Top 5 Questions about the Insurance Hard Market

You have questions, we have answers.  

In this month’s blog we address the top five questions we receive about the hard insurance market in Florida. It’s something that has been a hot topic for years and we’re here to clarify your concerns.  

What is the Hard Market?  

The most common question we get is, what even is the hard market? 

Like so many insider terms, there is a simple explanation. It boils down to the issue of availability.  Due to the number of natural disasters that have happened over the past decade or so, insurance companies have reduced the amount of coverage that they provide in the state and in some cases, have stopped providing coverage in Florida all together.  

The issue of course being that people still need insurance coverage for their assets and are now left with very limited options. Since there are less options that means higher premiums for less coverage.  

What does the Hard Market Mean for Me? 

For homeowners and business owners it means two things. 

The first and the one with immediate impact is that you are paying more premium for the same amount of coverage you used to get. This is because with less options, insurance carriers are assuming more risk and that means having to charge more to be able to cover claims in the event of an incident.  

The second and one that you might miss is that due to the hard market, insurance carriers are providing less benefits in the coverage, which means as the policy holder you assuming more risk. That means you have to be careful and understand what risks you are now assuming and plan accordingly.  

What are my Options in a Hard Market? 

It may not seem like you don’t have options, but there something very important you can do to ensure that you are putting your best foot forward during the hard market.  

Talk to your agent. 

Now that may seem simple, but it’s something that is often looked. Communicate with your insurance agent whenever you update your home, so you don’t miss out on any potential discounts. You might already have some you are not taking advantage of, so be sure to talk to your insurance agent in depth.  

Building a relationship with your insurance agent will always pay off.  

Should I Self-Insure During the Hard Market? 

Before asking this question it’s important to note one major thing. 

Not buying insurance and self-insuring are not the same thing. Yes, you are assuming all the risk in both, but if you are self-insuring, that means you have a plan. A plan on how to mitigate the hit to your cash flow in the event of an incident. If you don’t have that, you aren’t really self-insuring.  

Another thing to consider is what it means to assume compete risk. For example, let’s say your premium is 100k. But the building is worth 1 million. You could say “well instead of paying my premium, I’ll just put that in the bank, and I’ve self-insured.” 

Not so fast.  

In all likelihood, the amount of damage your asset will sustain will almost never be the amount of your premium. Your premium is just a fraction of the cost that goes into a pool of resources in the case of a claim. The fact is, if you just put away the amount of your premium, you’ll be underinsured.  

However, a better option, might be only assuming some of the risk for lower premiums. For example, getting a higher deductible or perhaps only forgoing a certain coverage like windstorm. 

Consider these factors before self-insuring.  

When will the Hard Market End? 

It will end. 

When? 

That we have no way of answering for you. Historically speaking, hard markets have always come and gone, but there is never just one moment where the entire insurance market softens. Instead, you can expect to see it soften coverage by coverage, as claims activity begins to baseline, and insurance companies feel more comfortable assuming more risk.  

Until then. Be sure to review your coverages on a annual basis and within some time, you’ll find some relief.