The insurance industry is now going through a hard market. A hard insurance market is when there is high demand for insurance coverage and low supply of insurance capacity. This is making it more difficult and expensive for businesses and individuals to obtain insurance.
A hard market can be caused by various factors, such as increased losses, reduced investment income, regulatory changes, or natural disasters. Here are a few examples:
- Insurers recorded a $26.5 billion net underwiring loss in 2022, up from $21.5 billion in 2021 (AM Best). An underwriting loss is when an insurance company pays out more than it collects.
- Climate change made 2022 one of the costliest years on record for natural disasters, with more than $120 billion in insured losses. This was also significantly higher than the previous five-year insured loss average of $97 billion (Munich Re).
- Rising litigation costs are increasing claims payouts and insurer loss ratios, also referred to as social inflation (Triple-I)
- Economic challenges, such as supply chain issues and record inflation, have made it more expensive for insurers to pay claims. This is because these challenges affect the cost of repairing or replacing damaged or lost property, as well as the cost of legal services.
Here are our tips for ways you may be able to save money in a hard market:
- Review your insurance policies and coverage. Make sure you have enough coverage for your most important and valuable assets, but also look for any unnecessary or duplicate coverage that you can eliminate or reduce. For example, you may be able to lower your car insurance premium by increasing your deductible, dropping collision or comprehensive coverage on an older vehicle, or taking advantage of discounts for safe driving, low mileage, or bundling policies.
- Improve your risk management practices. Insurers are more likely to offer lower rates and better terms to customers who demonstrate that they are taking steps to prevent or minimize losses. For example, you can install smoke detectors, fire extinguishers, security systems, or storm shutters in your home to reduce the risk of fire, theft, or wind damage. You can also drive safely, avoid distractions, and maintain your vehicle to reduce the risk of accidents or thefts.
- Know your loss history and explain any mitigating factors. Insurers will look closely at your past claims and losses when determining your premium and eligibility. If you have a high frequency or severity of claims, you may face higher rates or non-renewal. However, you can also provide evidence or explanations of any factors that contributed to your losses and the actions you have taken to prevent them from recurring. For example, if you had a large claim due to a natural disaster that was beyond your control, you can show how you have repaired or improved your property to make it more resilient.
- Contact your agent to review your policy before your policy renewal date. In a hard market, it may take longer to find the right coverage and price for your needs. Therefore, you should start the renewal process early and compare quotes from different insurers. You can also work with an independent insurance agent who can help you find the best options and negotiate on your behalf. However, you should also be careful not to switch carriers too often or too quickly, as this may make you seem like a risky customer who is not loyal or satisfied.
- Look for other ways to save money. If you cannot lower your premiums significantly, you may be able to save money in other areas of your budget. For example, you can cancel some unnecessary subscriptions, eat out less often, or use public transportation instead of driving. You can also look for other benefits or services that your insurer may offer, such as roadside assistance, identity theft protection, or online tools and resources.
During these challenging times, independent insurance agents are more important than ever.
Source: Trusted Choice & Big I