Market Trends in Insurance: Hard and Soft Markets Explained

By: Tosha Revell, Benefits Consulting Account Manager

Economists study consumer behaviors, but it is up to sociologists and psychologists to help explain why we buy what we do. When deciding what to buy at any given time, you will most likely consider your ability and willingness to buy a product. The utility, or total satisfaction of a product, will help you make your decision.

All industries go through cycles of ups and downs, and the insurance industry is no different. There are two defining cycles in which the insurance industry can determine what rates to impose and how much capacity is available at a given time for insurance in the market place. These two cycles are the hard market and soft market.

Characteristics of a soft market:

  • Lower premiums
  • Broader coverage
  • Available and reduced underwriting
  • Easier to obtain insurance
  • More competition among carriers

Characteristics of a hard market:

  • Higher premiums
  • More underwriting
  • Harder to obtain insurance
  • Less competition among carriers

So are we in a hard or soft market? There is some controversy surrounding this subject. Some would say that we are in a hard market or fast approaching one currently. However the evidence still does not prove that is actually true. According to economist there are four things that must happen before we reach the hard market.

  1. The insurance industry would have gone through a period of large underwriting.
  2. We must see a decline in capacity, or the ability to provide insurance.
  3. The cost of reinsurance would rise considerably, subsequently creating a shortage of reinsurance capital. This will take large catastrophic losses to reach. Although we are seeing some of these types of losses, we have not reached the level of hard market.
  4. We would see more pressure and restriction with underwriting and pricing.

Contrary to what some may believe, there is no concrete evidence that places us in a “hard market” today. We are, however, in an unstable economic market; this means agents and consultants must act accordingly and explain in detail the situations of their clients. Businesses should be looking to appropriately manage their risk at higher levels than they have done in past years.

One of the major components of managing risk starts first with identifying the risks you have. Once you have thoroughly assessed what your risks are, speaking with a insurance professional who can help implement the most effective way to reduce your loss frequency is key. This makes your risk less surprising and more predictable. It is also a good idea to see how each risk differs from each other, this way you can determine the best possible solution on how to insure the risk at hand.

Code of Conduct When Selling Insurance

By: Tosha Revell, Benefits Consulting Account Manager

One of the first rules of life many of us are taught is that we should “do unto others as you would have them do unto you.”  This is an especially important rule in business dealings. It is a litmus test for how we should be communicating with others in both a business environment and our personal lives.

The insurance industry, to some, has unfortunately turned into a culture where trust can sometimes be overlooked for a good price, and consumers should always be on the lookout for scams.  As a member of the insurance community, I, and many of my coworkers, apply this golden rule while communicating with customers.  We believe that trust is a huge part of a successful business relationship, and one cannot build trust without respect. 

As we build more relationships with more clients, we hope to change how consumers view insurance and the companies who handle their policies.  Every individual who works at an insurance agency most likely has a policy of their own, and those of us who abide by the golden rule understand exactly how it feels to be a customer of our own products, and how we would want to be treated.

One of the ways we work to exemplify this rule is by providing friendly courteous service without pressuring customers to buy the products we are selling simply for profit or personal gain.  Instead, we work to make options available that will enhance and complement a person’s lifestyle and reflect their needs. The goal is to provide the appropriate products and services that are best suited for the customer. These types of behaviors promote stronger business relationships, trust, and can benefit both the customer and the company in substantial ways.

Return on Investment: Insurance Shouldn’t Be a Commodity

By: Mark Ellington, Account Executive

In today’s economy, businesses are finding new ways to cut costs to protect their profit margins.  The majority of business owners look at “shopping” their insurance to find the most affordable deal.  One might think they are saving 30% on their premiums, but are they really getting the deal they think they are?  Business owners who only look for a cheaper product will eventually end up spending more in the long run.

Insurance is a vital asset to one’s business.  For some business owners, insurance is a big investment so they only budget for the cheapest price available.  Business owners scrutinize every expense – insurance is no different and, for some, is a considerable expense.  While it is understandable to assume that by purchasing the cheapest available insurance, money will be saved, the reality is that by purchasing the bare minimum coverage, your business may be left underinsured or even uninsured.  In some cases, a claim will need to be made against your insurance, which will end up costing you money out of your own pocket and become an unbudgeted expense.

