Hard Facts on the Soft Market: Risk Management and Insurance

Julie Mendel
Senior Vice President of Education Services
StoneRiver - RegEd

There are two categories of insurance markets in the industry’s cycle. These are the hard market and the soft market. The hard market is generally characterized by high or increasing rates, coverage restrictions and lower limits; a smaller appetite for insurance carriers. The soft market can be characterized by low or falling rates, the availability of higher limits and more flexible contracts; a bigger appetite by insurance carriers.

We are currently in the soft market phase of the insurance cycle. This is an excellent environment in which to ensure coverage needs are being met for your clients. It’s also an optimal time for you to review loss histories. It’s relatively easy to get insurance in a soft market – even with a poor loss history. However, once the market cycles back to hard, that same poor loss history could be the Achilles heel!

It is interesting to note, however, that according to Marlabs, the insurance industry is facing a paradox:

On one hand, we are seeing evidence that we are entering a hard market. Insurers are demonstrating an abundance of caution while underwriting new policies. With a focus on minimizing losses, they are taking a closer look at exposure. There is a push towards increased premiums.

On the other hand, consumers are exhibiting characteristics consistent with a continuing soft market. They are opting for lower premiums and reduced insurance cover[age]. Switching between insurance companies is rising.

Leaning on the evidence of a soft market, you can encourage your clients to use insurance premium savings to help build their loss control and prevention programs. Now – during this soft phase – is the time to be zealous about your client’s claims, loss ratios, and provide guidance on risk management strategies. During tough economic times and businesses that have high employee turn-over payroll figures change. Help your clients by reviewing monthly reports on coverage such as workers’ compensation to assure the salaries and claims are in line with the premiums.

Don’t sit back and wait for your clients to come to you - go to them with a strategy to review their coverage, loss history and premiums to find ways to both save and improve their overall insurance plan.

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