on the level of risk and exposure involved. Some of the most affected lines of insurance are:
Property: Property insurance covers the physical assets of a business, such as buildings, equipment, inventory, and furniture. The hard market has made property insurance more expensive and less available, especially for businesses that are located in high-risk areas or have a history of claims. Insurers may also require higher deductibles, impose stricter exclusions, or limit the amount of coverage they offer. According to the CIAB, commercial property insurance saw an average premium increase of 10.1% in the first quarter of 2024, and rising property values have made it necessary to buy higher coverage limits. Insurers may also demand professional valuations of some properties, quality risk management, and a disaster plan from the insured businesses.
Commerical Auto: Auto insurance covers the vehicles of a business, as well as the liability and medical expenses that may arise from accidents. The hard market has driven up the cost and lowered the availability of auto insurance, especially for businesses that have a large fleet, operate in urban areas, or have a poor driving record. According to the CIAB, commercial auto insurance experienced an average premium increase of 9.8% in the first quarter of 2024, due to multiple factors, such as rising vehicle repair costs, supply chain disruptions, increased claims frequency and severity, and higher litigation awards. Insurers may also charge higher premiums, reduce the coverage, or impose higher deductibles. To find affordable auto insurance, businesses need to ensure that their drivers have clean driving records and follow established safety protocols.
Workers Compensation: Workers compensation insurance covers the medical expenses and lost wages of employees who are injured or ill due to their work. Over the past year, Workers’ compensation insurance has seen a decline in premiums overall. This reduction is the result of businesses having an increased focus on safety, claims management and return to work programs to limit the overall claim impact.
What should you do if you can’t find affordable coverage?
The hard market isn’t just affecting premiums. It’s also impacting the availability of coverage. In some lines of insurance, the number of insurers offering coverage has declined because they don’t want to take on certain levels of risk. Even when insurance is available, the amount of coverage offered in a single policy may be lower than in the past. Your insurance agent can detail ways to overcome these problems, but here are some common options:
Buy excess and surplus lines insurance. This is a type of insurance that is offered by non-admitted insurers, meaning they are not regulated by the state and are not part of the state guaranty fund. These insurers can provide coverage for risks that are too high or unusual for the standard market, such as environmental liability, cyber liability, or terrorism. However, they may also charge higher premiums, impose stricter terms and conditions, or require higher deductibles.
Look into a Captive Insurance Program. This is a type of program that is owned and controlled by its insureds, meaning they share the risk and the profits. Captive insurance can provide coverage for risks that are difficult or expensive to insure in the standard market, such as workers’ compensation, medical malpractice, or product liability. However, they may also require a significant upfront investment, ongoing management, and compliance with tax and regulatory rules.
Work with an independent insurance agency
Another way to deal with the hard market is to work with an independent insurance agency like The Hartwell Corporation. Unlike captive agents who represent only one company, independent agents can shop around and compare quotes from multiple insurers to find the best coverage and price for your needs. Independent agents can also offer unbiased advice and personalized service, since they work for you, not the insurance company.
The Hartwell Corporation has been in business since 1963 and is a 100% employee-owned company. This means that every employee has a stake in the success of the business and the satisfaction of the clients. When you work with The Hartwell Corporation, you can trust that you are working with a team of employee-owners who are committed to finding solutions for you. Give us a call today and let us show you how we are different.
댓글