Hard Insurance Market and Rising Rates
August 10, 2023
Understanding the Factors Behind Rising Premiums
Introduction
If you've recently received your insurance premium bill and found yourself wondering why it seems higher than ever before, you're not alone. Many policyholders are grappling with the same question. The cost of insurance can be affected by a multitude of factors, some of which are beyond your control. In this article, we'll delve into the reasons behind the rising cost of insurance and offer some tips on how you can navigate these challenges.
Factors Driving Insurance Premium Increases
Insurance carriers are facing a perfect storm of challenges that are impacting their ability to offer competitive rates. These challenges directly affect their bottom line and subsequently influence the premiums you pay. Let's explore some of the key factors contributing to the higher cost of insurance:
- Increased Claims Frequency and Payouts: Insurance companies are experiencing a surge in the frequency and severity of claims. This can be attributed to a variety of factors, including supply chain disruptions that lead to longer repair or replacement times, ultimately increasing costs.
- Catastrophic Weather Events: With climate change leading to more frequent and intense weather events, carriers are facing larger claims payouts resulting from hurricanes, floods, wildfires, and other natural disasters.
- Social Inflation: The phenomenon of "social inflation" describes the trend of jurors awarding unexpectedly high sums of money in trials. This forces insurers to settle claims they might have previously taken to court. As a result, insurance companies are paying out more substantial settlements, driving up costs.
- Reduced Underwriting Capacity: Due to the increased financial strain caused by the factors mentioned above, insurance carriers are becoming more cautious about the risks they underwrite. This means they may limit coverage for specific classes of insurance or in certain geographic areas.
- Diminished Carrier Competition: In a hard market, where insurance carriers are facing financial pressures, there may be fewer options available to policyholders. This lack of competition can lead to higher premiums as carriers have less incentive to offer competitive rates.
Actions You Can Take to Manage Premium Costs
While you might not have control over all the factors impacting insurance premiums, there are steps you can take to help manage the cost of your coverage:
- Implement Risk Management Practices: Minimize your exposure to potential risks by following proper risk management strategies. This can include safety protocols, regular maintenance, and preventive measures.
- Maintain Open Communication: Stay in close contact with your insurance agent, who can serve as a valuable resource. Keep them informed about any changes within your organization that might impact your policy or risk profile.
- Document Everything: Properly document any incidents or events that could be relevant to a claim or policy dispute. This documentation can be crucial in supporting your case and potentially reducing claim costs.
- Plan Ahead for Renewals: Start discussing your insurance needs well in advance of your policy renewal date. In a challenging market, finding the right coverage might take longer than usual.
- Consider Long-Term Partnerships: Think twice before switching carriers frequently. In a hard market, carriers might be hesitant to bid on customers who frequently change providers.
- Explore Cost-Saving Options: If reducing premiums is not feasible, consider options like choosing a higher deductible or self-insuring a portion of your risk. These alternatives could help you save on overall costs.
Conclusion
The rising cost of insurance premiums is a complex issue influenced by a combination of factors, including increased claims, catastrophic events, social inflation, and reduced underwriting capacity. While these challenges are beyond your control, you can take proactive steps to manage your premiums and make informed decisions about your coverage. By implementing risk management practices, maintaining communication with your insurance agent, and exploring cost-saving options, you can navigate the current insurance landscape more effectively. If you have any questions or concerns, do not hesitate to reach out to our office and we can help guide you through these times!
