The Hard Insurance Market

The hard insurance market – Your broker has probably mentioned this to you once or twice when talking you through the insurance placement process. But have you ever actually understood what they mean by it?

As with many other industries, the insurance market can go through cycles/ stages. This is often referred to as cycles of expansion and contraction.

The hard market is the contraction period of the insurance cycle when there is a high demand for insurance, but a lower supply of capital available. The insurance industry has faced an array of challenges over the last few years which have resulted in the market ‘hardening’. These challenges include but are not limited to, an increase in severe weather events and catastrophes, a global pandemic, a higher prevalence of insurance fraud, unprecedented low investment returns and inflation.

PSA Financial has summed up the following points to best distinguish the ‘hard’ insurance market.

Characteristics of a hard market:

  • Higher insurance premiums
  • The insurers underwriting criteria becomes stricter
  • Reduced capacity – this means insurers cut back and write less insurance policies
  • Less competition among insurers

This means that business face more challenges when trying to renew or expand current insurance cover and could lead to taking on higher exposure of risks themselves

How can my insurance broker help me navigate the changing market conditions?

The role of an insurance broker is critical through these market changes. An article by The Business Journals has summed this up perfectly; an insurance broker is able to assist you in assessing appropriate coverage levels for your business, review your claims history, identify optimal insurer partnerships as well as implement risk management and training programs. Insurance brokers also provide added value to businesses by creating marketing strategies that help mitigate the impact of the hard market conditions so that businesses are able to retain current terms and conditions while managing through potential premium increases.

If you have any questions regarding your insurance program, the changing market conditions or just want to have a general chat with a broker – you can contact our office on 08 6381 9510.

This advice has been prepared without taking into account your objectives, financial situation or needs. You must therefore assess whether it is appropriate, in the light of your own individual objectives, financial situation or needs, to act upon this advice.


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