How to respond to a hard insurance market

Insurance Market


Mike Mulligan

Commercial Lines Manager



The commercial insurance market has been “hardening” over the past few years, even before the global pandemic and related economic recession. In a hard market, insurers are more reluctant to take risks amid fears that they may lack the financial stability to pay claims. A hard market means that insurers have a lower risk tolerance and customers may face more rigorous approval criteria, more restricted coverage, and higher premiums.


Some of the factors that have led to this hardening in recent years include an increase in catastrophic events and related losses (such as floods, hurricanes and wildfires), an increase in the frequency and severity of claims, and low interest rates which have negatively impacted profitability for insurance carriers.


According to the 2021 Insurance Marketplace Realities report, hard marketplace conditions are expected to continue throughout 2021. The impacts of the COVID-19 crisis on the insurance market are still unknown, but, depending on the outcome of pending court cases and proposed legislation, could still be significant.


Bottom line, during a hard market, businesses may face difficult decisions about their insurance coverage and can expect:

  • Higher premiums

  • Increased scrutiny regarding underwriting

  • To be required to provide more information regarding risk

  • Coverage restrictions or exclusions

  • Conditional or non-renewal notices


Ways for businesses to navigate a hard market

While there’s no way for businesses to completely avoid the drawbacks of a hard insurance market, there are strategies you can leverage to minimize the impacts on your company, such as:


1.  Review your current insurance policies.

Determine your business’ biggest vulnerabilities and be sure your policies provide adequate coverage. Talk to your insurance advisor about making necessary adjustments to better fit your needs.


2.  Increase risk management and safety efforts.

By investing in workplace safety and other programs that reduce risk, your business will be more attractive to insurers. Again, talk to your advisor about ways you may be able to lower your premiums.


3.  Understand your loss history.

Know the details of successful claims against your business, be ready to explain the factors that caused those losses, and show the steps you’ve taken to prevent future losses.


4.  Budget accordingly.

Higher premiums may be unavoidable in a hard market, so be sure to take d insurance costs into account when budgeting for the year.


5.  Plan ahead.

Now that you know we’re in a hard market situation, talk to your advisor as soon as possible to see how it could affect your business. Also, consider getting the renewal process started early so your broker has more time to secure the best rate and terms for your business.


Most important, it’s imperative that you find the right insurance broker for your unique business.


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