The insurance industry, just like any other, experiences trends and changes in it's market. There are two main cycles to be aware of: Hard and Soft.
It's important to know what the effects of each are, because it affects the way we purchase cover.
Characteristics of a Hard Insurance Market
- High insurance premiums
- Stricter underwriting
- Less competition amongst different insurers
Characteristics of a Soft Insurance Market
- Low insurance premiums
- Wider coverage
- More lenient underwriting
- Increased competition amongst insurers to cover you
It doesn't take a genius to figure out that all the factors involved in a soft insurance market are positive ones. Who doesn't want low insurance premiums and broad coverage?
Unfortunately, this can't last forever as Insurers make money through these premiums and investments. That's why it eventually bottoms out and we enter a hard insurance market...
Which cycle are we currently facing?
You're probably already aware that we are facing a hard market (since the beginning of 2013). This is due to a number of natural disasters and the remnants of the recession forcing premiums to shoot up.
And stay up, for the time being.
There has been a period where commercial companies were pulling in less revenue and therefore paying their employees less. In an extremely general manner this means that us, the insured, are willing to insure less than we previously would have in order to save a bit of cash.
This in turn results in premiums being hiked up by the insurers.
How to reduce the effects of a hard market
- Review your Health and Safety processes (and get a good one in place!). This can help to minimise the risk, and if you can demonstrate this to your insurer it can definitely go a long way.
- Consider self insuring some of your risks. This will reduce the amount of risk that your insurer will be taking on and therefore reduce your premiums. To find out more take a look at our blog 'Self Insurance: Should You Take the Leap?'.
- Start the renewal process earlier and be sure to do your research and challenge different insurers. If you leave it too late, you may be forced into an agreement you aren't happy with.
- Take a look at your claims handling processes. Showing your insurer that you have a pro-active claims handling strategy within your organisation can drastically reduce your premiums. It demonstrates that any claims will be looked at properly rather than just being offloaded straight to the insurer.
For more advice, take a look at our 11 Insurance Hacks to Reduce Your Premiums: