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The Hard Market Is Here

We have entered an insurance business cycle referred to as a "hard market". Coverage is difficult for some insureds to obtain and premiums are high. Some coverages, such as professional liability, may not be available for some insureds during a hard market. Generally, hard markets are caused by heavy underwriting losses or extreme price competition. The downturn in the U.S. economy has negatively impacted the investment gains of insurance companies over the past 18-24 months. Without these gains, companies have started to have difficulty covering their underwriting losses.

The Hard Market and Commercial Insurance

Prior to September 11th, gradual insurance rate increases were put into place and companies began to re-evaluate the risks they were insuring. The attacks of September 11th have escalated this trend. In addition, there are indications that some coverages that have been provided in standard policies may no longer be available or may be available only at a separate premium.

Be prepared for increases in premium and possible changes in coverage. In general, we will recommend that clients stay with the insurance company that has been writing the policy. We know from experience that they will be more likely to take your history and loyalty into consideration to minimize the impact of these changes. Since renewals are taking longer to secure under the new market conditions, we will need to contact you well in advance to gather the information we need to arrange the best terms and price we can for your individual situation.

The Hard Market and Health Insurance 

The hard market in Health Insurance has been caused by the weak economy and double-digit increases in health care costs, especially in the area of prescription drug charges. Employers face increases of at least 20% in the coming year. And in New Jersey, premiums will be higher than in most other states because state regulations require that all groups be eligible for coverage, no matter how poor their loss experience is. To minimize the anticipated rate increases, HMO and PPO co-pays will increase and prescription drug benefits will have higher co-pays and other restrictions.

What can you do?

• Think carefully about the insurance coverages that your business needs. We will be happy to answer your questions. 

• Be aware that we might request more detailed information than usual during the renewal process. 

• Understand that this hard market will affect you. It is industry wide and not confined to just a few carriers.

We appreciate your business and your loyalty. We will work together to make it through this difficult time.

Information for this article was obtained from Professional Insurance Agents and the Independent Insurance Agents of New Jersey.