Every month, our agents check the renewals of our current policies, to watch for increases in premium that may signal the need for us to shop for a new insurance provider for a client.  While factors like claims, tickets, insurance score, age, and home ownership can affect rates, there are also forces at work in the insurance industry itself that can make a big difference in your premiums when renewal time comes around.  In this article, we’ll look at some characteristics of the insurance market that can change over time, and how to stay ahead of any potential increases in your premiums.

The Insurance Market

We always say that the insurance market is cyclical in its expansion and contraction.  It may take two to ten years, but the ebb and flow of the market will always show itself in highs and lows described as “soft” and “hard” markets.

A soft market in the insurance industry is caused by companies’ expansion and positive outlook for business, and characterized by the following:

  • Broad coverage options
  • Generous underwriting decisions and relaxed underwriting rules
  • Lower insurance premiums (rate decreases)
  • More policies written, with higher limits
  • Competition among insurance companies
  • A “buyer’s market” – as an insured, you have companies offering great deals to get your business

When the decreased revenue and especially increased losses associated with selling in soft market begin to affect insurance companies’ bottom lines, they enter into a hard market, the characteristics of which include:

  • Fewer coverage options, with lower limits offered
  • More conservative underwriting decisions and more requirements to meet
  • Fewer policies written overall, in an effort to minimize risk
  • Less competition between insurance companies – usually creates rate increases
  • A “seller’s market” – insurance companies aren’t trying to entice lots of new business


Where is the Market Going Today?

There are two main causes of hardening in the insurance market: the economy and natural disasters.  Insurance companies get their revenue not only from policy premiums, but from investments.  When their investments don’t yield predicted results, companies will raise premiums to offset their losses.  Natural disasters hit everyone hard, including insurance companies, who pay out enormous sums to help their insureds recover from tornados, hurricanes, floods, wild fires, etc.  It’s counter-intuitive to think that a natural disaster in another state should affect rates here in Missouri, but insurance companies use the Law of Large Numbers to calculate statistics and rates nationwide.

Even though we’ve all seen the efforts that try to lighten the mood, it’s no joke that 2020 has been a miserable year on many, many fronts – and insurance companies are feeling it as well.  We’ve been fortunate here in Mid-Missouri that the weather has been so mild.  It’s a good bet that when the evening news mentions the latest disappointing economic report, or brings updates on this week’s biggest wildfire or hurricane, your insurance agent is also cringing at the news, knowing that these events will most likely impact your premiums in the future.

For an in-depth analysis of where one leading risk management company sees the market headed, take a look at USI’s Q2 2020 Property and Casualty Insurance Market Outlook.  It makes for some great bedtime reading!

Insure with the People You Trust

Whatever changes the insurance market may bring, an independent agency like Kasmann Insurance is perfectly positioned to do what’s best for our Personal and Commercial Insurance clients.  With multiple national, local, and specialty insurance companies to choose from, we’re able to explore options for our clients that protect your assets while fitting in your budget.  We’re always just a phone call or email away, and we look forward to answering any questions you may have.

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