As a business owner, you need to determine the correct amount of insurance coverage you will need to adequately protect your business assets.  Look at it in a different way: investing in the correct insurance coverage is crucial to your businesses success!  Although the upfront costs may be slightly greater, your company and employees, not to mention your peace of mind, will thrive with the knowledge that your business is properly insured.

Distracted Driving – Employers Liability

More than 16,000 Americans were killed in “texting while driving” accidents between 2001 and 2007. That number is now up to 16 people killed every day by distracted drivers, a rate that will equal more than 5,800 by the end of 2011.

Distracted driving affects virtually all age groups and backgrounds. For example, every week we hear about high school students taken too soon because of distracted driving. And in September 2008, 25 people lost their lives when the engineer of the train they were riding in slammed into a freight train that he never saw coming because he was texting while operating.

While these statistics would be enough to push any parent to the brink of an anxiety attack, employers need to be paying strict attention as well. As of October 2010, 30 states plus the District of Columbia had outlawed text messaging while driving. Nine have banned the use of cell phones by drivers in their entirety.

So What Does This Mean for Employers?

Employers are responsible for employees who do any driving while on the clock, whether it is making deliveries, or just running an errand for the boss. It is an employer’s legal obligation to have clearly stated policies against employee texting while driving.

Additionally, it is your responsibility to make sure that these policies are enforced. If a member of your staff causes an accident while behind the wheel of a car during work hours, the employer can be held liable by the victims of the accident. This is not direct liability, as if the employer committed the act themselves, but vicarious liability, which holds superiors responsible for the actions of their subordinates.

As the number of deaths from distracted drivers continues to skyrocket, it has become everyone’s responsibility to figure out how to stop it. Almost every day we hear about horrific accidents caused by those who text, check e-mail, or otherwise multitask while driving. Employers should communicate to their staff a zero-tolerance policy of these dangerous practices, because the consequences of failing to do so are too great.


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Protecting Your Business from Slips, Trips and Falls

Ensuring your customers, staff and your business are protected from slips, trips and falls is important during the entire year. People can track loose gravel, mud, snow, ice and other debris into your building, creating a potentially dangerous situation in which a business is liable for anyone hurt from hitting the floor due to this situation. Sometimes even the floor mats that are put down to absorb this moisture and debris can become the cause of the accident and the source for a liability claim.

By the Numbers

While the financial impact from a slip and fall varies greatly, the National Floor Safety Institute estimates that the average cost of a compensation claim for an injured worker is $4,000. However, if this accident should happen to a customer, vendor or other third party, the cost to your business leaps to between $60,000 and $100,000. While these types of workers’ compensation and liability claims occur all year, during the winter months they make up the majority of all workers’ compensation claims. The U.S. Department of Labor’s Occupational Safety & Health Administration (OSHA) states that 15 percent of all accidental deaths happen as a result of slips, trips and falls, second only to motor vehicle accidents.

Prevent the Accident, Protect Yourself

The best way to protect yourself and your business from these types of liability claims is to make sure that these accidents don’t happen in the first place. While there is nothing that you can do to control the weather, managers should walk the grounds of the business often to ensure that sidewalks, walkways and stairwells are free of rocks, loose gravel, snow, ice, puddles, spills and other debris.

Putting down proper matting to absorb wetness and debris that makes its way into entryways is important to reduce the chances of an accident. However, you must make sure that these mats lie flat on the floor, because if they are the cause of an accident themselves, you could have a liability claim on your hands.

Another element you will want to manage is the way that floors and entryways are cleaned. Using the correct cleaning products on floors will not only keep them free of moisture and debris, but also ensure the proper traction – the better traction your flooring provides, the less likely that there will be an accident.

Despite your best efforts at floor maintenance and slip protection, accidents will happen. Slips, trips and falls are accidents that need to be managed on a year-round basis. Call your insurance agent today to make sure you have the best coverage available to protect yourself in case of workers’ compensation and other liability claims.


Image: BrokenSphere