Contributer: Derek Wiley
The insurance market is always in flux, with various factors influencing the availability and cost of coverage. In recent years, the market has been hardening, with insurers raising prices and becoming more selective in the risks they’re willing to take on. This trend is expected to continue in 2023, making it a hard insurance market for businesses and individuals seeking coverage.
One of the major drivers of the hardening market is the increased frequency and severity of natural disasters. Wildfires, hurricanes, and other weather-related events have caused billions of dollars in damages in recent years, and insurers are raising rates to account for the increased risk.
Another factor contributing to the hard market is the low interest rate environment. With interest rates at historic lows, insurers are facing pressure to raise prices in order to maintain profitability. This is particularly true for life and annuity insurers, who often invest premiums in long-term bonds and other fixed income securities that pay lower returns in a low interest rate environment.
Rising loss costs also contribute to the hardening market. For example, Medical malpractice, auto insurance, and workers’ compensation insurance has seen a huge cost increase, which has led to the rising of insurance rates for clients.
The hard market also affects different industries and regions differently, which means that some clients might be affected more than others. Industries such as construction and transportation, as well as regions with high levels of natural disaster risk, may see steeper rate increases than other industries and regions.
In this market, it’s more important than ever for businesses and individuals to shop around for coverage and negotiate with insurers to get the best rates and terms. As part of this process, it’s crucial to have a comprehensive understanding of your coverage needs, as well as the risks you face.
While the hard market can be challenging, it also presents opportunities for companies that are well-prepared. By taking steps to mitigate risk, such as implementing safety measures and ensuring compliance with industry regulations, businesses can show insurers that they’re a lower-risk proposition and secure better rates and terms.
In conclusion, the hard insurance market of 2023, characterized by high prices and limited coverage availability, will continue to be a challenge for businesses and individuals seeking coverage. However, by being proactive and taking steps to mitigate risk, businesses can position themselves to secure the coverage they need at more reasonable rates.