Navigating a Hard Insurance Market: A Guide for Savvy Shoppers

In a hard insurance market, policyholders are facing increased premiums, reduced coverage options, and stricter underwriting criteria. The knee jerk reaction is to shop and change carriers.

To ensure you make the best decisions while shopping for insurance during such times, it's essential to educate yourself about the market conditions and adopt a strategic approach.

Below is the advice we provide to our client. This simple guide aims to equip you with valuable insights and tips to navigate a hard market successfully.

1. First you have to learn what contributes to a Hard Market. 

   Here are several factors to the development of a hard insurance market:

    

   •  Increased Claims and Losses: When there's a rise in the frequency and severity of insurance claims, insurance companies have to pay out more money to cover these losses. This can strain their financial reserves and prompt them to raise premiums to maintain profitability.
   •  Reduced Investment Returns: Insurers often invest the premiums they collect to generate income. In times of economic uncertainty or low investment returns, insurance companies might struggle to make up for potential shortfalls through investments, leading them to rely more on premium revenue.
   •  Catastrophic Events: Natural disasters, large-scale accidents, and other catastrophic events can result in significant insurance claims. These events can deplete insurers' resources and prompt them to increase premiums to mitigate potential future losses.
   •  Tightened Underwriting Standards: Insurers become more selective in the risks they are willing to cover. They might raise the bar for eligibility requirements and demand more extensive documentation to ensure that the risks they take on are adequately assessed.
   •  Market Competition: A lack of competition among insurers can contribute to a hard market. If fewer insurers are operating in a specific sector for example Florida, they might have more control over pricing and coverage terms.
   •  Regulatory Changes: Changes in regulations and compliance requirements can impact insurers' operations and profitability, potentially leading to adjustments in premiums and coverage offerings.

Why is this important? Remember my comment about your knee jerk reaction?

Here is a frequent scenario:

You shopped your insurance and found another carrier that will save you $300.00 a year. Great - Right?

You cancel your "old" policy and go with the new carrier.

Remember "Tightened Underwriting" - this is where clients get into a pickle. 

The new carrier comes out to inspect and finds your home unacceptable due to "Tightened Underwriting". The new carrier sends you a non-renewal notice (letter) for the "unacceptable" exposure(s).  There is nothing the new agent can do other than to offer you another carrier quote that is $600 more than your "old" policy.

You call your "prior" agent to reinstate your "old" policy. Sadly, they can't since the policy was cancelled and they have new Tightened Underwriting. 

Now "stuck" with a  new carrier that is $600 more than the policy you cancelled with your "prior" agent. 

 Here are some recommendations:

1. Assessing Your Needs:

   • Review your coverage needs: Analyze your current insurance policies and assess whether they still meet your requirements. For example -Do you need full coverage on your 15 year old vehicle? 
   • Prioritize coverage: Identify essential coverage types and prioritize them based on your specific circumstances.

2. Research and Comparison:

   • Explore multiple options: Your Independent Agent can research and obtain quotes from multiple insurance providers to gain a comprehensive understanding of available offerings.
   • Look beyond price: make sure you are comparing coverage terms, policy limits, deductibles, and exclusions, not just focusing on the premium. Last thing you want is to lose coverage. 

3. Consulting Professionals:

   • Seek advice: We encourage you to consult with your Independent Insurance Agent as they should have a deep understanding of the market and can provide personalized guidance.
   • Expert insights: Agents can offer valuable advice in finding tailored coverage solutions amidst a hard market. Make sure they confirm carrier underwriting before you switch.

4. Risk Mitigation:

   • Focus on risk management: As agents, we can provide risk mitigation strategies. Super important when you switch to a new carrier during this market.
   • Safety measures: Implementing safety measures can reduce the likelihood of claims and portray you as a lower-risk client.

5. Review and Negotiation:

   • Regular policy reviews: When we touch base with our client each year we review their policies and ask if  their circumstances has changed, ensuring coverage remains up-to-date.
   • Negotiation skills: Ask for discounts that you could qualify for. Association, Military, Good Student, Advance Purchase, Smart Driver are just a few. You could save hundreds. 

6. Long-Term Planning:

   • Consider long-term solutions: Think beyond the current market conditions by staying with your carrier during interim. Bundled policies with the same carrier to lock in favorable rates. At some point, when this hard market is over, you will have the opportunity lower cost while enhancing coverage.

7. Avoiding Fraud:

   • Beware of scams: If it sounds too good to be true then chances are it is! Watch out for the possibility of fraudulent insurance offers during a hard market and we advise you verify the legitimacy of providers.

8. Financial Preparedness:

   • Budget for premiums: The rates will continue to increase the next 12 to 18 months. Plan for potentially higher premiums by adjusting your budget (if possible) and making necessary financial preparations as best you can. Check with your carrier to see if they offer a discount for having your payments deducted automatically from your checking account. 

Navigating a hard insurance market requires vigilance, research, and strategic planning. By understanding the market dynamics, evaluating your coverage needs, seeking expert advice, and practicing risk management, you can make informed decision that protect your interests and assets - even in challenging market conditions.

Remember, being a careful and an informed shopper is the key to securing the best possible coverage in a hard market.