Business Insurance: The Hard Market & How to Prepare

The Property & Casualty insurance industry is cyclical, continually fluctuating between a “hard” and “soft” market. Since the early 2000’s, the industry has experienced a historically long soft market with business owners benefiting from available coverage at reasonable premiums. As of late, “U.S. commercial insurance prices have increased 18% in the third quarter of 2020”, the eleventh straight quarter they have risen, indicating signs of a transition to a hard market.  As the insurance industry enters a hard market, business owners should be prepared to experience changes in the market.

Soft Market vs. Hard Market

In a soft market, business owners experience:

  • Lower insurance premiums
  • Relaxed underwriting and flexible negotiation
  • Broader coverage and higher limits
  • Increased competition between carriers

On the other hand, in a hard market, you’ll experience:

  • Higher premiums
  • Rigorous underwriting and stricter standards
  • More restrictions on coverage, limits and conditions
  • Non-renewal notices
  • Less competition between carriers

What Causes a Hard Market and How Does it Affect Business Owners?

A number of factors have contributed to a hard market transition including increased claims payouts, poor investment returns from historically low interest rates and the recent spike in severe weather events and catastrophes.  Even before COVID-19 pandemic hit in early 2020, these factors were apparent. The pandemic, in combination with economic uncertainty, has accelerated the transition. Insurers are still unsure what effect it will have on the insurance industry.

“Analysts for Standard & Poor’s Global Ratings predict U.S. underwriting losses from COVID-19 would fall in the $15-$30 billion range, with others stating that this estimate is light.”

In a period with low investment returns and an increase in claim payouts, insurers are forced to take measures to ensure that they have enough premium to protect customers and pay current and future claims. In this environment, insurance buyers tend to find it more difficult to secure coverage at what they feel is a reasonable price.

What Can You Do To Prepare?

As we enter the hard market, insurers become more selective with accounts they want to do business with vs. taking on anything and everything. You must make your business that much more appealing to underwriters. When they have a stack of accounts to review, they will always be attracted to the submission that has the most complete information and an easy story to read.

This is an opportunity for business owners to differentiate themselves from the others by:

  • Strengthening your risk management and safety programs
  • Explain your past losses and the steps you’ve taken to mitigate
  • Reviewing your contractual risk transfer process
  • Reviewing exposures and deductibles
  • Taking advantage of value-added services offered by insurers
  • Aligning with an insurance agent who understands your business and unique risk

These strategies are essential in any market cycle but become even more important to make your business a more desirable risk.

Why Partner with McSweeney & Ricci for Your Business Insurance?

Your agent plays a critical role in helping your business navigate the insurance market by   your risk story to insurance carriers and advocating on your behalf.

Since 1964, McSweeney & Ricci has helped businesses of all sizes throughout Massachusetts, New England and beyond, navigate through insurance market place fluctuations. Our Commercial Insurance team acts as your guide, offering trusted insurance advice and expertise to ensure your business has the most complete and affordable business insurance program.

Your Business will benefit from our:

  • Strong Carrier Relationships-We represent more leading insurance companies than most agencies our size. These strong long-term partnerships allow us to select the best business insurance program for your individual business’ needs at the most competitive prices.
  • Contract Review– Our business insurance experts will review your contracts to ensure you are properly covered for the risks presented by each job.
  • In-House Risk Management-Good safety practices, help your business avoid increased insurance costs due to higher claim submissions. our in-house risk advisors provide your business with risk management solutions and safety materials customized to your business’ unique risk exposures.
  • On-Site Registry-Your time is precious! We offer the convenience of in-house registry services at our locations in Braintree, Marshfield and Cohasset. In many instances, we are able to save you a time-consuming trip to the Registry of Motor Vehicles (RMV) for many common transactions.
  • In-House Claims Department-We hope your business never has to experience a claim, but if you do, our in-house claims professionals are available to guide you through the claims process, and return you to business as usual, as quickly as possible.
  • Coverage-Review-Having improper levels of business insurance can prove catastrophic to your business in the event of a claim, and being overly insured impacts your budget. Our commercial insurance team will continually review your coverage to ensure your business has the correct levels of coverage and proper endorsements.

By working with an experienced and reputable insurance agent that understands your business and can leverage its array of long-term carrier relationships, you are in a much better position to sell a top of the stack submission and secure the broadest coverage possible at the most competitive rates.

McSweeney & Ricci’s Commercial Insurance Division can help guide your business through changes in the insurance marketplace and will advise on the various rating factors that can influence your Massachusetts business insurance costs. For more information on how a transition to a hard insurance market can influence your business insurance program, contact Commercial Lines Sales Executive, Kyle Carrigan or request a complimentary business insurance quote here on our website. With 10+ years of industry experience, Kyle specializes in insuring businesses of all types and has earned the Chartered Property & Casualty Underwriter (CPCU), Associate in Fidelity and Surety Bonding (AFSB), Construction Risk and Insurance Specialist (CRIS), Management Liability Insurance Specialist (MLIS) and Accredited Advisor of Insurance (AAI) designations.

Sources: “Chief Risk Officers Believe U.S. Coronavirus Losses Could Top S&P’s $15-$30B Estimate” by Susanne Sclafane 6/10/20

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