What Is a Hard Insurance Market? What Does It Mean for You?

What is it?

A hard insurance market refers to a period when insurance is more expensive and there is stricter underwriting, and reduced capacity to write new policies. This can make it more difficult to obtain coverage or renew policies.

Why are we in a hard insurance market?

One reason is the increased frequency and severity of losses that have been happening over the last couple of years due to wildfires, natural disasters, crime, theft, vandalism, and post-pandemic aggressive driving.

Add to this the supply chain issues that started happening during the pandemic. The difficulty in obtaining materials, and parts to make repairs in turn increased the payouts companies pay for loss of use (rental cars for people to live elsewhere while homes are being repaired or rebuilt).

Another major factor is inflation. Why does inflation have a significant impact on the cost of property and auto insurance premiums?

Inflation can affect the value of insured property. As property values increase, so does the cost of rebuilding or repairing that property in the event of a covered loss. This means that insurance companies may need to adjust their coverage limits to ensure that policyholders are adequately protected.

When it comes to auto insurance, inflation can affect the cost of repairs and medical expenses associated with accidents. As these costs rise, so does the cost of insurance premiums to cover them.

As the cost of goods and services increases due to inflation, insurance companies need to increase their premiums to cover the rising costs of repairs, replacement, and liability claims. This means that you as a policyholder will see your premium rise over time, even if you haven’t filed any claims.

Why does your rate go up even if you haven’t filed a claim? Insurance is a system where individuals pay premiums into a pool of funds that is used to pay for claims when they arise. However, when there are too many claims and the pool of funds is depleted, insurance rates increase for everyone not only the people that have had the claims.

We get it. It stinks to pay money for something you hope to never have to use.

However, despite how much we dislike paying for it, insurance remains a crucial aspect of our lives because it protects us financially against catastrophic losses.

What can you do?

Despite the challenges of a hard insurance market, with the right approach and mindset, it’s possible to navigate through it successfully and continue to protect your business or personal assets.

During such times, individuals and businesses need to be proactive in their insurance strategies. This may include asking your agent to run comparison quotes to see if better pricing is possible. Consider adjusting coverage limits, and deductibles to save. If your credit rating needs improvement then keep working on it. Improved credit history can help lower your insurance pricing.

It’s also important to maintain a strong risk management plan to minimize potential losses. Don’t ignore home maintenance issues that could lead to bigger and costlier problems later on. If your driving history needs improvement work on it, slow down, pay attention, and be patient. Simple things like giving yourself enough time to get where you need to go without the need to rush or speed. Lastly, consider enrolling in a temporary telematics program to earn a discount based on your safe driving.

It is important to understand how insurance works, and what coverages you need so that you can make informed decisions. By choosing the right insurance plan, you can ensure that you are adequately protected and prepared for life’s unexpected events.

We are here to help you understand your insurance options, and make the best decisions possible for you and your family.