6 Steps to Take Before the Soft Market Hardens

Most insurance professionals detest a soft market because of the increase in competition, unreasonably low pricing and increased market vulnerability. Some, however, may appreciate a softening precisely because of the change in underwriting and pricing philosophies.

No soft market lasts forever. The hard market will arrive. Like the “real estate bubble,” carriers cannot sustain underwriting and investment losses. What does this mean to retail agents and brokers?

Agencies with a majority of their book placed with preferred carriers may spend additional, unanticipated time trying to re-market those accounts because of the crises faced by those carriers. Carriers know that if they entertain risks as they have during the soft market, it could lead to insolvency.

When the market does turn, the burden once again will be on agents to adapt to the new market condition — to which some may not be accustomed or even ever experienced.

Underwriting complacency and pricing latitude will disappear in the next hard market, as in all hard markets. Clients accustomed to the current market conditions are going to complain, asking why their renewal offers are so much higher, or why the incumbent carrier is not renewing the policy despite a clean claims history. Being able to satisfactorily answer these questions and successfully retain clients will soon be the goal of every agent.

Avoid Being Left Behind

How does an agent avoid being left behind when the shift happens?

Be prepared for the reality of the coming marketplace.

Remember that the industry will be facing greater challenges in the near future. Preparation is your best option.