In today's insurance landscape, navigating the hard market can be a daunting task. Rising premiums, reduced capacity, and increased underwriter workloads make securing the right coverage a complex endeavor. However, there are ways to ease the process and make informed decisions. Here are four key tips to help you navigate the challenges of the hard insurance market: 1. Partner with a Trusted Broker/Agency One of the most effective strategies in a hard insurance market is to collaborate with a trusted broker or agency. In times when underwriters are overwhelmed with submissions, having a seasoned professional on your side can make a significant difference. A trusted broker not only understands the market dynamics but also has established relationships with underwriters. This can enhance your chances of securing the coverage you need. Avoid the common pitfall of submitting the same proposal to multiple brokers. Underwriters prefer working with brokers who prioritize quality over quantity. Submitting the same information through different channels can reduce efficiency and potentially harm your chances of getting the best coverage and premium. 2. Prioritize Longevity with Your Carrier While the temptation to switch carriers for immediate cost savings is understandable, it may not always be the best long-term strategy. Building a long-standing relationship with your current carrier or agent can have advantages. Insurers appreciate loyalty, and it may lead to better terms, even in a hard market. It's crucial to recognize that the challenges of the hard market extend across the entire industry. Switching carriers may provide short-term relief, but it doesn't necessarily mean escaping the broader industry trends. Consider the stability and reliability of your current carrier, and work collaboratively to navigate the changes together. 3. Understand that the Hard Market is an Industry-Wide Issue It's essential to acknowledge that the hard market is an industry-wide problem, not exclusive to your current carrier. All insurance companies are adjusting their strategies to adapt to the changing landscape. Rather than chasing the lowest premium, focus on finding a stable and reliable carrier for your insurance needs. Your trusted broker can play a crucial role in helping you identify carriers with a strong financial standing and a commitment to weathering the challenges of the hard market. Collaborate with them to assess various options and make informed decisions that prioritize stability over short-term gains. 4. Embrace Patience A burning question on the minds of many in the insurance industry is, "How long will this hard market last?" Unfortunately, predicting the exact duration is challenging, but indications suggest that it might persist for several years. During these uncertain times, it becomes even more crucial to rely on the expertise of your trusted broker or agency. They have a pulse on the industry and can provide valuable insights into market trends and potential shifts. By fostering a strong partnership, you can navigate the duration of the hard market more effectively and make informed decisions about your insurance coverage. Understanding that this is a prolonged industry-wide challenge allows you to adjust your expectations and strategies accordingly. Instead of seeking quick fixes, work collaboratively with your broker to develop a long-term plan that aligns with the evolving landscape of the insurance market. In conclusion, while the duration of the hard market remains uncertain, leveraging the expertise of your trusted broker or agency is a strategic move. Patience, coupled with informed decision-making, will be your ally in weathering the challenges that lie ahead. By staying proactive and maintaining open communication with your insurance partners, you can navigate the complexities of the hard market with confidence.
Here's What You Need to Know
Safeguarding Your Business in the Digital Age: The Rising Importance of Cyber Coverage In today's interconnected world, businesses of all sizes are increasingly reliant on digital technology. From company websites and email systems to storing client information and accepting credit card payments, many businesses have embraced the convenience of the digital landscape. However, with these technological advancements come cyber threats that can pose a significant risk to businesses. If you have a company website, email, store client data, or accept credit card payments, it's crucial to be aware that you could be vulnerable to a cyber attack. The Prevalence of Cyber Threats: Cyber threats are found everywhere and constantly evolving. No business, big or small, is immune to potential cyber attacks. The frequency and severity of cyber incidents have prompted a paradigm shift in how we perceive Cyber coverage. It has evolved from being a "nice to have" aspect to a fundamental "need to have" policy for almost every company, across all industries. Small to medium-sized businesses are particularly at risk. Shockingly, over 98% of cyber claims stem from such enterprises. These attacks can have disastrous consequences, resulting in financial losses, damage to the company's reputation, and even business disruptions. The Average Payout and the Need for Protection: The financial implications of a cyber attack can be staggering. On average, a cyber claim results in a payout of approximately $170,000. For businesses, this could mean a severe blow to their financial stability, possibly even leading to closure. To mitigate these risks, businesses need to take proactive measures, and Cyber insurance has emerged as a critical solution. Unlike many other insurance products, Cyber coverage offers comprehensive protection against a wide range of cyber risks, including data breaches, ransomware attacks, and business interruption caused by cyber incidents. Moderated Rates and Increased Accessibility: The good news is that Cyber insurance is now more accessible and affordable for businesses. Recent months have seen a significant moderation in Cyber insurance rates. Previously, businesses faced annual rate hikes of 20-30%, making Cyber coverage daunting for some. However, the trend has shifted, and insured parties now experience more stable or even decreasing rates, particularly during policy renewals. High-income households are also recognizing the value of Cyber insurance, and the same positive trend can be observed among them. This indicates that businesses and individuals alike can now secure comprehensive cyber protection without breaking the bank. Take Action Today: If you're concerned about your business's exposure to cyber threats and want to explore Cyber insurance options, don't hesitate to reach out to our office. Our team of experts is here to assist you in understanding the cyber risks your business faces and finding the best coverage to safeguard your assets and reputation.
