For many years the UK insurance market has operated in soft market conditions, but what exactly does this mean? UK businesses across all sectors have enjoyed insurers charging lower premiums than the rest of the world but are now experiencing a hardening (tightening of belts), which hasn’t been seen for almost 20 years. Naturally all industries experience cycles of expansion and contraction, and there are many factors that have brought us to the hard market position now being seen across the insurance sector.

What is a hard insurance market and what has caused this?

The insurance market has suffered persistent high losses for a number of consecutive years and some classes have been under-rated for years due to a highly competitive market place. The increased number of claims in specific areas such as liability, professional indemnity, management liability, marine and property have meant that many insurers have stopped underwriting certain lines of business altogether. Premium profitability has previously been counteracted by insurers investments of funds – but low interest rates further accelerated by the impact of the COVID-19 pandemic has led to insurers being more selective about which risks they choose to insure.

The rising cost of litigation and the no win no fee battleground has led to increased insurer operating costs, even just to defend and administer claims brought against them. This cost is now being passed on to clients, whether they have made a claim or not.

Directors and Officers liability claims have also skyrocketed in recent years, as a result of legal action and employee disputes, further accelerated by the pandemic meaning a huge rise in premiums.

A number of insurers are also now not dealing certain products due to spiralling costs so as the market shrinks and there is less competition, we are seeing an increase in premiums in certain classes.

Understanding the dynamics of the insurance market is essential to achieve the right deal at renewal.

The bottom line is that in hard market conditions, underwriters often adhere to stricter conditions.

At GPS we proactively engage with insurers and are constantly developing relationships for the benefit of our clients. Insurers will often put more attractive terms forward for a company with a stable review process, rather than one that changes broker or insurer every year.

With the added pressure of COVID-19 and many insurer staff working remotely it may take a little longer than usual to arrange your renewal this year. We are aiming to start reviewing your risks well ahead of renewal to allow the required additional time to represent your business to the right insurers, with your best interests at heart.

How we are working harder for our clients

GPS will work with you to prepare a risk management strategy that mitigates the impact of the hard market and ensure risk management controls are in place, providing underwriters with an insight into how well managed and protected your business is. The more appealing your risk profile, the greater the likelihood an insurer will be to accepting the risk and providing agreeable terms.

In difficult trading conditions it is understandable that businesses are looking to reduce their insurance spend, but it is also essential to ensure you have the correct level of cover to return your business to the same position, should you suffer a loss.

If you have any concerns about the hard market please do contact a member of the team and we can explain further how we will be fighting our client’s corner at every opportunity – to negotiate with insurers and help minimise the impact this has on your business.

To arrange a review of your existing commercial insurance arrangements please call 020 3907 7866.