Hard Market vs. Soft Market in Insurance

You may or may not have heard the terms soft market and hard market. It is likely that you have felt the effects of both as an insurance customer. When the market is soft all is well for business, but when the market turns hard, the average insurance consumer finds it harder to obtain quality coverage at an affordable price.

In a soft market, insurance carriers have a larger appetite for risk, more underwriting capabilities, and they compete by lowering premiums to attract more clients who are shopping. There is a surplus of carriers relative to the amount of buyers. A soft market is a buyers’ market and gives the buyer more bargaining power to negotiate better coverages at a lesser cost.

Alternatively, a hard market is when there is an increased demand for insurance, a lower availability for coverage, and increased premiums. The insurance carriers’ appetite closes in and sometimes they stop providing coverage for certain risks altogether (most prominently the high-risk industries), making it more difficult to find affordable coverage.

What makes a hard market?

If you look back on the trends throughout the insurance industry, you will see that it is cyclical, like a pendulum. It fluctuates consistently between a hard market and a soft market historically every 7-10 years.

There are numerous factors that influence a hard market. The largest contributor to the approaching hard market is the increased severity and frequency of catastrophic events in the United States, and worldwide. Natural events such as wildfires, earthquakes, and severe weather coupled with lawsuits, and the dollar amount of claims paid out put pressure on the insurers’ ability to pay out claims with the current reserves they have. For the carriers to continue paying out the claims, and to ensure they have enough reserves to pay future claims they need to mitigate risk, reduce coverages, and increase premiums.

How can MartinoWest Help?

We strive to ensure you get the best possible coverage at the most reasonable price, whether in a hard or soft market. We are knowledgeable advisors and understand what’s going on in the industry. We will work with and for you to protect, streamline, and grow your business. As the insurance market ebbs and flows, our programs offer stable and controlled rates, reducing costs so you can focus on your business.

Let us help you navigate the insurance markets, !!