Understanding the Current Property Insurance “Hard Market”

property insurance

The property insurance market is experiencing a significant shift. Industry premiums are on the rise, coverage seems to be reduced across the board and the underwriting standards have gotten more strict. The insurance industry has a term for seasons like this: “hard market.” But, why are these things happening? How did we get here? Below we will explore the current landscape of the property insurance market, highlight the factors contributing to this hard market and the impact it has on various types of property coverages, including commercial buildings, homeowners’ policies, and auto insurance.

 

Understanding the “Hard Market”

A “hard market” in the property insurance industry refers to a period characterized by:

  1. Premium Increases: Insureds are experiencing significant hikes in their insurance premiums. Commercial property owners, homeowners, and auto insurance policyholders are all witnessing substantial rate increases.
  2. Reduced Coverage: Insurers are becoming more selective in the coverage they offer. Policies that once covered a wide range of risks may now come with more exclusions, leaving policyholders with potentially less protection.
  3. Tightening Underwriting: Insurers are imposing stricter underwriting standards, making it more challenging for applicants to secure coverage.

 

Contributing Factors to the Hard Market

What is happening to contribute to the property insurance market’s current state?

  1. Inflation: The rising cost of living and the increasing price of goods and services can put additional pressure on insurers. Insurers may need to increase premiums to account for the increasing cost of claims payments and operating expenses.
  2. Supply Chain Issues: The global supply chain disruptions have led to increased construction costs and delays. This has a direct impact on property insurance rates, particularly for commercial properties, as insurers need to account for the increased expenses of rebuilding or repairing damaged structures.
  3. Climate-Related Events: The growing frequency and severity of natural disasters, such as hurricanes, wildfires, and floods, have led to a higher number of property insurance claims. Insurers must anticipate the increased risk of property damage due to climate-related events, and this can translate into higher premiums and reduced coverage.

 

Impact on Policyholders

The property insurance hard market is undoubtedly impacting policyholders. Homeowners may struggle to afford increased premiums, while businesses may need to allocate more of their budgets to insurance costs, potentially impacting their competitiveness. Reduced coverage can leave policyholders vulnerable to unexpected losses, and stricter underwriting may make it harder for individuals and businesses to secure insurance protection.

 

Adapting to the New Normal

In a hard market, it’s crucial for policyholders to adapt and make informed decisions. Here are some steps you can take:

  1. Shop Around: Don’t settle for the first insurance quote you receive. At Chastain, we can guide you to explore multiple options to help you find the best coverage at competitive rates.
  2. Risk Mitigation: Implement risk management strategies to reduce the likelihood of claims. For example, homeowners can take steps to safeguard their properties against theft and natural disasters.
  3. Review and Understand Policies: Thoroughly review your insurance policies to understand the coverage and any exclusions. Ensure that you have the protection you need.


Contact Chastain Otis Today

Navigating a “hard market” can feel daunting if taken on by yourself. That is why Chastain Otis is here to help! Consulting with Chastain Otis, we can help you assess your insurance needs and select the right policies to protect yourself and your loved ones from life’s uncertainties. Remember, investing in insurance today can provide invaluable peace of mind and financial security for the future. Contact Us today to ensure you have the insurance coverage you need.