Once upon a time, the insurance market cycled from hard to soft and back to hard again in a pattern that was reasonably predictable—about every 5 to 7 years. For the past 25 years or so, however, there has been no discernible pattern, and soft, or buyers’, markets typically last much longer than hard, or sellers’, markets. We recently entered a hard market for most commercial lines of insurance, characterized by significant increases in rates and reductions of coverage with much tighter scrutiny by underwriters. Hard markets are much more difficult to navigate for insurance buyers, agents/brokers, and even underwriters.
With lengthy soft markets the norm, many younger risk professionals have never experienced a hard market, and those who have may still find themselves brushing up on the fundamentals. With that in mind, Jack Gibson, President & CEO of IRMI, offers a few tips below:
- Verify the accuracy of current loss reports, and make sure any discrepancies are corrected. Develop a written narrative explaining actions taken to address negative trends or large losses.
- Review reserves on open claims, and meet with adjusters to make sure they are reasonable and accurate.
- Prepare an in-depth description of safety and other risk control programs and evidence of top management’s commitment to them to provide to underwriters.
- Review the organization’s capacity to retain loss, and think through areas where it will make sense to retain more risk in return for reductions in premiums.
- Establish a game plan for insurance renewals, identifying which markets to approach, what risk financing options to consider, and what steps to take in the event proposed terms are unacceptable.
- Begin the renewal process at least 4 months prior to a program’s expiration.
- Prepare a well-organized, high-quality underwriting submission that will help distinguish your account from others.
- If possible, arrange to meet underwriters in person to showcase the organization’s risk management program, financial position, and future business plans.
These are some of the basic steps that will help any organization better navigate the rocky waters of a hard market. What additional advice would you like to share? Please add your suggestions to the discussion in the IRMI LinkedIn Group and check out the tips provided by your fellow readers.