Guest Author Post: What you need to know about a ‘Hard Insurance Market’

24 Sep, 2020

You may find your business’s insurance facing rate increases as the insurance market becomes more challenging. Why? Insurers are looking to balance their books with either reduced capacity, pulling out of some risk areas, and/or revisiting terms and conditions. This is known as a ‘hard insurance market’, but what does that mean?

Duncan Sutcliffe, director, Sutcliffe & Co Insurance Brokers, explains, “Just like any industry, the insurance market goes through peaks and troughs. A ‘hard market’ is the upswing in a market cycle, when premiums increase and capacity for most types of insurance decreases.”

A hard market can be caused by several factors:

Solvency Margins: Insurers are being forced to set aside more capital to satisfy Regulatory requirements restricting their liquidity.

Increased reinsurance costs: Insurance companies buy insurance themselves; this is called reinsurance. The price of reinsurance is rising, and this cost is being passed down the chain. Reinsurance companies are also restricting what they let insurance companies insure

Less competition: The number of insurers is reducing therefore the competition for polices is reducing.

Poor Investment Returns: Most insurance companies invest the premiums they receive, in normal times much of their income comes from these investments. The current low interest rates and decline in investment returns means this income source has been lost.

Increase in frequency and severity of claims: Catastrophic losses are increasingly common due to climate change. Compensation payments for injury claims are increasing sharply. Property, equipment and vehicles are becoming more expensive to repair and replace. All of these are factors that have led to insurers having to pay more in claims.

So, what to expect during a hard market?

With insurers tightening their belts, this brings a more restrictive criteria for what they’re looking for and what they are willing to cover – with some insurers exiting certain areas entirely. Insurers will become choosy about what they insure, will insist upon strict conditions and will reduce the breadth of cover they offer whilst simultaneously increasing premiums.

You can no longer assume that your renewal will be secured easily, that cover will be comprehensive and that insurers are keen for your business.

How can your Broker help influence the markets?

First and foremost, a good insurance broker will have anticipated the hard market and will be ready for the changes. They will work with you and underwriters to review the options and alternatives.

A hard market makes underwriters cautious about who and what they will insure. So as a policyholder, you need to demonstrate a high standard of risk management that will convince an underwriter you are unlikely to make a claim and certainly not a big one.

Your Broker will need to improve the quality of their presentations to underwriters; differentiating your Risk Profile. To do this you will need to devote plenty of time to work with your broker in order to give them the best opportunity of putting together a thorough case on your behalf.

Brokers that have prioritised technical expertise and maintained strong ties with a range of insurers during softer market conditions are now better placed than those brokers that dumbed down and commoditised insurance.

Duncan concluded: “Our advice has always been to engage early for renewal, and this is even more important in a hard market: Insurers need more time to review all information and may have to refer some risks up their management chain. So be prepared to be proactive and involved throughout the renewal process, and ready to answer more in-depth questions from your broker.”

If you require assistance with your insurance, you can contact Duncan Sutcliffe and his team at Sutcliffe & Co Insurance Brokers: 01905 21681 or by emailing enquiries@sutcliffeinsurance.co.uk.

If you’re considering ISO Certification to help reduce your insurance premiums, please call us on 0330 058 5551 or if you’d prefer to put in an enquiry and have a free consultation, click here.

Author Bio

Duncan Sutcliffe is the Director of Sutcliffe & Co Insurance Brokers. You can contact Duncan and his team on 01905 21681 or by emailing enquiries@sutcliffeinsurance.co.uk.

News Archive

  • News Archive

Featured News

Related Posts

Guest Author Post: Business Continuity and Resourcing Management – Facing Uncertainty with Innovation

19 Oct, 2020

Business resilience starts with the awareness of potential risk. It is built around strong organisational cultures, the promotion of emergent leadership, and investment in safe and secure workspaces and operations. With a job lost every 20 seconds since lockdown in March though, it became evident to us all that one of the main risks to business sustainability and continuity lies in the potential loss of talent, and the major disruption to operational continuity and internal resourcing capacity this brings.

Are you finding it difficult to ask for help?

7 Oct, 2020

If you’re finding things hard right now, you’re not alone. The coronavirus pandemic is affecting every area of our lives.  You might be feeling frustrated, low, worried, anxious or concerned for yours or your loved one’s health.  Whilst these are all common reactions, we each respond differently to such events and it’s important now, more than ever, that you to take care of yourself and ask for help if you need it.

Covid-19 Didn’t stop Sentinel Partners on their Road to Certification!

6 Oct, 2020

Back when things were ‘normal’, Sentinel Partners began their journey to certification but with lockdown putting physical visits on hold, we had to quickly adapt our services in order to continue to deliver a high level of service.   How would our new clients find this new dynamic way of working with us?

No more furlough merlot’s – Top Tips for returning to work after furlough

30 Sep, 2020

As the Government’s furlough scheme is set to end at the end of October, our Business Development Specialist, Stacey Humm, talks about her experience of furlough and gives her top tips for anyone returning to work shortly.