04 Feb Did Anyone Find That Crystal Ball?
If you are wondering why I chose this title, it is a follow-up to my December E&O Plus webinar: “Wish I Had a Crystal Ball.” The webinar aimed to make us think about where we have been, where we are, and, more importantly, where the industry is going.
As we start 2025, we are hoping for the best after some hard years, but maybe we should prepare for another tough year. If you have read any predictions for this year, those in the know say that market conditions remain unpredictable. They are telling us the top risks are not new, but many have become more complex. So, what does the future hold?
Just look around. Extreme weather events are happening more often than ever before and have become more expensive (inflation and valuation). There have been floods in parts of North Carolina, Tennessee, South Carolina, and Georgia, where floods rarely occur (if ever), and severe wildfires in California with no water to fight them.
Then add in the legal system abuse, not just nuclear verdicts but the thermonuclear verdicts, which American corporations worry will continue to escalate. How much is enough has become an even bigger question, and it is not just about liability.
Last but not least, the government’s role in regulatory reform. That is one of those “good news, bad news” scenarios: consumer protection at the potential expense of industry sustainability.
Insurers may need to continue tightening their belts to address profitability concerns and continue doing business. We have already seen insurers withdraw and non-renew, and if they haven’t withdrawn, they are not offering to write any new business and are re-underwriting their current policies in certain areas, added on top of rate increases, reinsurance troubles, and insolvency.
So, what does this mean to you? Regular communication to ensure that you are aware of any changes in their risks or operations. Educate your clients on loss control and prevention. These steps will help your clients reduce exposures and avoid potential losses. In other words, help them help themselves. Demonstrate to your clients that your agency cares and is working to help them protect themselves.
Your insureds will have to play their part, too. They may have to engage in more loss prevention practices, such as installing water sensors, shut-off values, sprinkler systems, and central alarms.
Clients have heard the reasons for tighter policy terms and higher premiums over the last few years, including promises that it will get better. Your job is to keep them informed and educate them about the market realities and the cost, be empathetic, and let them know you are working to find better solutions. The problem is that this “hard market” has gone on longer than expected and continues to be an issue for agencies.
Although we continue to face challenges, we also see several opportunities: new markets that can offer quotes, technology to help agencies become more effective and efficient, and customer-centric solutions — putting the customer at the core of decisions and activities. In addition, parametric insurance models offer a glimpse of what could be — defined benefits aligning with specific types of loss events.
We have always survived the hard markets and will survive this one. Business has been challenging, but let’s look for the rainbow at the end of the storm.