If you’ve had conversations about insurance in recent months, you’ve likely heard the terms “hard market” or “market hardening.” Many policyholders are experiencing dramatic rate increases that pinch budgets. Here’s a description of some root causes and what you can do to mitigate them as much as possible:

What Is a Hard Insurance Market?

A hard market is defined as an “upswing in a market cycle when premiums increase and capacity (the supply of insurance available to meet demand) for most types of insurance decreases.” That means insurance is more expensive and harder to obtain. In contrast, during a “soft market,” buyers benefit from attractive rates, bigger capacity, and flexible policy terms and conditions. Insurance is available and affordable.

What Causes a Hard Insurance Market?

Market hardening begins when carriers take corrective action to shore up their profitability. Many events can trigger hardening of the markets.

For example:

  • Increases in costs, the biggest being building/labor costs and vehicle prices.
  • Increases in the frequency or severity of losses and the payout of losses.
  • Decreases in insurers’ investment returns caused by stock market declines.

Carriers may discontinue or reduce their risk appetite (the risk an insurance company will take on) and adhere to strict underwriting discipline.

How Often Do Hard Insurance Markets Occur?

Since 1985, the insurance industry has experienced three hard markets: 1985–1987, 2001–2004, and the current one starting in 2019.

In 1985, extensive liability lawsuits almost collapsed the insurance industry and contributed to the hardening of the market.

In 2001, the events of 9/11 triggered a hard market that took several years to work through.

Many factors have contributed to the current hard market, which began forming in 2019 and stubbornly persists. While the COVID-19 pandemic did not initially cause the hard market, it’s one of several factors prolonging it.

The increase in catastrophic events, social and price inflation are the major factors that are driving up insurance costs and leading to premium increases.

As time passes, insurance carriers are finding their business to be increasingly unprofitable and unsustainable.

What Strategies Help In a Hard Insurance Market?

Eventually, the hard market will subside and things will become more stable for buyers. But until that happens, here are some strategies to soften the impact on you and your budget:

  • Research and compare. An independent insurance agency can use resources and tools to compare your policy, coverage limits, and premiums with multiple carriers.
  • Assess your risk and coverage. Tailoring your coverage to your specific circumstances will help you avoid paying for what you don’t need while protecting yourself adequately.
  • Implement risk management strategies. What actions can you take to improve your risk profile and what does your risk health look like? For example, do you have protections like temperature monitoring, a backup generator, automatic water shutoff or water alarms, lightning protection, or a security system? There could be discount options available.
  • Explore your claims options with a specialist before filing.
  • Review your deductibles.
  • Maintain a great insurance score.
  • Consider carriers that offer discounts to bundle your policies together.

Navigating a tough insurance market requires patience, diligence, and informed decision making. A hard market can be very frustrating, but these tips can help you position yourself to get the best possible coverage at a competitive rate. To brainstorm options for your unique situation, I invite you to schedule a time to sit down with me and discuss these issues further.

This article was published in the Fall 2023 issue of the General Insurance Services Risk & Business Magazine.  Access the full publication here.

Industry Insights, Personal Insurance




Navigating a Hard Insurance Market

Navigating A Hard Insurance Market