What to Expect When Expecting a Hard Market
By: Rodney T. Nubin, Senior Vice President and Casualty Practice Leader
All industries have cycles of contraction and expansion or in insurance terms hardening and softening. Typically the contraction or expansion, regardless of the industry, will last between two to ten years. What’s been unusual about our industry is the soft market started as far back as 2004. From 2004 to around 2012 we experienced a truly soft market. Around 2012 the market bottomed out. From 2012 until about 2017 we have seen pockets of the market attempt to harden only to experience moderate softening again in the years to come. At the end of 2017 we begin to see commercial auto show signs of real hardening and the increase in premiums has continued into 2020. Commercial auto is a space I don’t see being soft again for quite some time.
What was started by the hardening of the commercial auto space has now bled over to other lines of coverage and sectors. Construction in CD states and highly litigated counties, Excess Liability, Habitational, Liquor Liability, and Sexual Abuse all began to see hardening in 2019. As we start 2020, rates in these sectors and others will continue to climb. The market is being swayed by social Influence on judgments, catastrophic losses, lower company profitability and rising reinsurance rates. What was a $100,000 loss 5 years ago is now a $1,000,000 claim today. Increased payouts like this and other factors previously mentioned are pushing rates higher.
The soft market lasted so long that we have an entire generation of agents who have never sold in a hard market. Like new parents they don’t know what to expect !!!
So what can we expect as we expect the market to get harder?
- Underwriters will become more stringent with adhering to underwriting guidelines
- Carriers will lower capacity
- 10% to 30% rate increases ( depending on losses and type of business )
- Safety records, loss runs, and past history will be scrutinized closer by underwriters
- More non renewals
- Excess Liability limits will be lowered and you will need to layer high limit policies.
- Program eligibility will change and shift
- Underwriters will require more information to underwrite and rate an account
Knowing what to expect will help you prepare submissions so that underwriters put you top of mind when rating and considering accounts.
If you are interested in obtaining more information or a quote, please do not hesitate to contact your broker at Socius Insurance Services