Insurance markets can become hard or soft which impacts overall premiums for a consumer. To understand the difference between the two, think about the terms of supply and demand. When supply in the market is low, insurance carriers have leverage with coverage and premium offerings while limiting options to consumers. This kind of market is known as a hard insurance market. In a soft insurance market, consumers have insurance companies competing with lower premiums and offering a variety of coverages and services. Insurance markets shift when the balance between claims paid by the carrier exceeds premiums received. Other economic factors such as interest rates can impact the insurance markets and premiums. Ultimately, when carriers reduce claim damages and rebuild their financial cushion, insurance carriers become more competitive with policy offerings and the market can see a shift between hard and soft.
Today we are experiencing a hard insurance market. For many years now, insurance carriers have been pummeled with claim damage caused by natural disasters. Hurricanes, floods, wildfires, hailstorms, and windstorms have caused significant property and liability damage, and helped contribute to the hard insurance market we are experiencing today. Reinsurance rates have caused many insurance carriers to continue to increase their rates which makes the insurance market harder. Navigating through a hard insurance market while minimizing the financial impact on the community can be challenging, but it is possible to do so.
Community associations are experiencing large rate increases, changes in coverage, and in some cases unexpected non-renewals. An association which is proactive with their risk management strategies to reduce claims will have a better position in a hard market. The Greek philosopher, Heraclitus, is credited with saying, “Change is the only constant in life.” With this thought in mind, we are reassured a hard market won’t last forever.
Wildfire Prevention
