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Insurance | 4 min read

4 Tips for Navigating a Hard Insurance Market

This has been a year of unprecedented changes. A global pandemic, country-wide lockdown, economic downturn, and an uncertain future outlook have combined to create unique challenges for business owners and the insurance industry as a whole. In recent months, we’ve seen the industry shifting out of the longest soft market in recent history and moving toward a hard market. In this blog post, we’ll discuss what a hardening insurance marketplace means for business owners, and give you tips for navigating the changing landscape into 2021.

Soft vs. Hard Insurance Markets

Hard and soft insurance markets are defined as follows:

  • Soft Market. Also known as a “buyer’s market,” a soft insurance market is associated with stable premiums, expanded terms of coverage, higher available coverage limits, increased market capacity, and a more competitive marketplace among insurance companies competing for new business. A soft insurance market favors the buyer, because these conditions make it easier to obtain coverage at a favorable price.

  • Hard Market. Also referred to as a “seller’s market,” a hard insurance market is typically characterized by higher premiums, more restrictive terms, decreased capacity and enthusiasm for underwriting, and less competition for new business among insurance companies. A hard insurance market is not as favorable to the buyer because coverage can be more difficult to obtain and prices are not as competitive under.

The industry shift toward a hard insurance market is occurring just when risks for businesses seem to be higher than ever. Between safety concerns during a global pandemic, cyber security and trade risks during a contentious election year, and potential losses during an economic downturn, now is the time for business leaders to take a step back and evaluate the efficacy of their organizations’ risk management efforts.

4 Tips for Navigating a Hardening Insurance Market

Even the most financially stable and well-prepared businesses will need to make adjustments to adapt to a hardening insurance marketplace. With increasing premiums, more complex and heavily scrutinized underwriting processes, and heavier coverage restrictions on the horizon, here are some tips your organization can follow to help navigate the changing waters:

1. Review Your Current Insurance Program

Often times, changes in your business operations will dictate just how much insurance protection you require. At the end of the day, you just need to make sure your policies match your current state of business. Speak to your agent and make sure they understand your current situation, have assessed the potential risks, and discuss if you have the right coverage for your business. Assess your situation since the last time you reviewed coverage:

  • Have you had to restructure your business operations or employee base due to COVID-19-related disruptions?

  • Has your business recently expanded (or scaled back) its locations?

  • Have you added a product line or service?

  • Have considered how COVID-19 may impact your commercial insurance policy?

Related reading:Proactively Reviewing Your Commercial Insurance Can Save You Thousands

2. Increase Your Risk Management Efforts

Risk is everywhere. To help your organization weather the hardening insurance market, consider evaluating non-obvious financial risks that your business may face, such as a security data breach. In a recent study, more than 50% of small-to-mid-sized businesses surveyed stated they faced a cyber security attack, and the average cost of a data breach has increased to a staggering $5.9 million!

Risk goes beyond the financial implication; don’t underestimate the potential effect on your company’s reputation. Other financial risks include breach of contract, mistakes or oversights that cost your clients money, and lawsuits against your organization or employees.

Don’t forget to consider the obvious physical risks that could present themselves: natural disasters, building fires, hail damage, or an employee injured during working hours—whether it occurs while performing their job or driving a company vehicle.

Related Reading: The Value of Encouraging Company Vehicle Safety

3. Take Preventive Measures and Explore Possible Discounts

Have you done your part to minimize your business’ exposure to potential risks? For instance, do you have smoke detectors and sprinklers installed to avert potential fire, or have you installed a security system? Do you have a disaster plan in place protecting both your employees and customers? According to the Insurance Information Institute, you may be able to reduce your premium for certain coverages by following your insurer’s recommendations.

4. Speak to a Reputable Licensed Insurance Agent

The importance of working with the right commercial insurance agent cannot be overstated since your insurance coverage protects the livelihood of your business. A professional licensed insurance agent can discuss your current situation, let you know if you have the correct coverage, and discuss your options. While it is cause for concern to be under-insured, it can also be problematic (and, unnecessarily expensive) to be over-insured. Be prepared to discuss your five years of claims history and start your comparison shopping—at least 30 to 60 days of renewal date. Keep in mind you will want to reassess your commercial insurance coverage annually to be proactive and save your organization money.

Contact an Agent

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Mike Karageorge

As Executive Vice President for Sales and Marketing within SWBC’s Insurance Services division, Mike Karageorge oversees marketing efforts focusing on sales and growth. Before joining SWBC, Mike spent over 20 years as a sales and marketing executive within the wireless communications industry, including 12 years at Sprint. Mike holds a bachelor’s degree in finance and an MBA.

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