Most industries are cyclical to some extent, and insurance is no exception. It’s important to know which factors determine the cost of your insurance. But understanding the market cycle is only half of the pricing equation: since you can’t control the market, it’s equally important to know what you can do to ensure you are always securing the best price.
The insurance industry pricing cycle alternates between periods of soft and hard market conditions. In a hard market (what we are experiencing today), coverage is harder to place and premiums grow. A soft market indicates premiums are stable or falling, and insurance may be more readily available.
A variety of factors influence price, including economic downturns, catastrophic events, insurers’ claim reserve dollars and supply and demand. Catastrophic events have increased in both severity and frequency. Supply is tied to the amount of policyholder surplus in the industry, and demand is the appetite of the insurance-buying community to transfer risk.
Pricing cycles can also vary between lines of coverage and geographic location, creating both hard and soft market conditions depending on what type of commercial insurance is involved and how exposures to loss have changed.
Industry experts have seen signs of hardening within the insurance market over the last year. Commercial insurance buyers should prepare for rising premiums and decreasing capacity from carriers in the coming year.
What can you do to get the best price for your insurance?
Although premiums vary due to market pressure, your true cost is determined by your claims history. The key to controlling price is to control losses through instituting safety prevention programs, managing claims efficiently when you have a loss, and employing cost containment strategies.
We have the resources to help you employ cost reduction strategies to limit exposures and reduce premiums, including the following:
- Identify your exposures to loss
- Recommending loss control solutions
- Improve your disaster response potential by creating or updating a business contingency program
- Assist in building a culture of safety
- Provide claims management to keep costs down
- Seek continuous improvement
- Review and recommend coverages to ensure your protection
- Guide you to avoid making your business or yourself personally a victim of increased scrutiny by insurance underwriters. See Karen Spencer’s article regarding pitfalls to missing insurance payments.
The market may fluctuate, but our goal—to be your broker of choice—never wavers. To review your risk management strategies, contact Scrivens today.
Ottawa, ON K2P 0M3