You come into the house in a rush moving onto the next thing on your to-do list. You pause for a moment and happen to look down at your hand. A wave of terror washes over you as you realize that the diamond from your engagement ring is gone. You immediately begin retracing your steps to try and remember where you might have been and what could have possibly happened to it? Panic, guilt, rage, are all emotions that you are experiencing simultaneously as you try figure out what happened and where that stone could have gone. You enlist the help of family and friends to help with the search. The kids, your dog, neighbors, any able-bodied person is called upon to help solve this horrific mystery. The fortunate few find the stone, but the majority of people do not and eventually the search is ended. Your insurance program and how well it was designed will have direct bearing on what happens next. A typical homeowner’s policy may provide some limited protection for valuables such as jewelry if they are stolen, but is it enough and does it cover loss or damage? A majority of home insurance carriers offer additional and broader coverages for jewelry and valuables but they have to be specifically scheduled on the policy. What are the steps make this happen? Have the conversation with your agent. Your agent should be a resource. Use them to make sure that you have the proper coverage and carrier for your jewelry and valuables. Get a professional appraisal. Go to your jeweler and have the value of your jewelry formally documented. Document, document, document! Good documentation is always one of your best assets in a claim. Take photos and save your receipts. If you have additional questions or want additional information on coverage for your jewelry, please call us or send us a message on Facebook - we will be happy to discuss your options. Happy Valentine’s Day from all of us at Fuqua Insurance Group!
1. Liability Limits This coverage provides a specific dollar amount of medical coverage to other people you would injure in an accident. The higher the limits, the better you will be protected. (ALWAYS) A way to check if you have enough is to see if bodily injury limits are more or less than the value of your home and retirement accounts combined. **ADDED BONUS: IT GETS CHEAPER PER $1000 OF COVERAGE AS YOU INCREASE LIMITS WITH THE VAST MAJORITY OF INSURANCE CARRIERS** 2. Uninsured/Underinsured Motorists This coverage is for medical damage caused to you and your passengers. It is sometimes reduced to save premiums which leaves you exposed to the 7.2% of drivers in the state without auto insurance. This doesn’t even take into consideration the number of people with inadequate limits. 3. Loan/Lease Gap Coverage This coverage provides additional money to cover the depreciation of your vehicle in the event of a total loss. Cars are expensive, and they depreciate the most in the first few years. Insurance policies will settle claims on an Actual Cash Value basis, meaning what the vehicle is worth at the time of accident. This can create havoc if you owe more on the car than what it is currently worth. This gap coverage helps handle this problem. 4. Glass Coverage Does your coverage cover rock chip repairs? Is there a deductible? One of the most common auto claims is rock chips and broken windshields. Many carriers will repair a glass chip with no deductible. If the chip moves to crack, you will have to pay your comprehensive deductible. 5. Rental Car Coverage This coverage provides a rental car to you in the event you are involved in an accident. This is not a mandatory coverage, but it can be very helpful in the event you have an accident. Often repairs after an accident can take multiple weeks which can make this a very valuable coverage. **Note: This is not coverage for renting a car.**
One of the ways to reduce your premium on your home insurance is by raising your deductibles. The more risk you are willing to take on, the cheaper the premium you will have to pay. But, how do you know this option makes the best financial sense for you? The most common risk in the State of Kansas is wind and hail. That is why the vast majority of insurance companies include a wind and hail deductible on home insurance policies in Kansas and the Midwest. Statistically, you can expect a “significant hail event” every 7 years in any Kansas community. So how do you decide if a higher deductible works for your insurance program? Arithmetic. 7 years is our time frame. Let’s assume that by moving your wind and hail deductible from $1000 to $2500, you save $187 annually (or $15.58 per month) on your home insurance premium. That means that you will save $1,309 in premium over 7 years to take on an additional $1,500 in risk to your pocket book during a wind or hail storm. $187 x 7 years = $1,309 premium savings. $2500 - $1000 = $1500 in deductible difference. Risk an additional $1500 out of pocket to save $1309 in premium. Is that the best choice? This depends on you, your finances, and what the actual premium savings are in your specific situation. It might also be good to know when your “significant hail event” is going to happen, but sadly, we aren’t able to do that yet… The decision will be up to you, but now you have a quick formula that can help you decide whether or not you want to self-insure more of the most common risks in the great State of Kansas. For help with this or many other insurance and risk management questions, we are always available at > > Contact Us