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Like many things, Insurance is a cyclical market. It moves from ‘soft’, when premiums are lower, cover is available and insurers are competing for business - to ‘hard’, a time when premiums rise and becomes a ‘sellers’ rather than ‘buyers’ market.
For at least 15 years we have been in a sustained ‘soft’ cycle, meaning that businesses haven’t had to focus too much on their insurances. There has been plenty of competition between insurers and brokers have been able to secure terms easily.
This is changing at a pace many of us have never seen before. We are rapidly moving into a ‘hard market’ - with analysts projecting that it will be ‘the hardest market in a generation’.
Why is this happening? - Well there are a myriad of factors including significant increases in claims costs, the loss of investment income due to prolonged historically low interest rates and of course the impact of the Covid pandemic globally.
We must also accept that certain areas of the insurance market have been ‘ultra-competitive’ and effectively writing business at a loss for a number of years, covering those losses by investment income. With interest rates at a 300 year low, Insurers now have no alternative but to return to profitable underwriting.
Not only will this lead to significant premium increases - it will also result in the cover available being restricted.
One sector that is being particularly hard hit is property, primarily due to historically low premium rates and significant losses. It is no longer unusual for insurers to reduce the amount of cover they will offer, refuse terms altogether, or to seek very substantial premium increases.
Interestingly insurers appear to be adopting a very specific, case by case approach with the impact on each risk varying significantly. There are many factors driving these decisions, but the overall theme is that quality - well managed risks are being impacted to a lesser degree.
In a soft market it is relatively easy to obtain competitive terms and the information insurers require is often more limited. As the market hardens and insurers become more selective, a substantial amount of additional information and an entirely different approach is required to obtain the best terms.
With limited capital available, Insurers now need to be persuaded to use it to provide you cover - rather than someone else. In order to do this, we recommend:
In summary - the hard market means that it will be more difficult to obtain cover and to control premiums. You therefore need to prioritise your insurance management and ensure you are receiving the right advice from a specialist broker.
Berkeley Insurance Group have been a ProCon Patron for many years and we are committed to supporting the membership. In these challenging times it’s important that Leicestershire businesses work together and support each other.
Mark Hayward BA (Hons) Chartered Insurance Broker, Director
With a heritage dating from the 1920s, Berkeley Insurance Group is now one of the UK's largest privately owned insurance brokers.
Our business has been built upon the core values of service, integrity and professionalism and it is for this reason we are one of the few brokers to be awarded the prestigious "Chartered Broker" status. We are very proud of our company, but we never lose sight of the fact that our client must be the focal point of everything that we do.
ProCon Leicestershire Limited
47 Westview Avenue, Glen Parva, Leicester. LE2 9JU. Company number: 5420643