The Changing Insurance Landscape
EXPLORING THE CYCLE OF SOFT & HARD MARKETS WRITTEN BY AARON LINDEN
Good day to you, dearest readers of Artisan Spirit Magazine, The insurance market can be a dark and dangerous place for the unfamiliar, so distillers need to take heed when wandering into this realm. Insurance markets are finicky creatures that are cyclical in nature. In my 20-plus years of experience in the industry, these cycles generally last about three to five years, swinging from “soft markets'' to “hard markets” and back again. In soft market times, everything is great for insureds who purchase the actual insurance. They enjoy lower premiums, easier underwriting guidelines (appetite), and everything in Insurance-opolis is just hunky-dory. These are the times that should be treasured like an old friend, your dearest loved ones, or your favorite bottle of expensive alcohol, because at some point they may just be a fond memory. Soft markets are usually driven by a strong economy, low loss ratios on a national sc a l e,
and costs of goods and services being lower — all the good stuff that makes insurance companies happy, thus passing along the happiness to the insurance purchasers. In fact, the insurance market really wants to be soft, for the most part. If left in its natural state, it would remain soft and we all would remain pleased as punch. Then we have the opposite end of the spectrum. The hard market. I just got “chicken skin” even typing that phrase. Just the mention of a hard market brings to mind the most horrible, terrible, dark, terrifying things that the brain can conjure up. Hard markets are what Dickens must have had in mind when he wrote the famous line about it being the worst of times. Hard markets come with much more stringent underwriting guidelines, gigantic premium increases on new and renewal policies (property rates this year alone have seen increases anywhere from 15 percent to 35 percent), insurance carriers completely leaving certain sections of markets (like homes or liquor liability), and sometimes even leaving entire
Soft markets are usually driven by a strong economy, low loss ratios on a national scale, and costs of goods and services being lower — all the good stuff that makes insurance companies happy, thus passing along the happiness to the insurance purchasers.
Hard markets come with much more stringent underwriting guidelines, gigantic premium increases on new and renewal policies (property rates this year alone have seen increases anywhere from 15 percent to 35 percent), insurance carriers completely leaving certain sections of markets (like homes or liquor liability), and sometimes even leaving entire states. 42
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