The insurance market is hardening, bringing pressure from insurers to increase premiums, tighten terms and reduce coverage.
This article reviews current market conditions, and provides guidance on how to work with your broker to manage the hard market.
As with many markets, the insurance market is cyclical. For many years businesses buying insurance have enjoyed the benefits of a “soft” in which insurers compete hard to win business by cutting premiums, relaxing underwriting criteria and offering wider cover.
The inevitable long term result of these soft market conditions is that claims costs rise compared to premiums, reducing insurers’ underwriting profitability. This trend has been exacerbated in recent years by claims inflation, putting even more pressure on margins.
Insurers are now responding to this reducing profitability by tightening underwriting criteria, reducing cover and increasing premium rates – in some cases insurers and Lloyd’s syndicates have exited unprofitable insurance classes or sectors all together. We are now seeing the insurance market “harden” across most classes of business.
Examples of factors fuelling the current hard market include:
As part of GRP, one of the largest independent insurance broking Groups in the UK, ABL Group is well placed to fight your corner.
A core element of GRP’s strategy has always been to maintain strong mutually supportive partnerships with insurers, and this strategy is now paying dividends for our clients, as our local negotiations with insurers are backed by GRP’s national strength and insurer relationships.
Your approach to your insurance renewal can also make a difference: Here are some tips which will enable you to help us secure a fair deal on your behalf:
Insurers are becoming more selective about the risks they choose to write, and for some renewals may want to ignore previous years’ underwriting to take a fresh look at your business. A more cautious risk selection approach may also mean that cases need to be referred upwards to more senior underwriters.
This means that the renewal process can take longer, so agree your renewal strategy early and prepare the information needed for your renewal well in advance to help us get on the front foot in negotiations.
More detailed underwriting information which demonstrates that your business is a well-run and attractive risk justifies more competitive terms, so help us to secure the best possible deal by being responsive to requests for additional information.
Under-insurance is a massive problem for the insurance industry, with property reinstatement values often being significantly understated (our research shows that this is the case for up to 75% of businesses). Insurers are increasingly imposing terms such as co-insurance (requiring the insured to pay a % of any claim) to combat this issue.
To avoid the imposition of restrictive terms, or the reduction of pay outs in the event of a claim, it is essential that you can demonstrate recent and accurate valuations. We now offer professional desktop rebuild valuations from our partner Rebuild Cost Assessment Ltd to help our clients with this issue.
Similarly, it is important to review your Business Interruption sum insured, indemnity period and all other policy limits to ensure they are adequate.