Hard and Soft Insurance Markets

We have previously highlighted that there is growing commentary that the insurance market is starting to harden within not only in Australia but Globally, but what does that mean?

Whilst more complex explanations exist, for ease, the insurance market is generally segregated into two fields, a ‘harder’ and a ‘softer’ market. These two ‘states’ of the insurance market have impacts within the pricing and the extent of cover which insurers are preparing to provide to clients and are highlighted within the table below[1]:

So, what are we seeing? Well primarily we deal within Professional Indemnity Insurance where there is still an abundance of insurers willing to provide terms on the majority of industries, even those whom have had a history of claims i.e. structural engineers. Whilst some insurers have raised their pricing there is still more willing to negotiate but I can feel that there is a change coming and I would not be surprised at all that in a years’ time there are insurers being more selective on the policies they quote on.

At Colne Risk Advisory we feel that you should always be considering the ‘what if’ and in this instance there are a couple of pointers which we feel would be useful for businesses concerned by what a changing market could do to their insurance costs, these are:

  1. Ensure that you have a knowledgeable broker. Does your broker understand the industry which you work within and do they have experience (and therein contacts) to ensure that they can constantly present your business to the correct insurers?

  2. Does your broker keep you updated as to how the market is reacting and what claims are impacting insurers? and

  3. Have you reviewed your own internal procedures? Internal risk management steps are a key way to ensuring that claims can be kept to a minimum. Claims within a ‘hard’ market can have a greater impact on the availability of insurance and ‘sensible’ pricing so it is important to ensure that manageable risks are managed;

[1] Insuranceinfoandtips.com. (2017). Hard Market Versus Soft Market. [online] Available at: http://www.insuranceinfoandtips.com/index.php/2016/08/19/hard-market-versus-soft-market/ [Accessed 21 Nov. 2017].

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