If you’re like me, your kids are constantly filling your heads with the latest vernacular. You watch them. You listen to them. You pick up on their terminology. Have you heard, “Don’t be soft”? This is the statement used when one of my kids doesn’t want to take out the trash because it is raining. The others chime in with, “Don’t be soft”.
I bring this up to set the table for this blog – you can be soft in the hard market. If it helps in any way, you have my permission. Now, more than ever it makes sense to have a place to pivot to – and a strategy to approach the uncertainty we are all facing. Even more so, when that uncertainty is also tethered to a hard insurance market.
So, what is the hard insurance market? And how can you get away with being soft?
I’ll give it to you straight, it’s not a easy climb to summit. In a hard market, insurance buyers can face sizable increases in premium and more difficultly in the underwriting process and market available. This is especially true for lines of business that underwriters find perilous. There are several reasons why we are heading deep into a hard market. Low interest rate have had a negative effect on the investment portfolios of insurance companies. We have seen an increase in extreme weather and catastrophic events through wildfires, hurricanes, and more. This has had a direct impact on pricing and lead us to this hard market. And now, in the middle of a pandemic and faced with such uncertainty, the hard market with get even harder. I’d be happy to dive head long into the economics of all of this and why and how it happens. But that is a blog for another time.
While economics, social pressure, reinsurance costs, and the weather have had this effect, we are left dealing with the hard market. You, as the insurance purchaser, are left to face increasing rates. This is where I give you permission to be “soft” in this hard market.
Insurance companies have to consider all the factors discussed above to determine rates that keep them profitable, stable, and able to pay insurance claims. So, they impose rate increases and their underwriters sharpen their pencils. Insurance companies will more diligently review risks due to this hard market and will keep a keener eye on those risks that they find perilous.
Have you been properly prepared for this type of market?
Take a nice soft baby step into this hard market and ask yourself, “What have I done to prepare for this hard market? How is the story of my business being told in the marketplace?” This is the key to many of the problems with the “traditional” process. How confident are you that your business is being represented appropriately in the insurance marketplace? The current state of uncertainty breeds risk so take that first baby step to start a dialogue around what you are doing to be proactive in driving your own insurance costs down.
Statistics show that just 20% of submissions to underwriters are clear, clean, concise, and tell the full story of an organization. The full story means not only where the business has been and what claims they’ve experienced, but also where they are going and what the organization is doing to improve. Are you confident that you are not one of the 80% that ends up at the “bottom of the pile”. You’ll have much more success if you know that you are in the top 20%.
Approaching the insurance process differently is the soft step most are looking for. Work with a Risk Advisor that understands all aspects of your business. This goes beyond your annual revenue multiplied by a liability rate factor. It means working with a risk advisor who can understand your culture, how you onboard employees. It means working with a broker that can help you review contractual obligation to transfer risk.
Unfortunately, many organizations will continue to approach this hard market the “hard” way. They will rely on more traditional methods when what they need to do is focus on innovative and proactive strategies. They may shop the hard market to see what other rates “are out there”. Organizations will be faced with hard conversation and facing uncertainty, may choose to push those conversations off.
Instead, consider taking a first soft step. Let’s look at your organization as a whole and develop a plan to improve upon what you are already doing excellently – and work on the areas that need some buttoning up. With a team behind you that can relay that message to the insurance marketplace, you will find increased productivity and profitability while driving your total cost of risk down. If you would like to take that first soft step, we can surely walk with you the rest of the way.
Reach out to me at AHofmann@fbinsure.com
