If you’ve been keeping a close eye on financial news in recent months, you may have read that the insurance market is undergoing a period of “hardening”. This means that many insurers have been raising their premiums and tightening their terms and conditions.
Nobody likes the prospect of paying more for protection than they need to, which is why these headlines might alarm you. Thankfully, there are ways that you can avoid this.
Read on to find out more about why the market is hardening, what it means for your business, and how working with a broker can help you.
As a rule, all sectors go through cycles of expansion and contraction and the insurance industry is no exception.
For many years, the insurance market was what we’d call “soft”. In this stage of the market cycle, there is strong competition between insurers, and this means that premiums are generally low. During times like this, insurers typically relax their standards and offer more broad coverage in insurance policies in order to win customers.
However, for the past several years the market has been undergoing a process of change and the coronavirus pandemic has accelerated this.
A “hard” market is typically characterised by high demand for protection, coupled with a limited amount of supply. In this type of market, many insurance companies tighten their terms and conditions, and are less willing to offer broad coverage.
Even before the coronavirus outbreak in the spring of 2020, it appeared that the market was hardening but the pandemic has certainly hastened the process.
According to a report by the Association of British Insurers (ABI), recent years have been difficult for the UK insurance industry. This study shows that there has been a significant decline in the number of insurance firms since 2015.
This is partly due to consolidation, as more insurance firms adapt to more efficient business structures. However, the report also notes that another significant factor to consider is that of the UK leaving the European Union.
While the UK has traditionally been a net exporter of financial services to Europe, the uncertainty surrounding Brexit has meant that many insurance firms have struggled in recent years.
Some markets have also undergone difficult periods due to a high volume of claims. According to the Insurance Times, areas such as professional indemnity insurance and directors and officers cover have been particularly hard-hit in recent years.
The pandemic has also impacted the insurance industry due to many of the other health problems that arose during the lockdowns, such as mental health issues. Data from the ABI also shows that the total payout from the insurance industry rose by 8% in 2020 to £6.2 billion.
As the market hardens, many insurers look to increase their profit by raising premiums and reduce their risk by tightening terms and conditions. This can pose some obvious problems, as it means that cover for your business will not only be more expensive, but it may also be more difficult to make a claim.
As the pandemic has taught us, having the right protection in place can give you an invaluable safety net when the unexpected happens. If you want to ensure that you have the right cover, then it’s important to work with a professional.
When you work with an insurance broker, you can benefit from their expertise, which can help you to find the right protection for your needs. They can also help to scour the market, saving you a significant amount of time.
Furthermore, a broker can also help you if you ever need to make a claim, speaking to loss adjusters and insurance providers on your behalf.
Knowing that you have protection in place can be an invaluable way of gaining more peace of mind, but a hardening market can mean it’s more difficult for you to find the right cover for your needs. Working with an insurance broker can make the process faster, simpler, and as hassle-free as possible.
If you’re concerned about the prospect of a hardening insurance market and want to know more about how a broker can help you, get in touch. Email firstname.lastname@example.org or use our contact form to request a call back from our team.
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