The Hard Market: What’s Going on in Personal Insurance

Now more than ever, people are talking about their insurance rates. Whether it’s a conversation amongst friends, or a post on social media that brings it about – there is widespread concern and confusion about why substantial rate increases have occurred with nearly every home and auto policy holder over the past year. Including those with clean records and claims histories.

So, what’s going on in the world of Personal Insurance (aka, Home and Auto insurance)? Here’s a quick breakdown of what it means to be in a Hard Market for Personal Insurance, and how it’s affecting coverage and its cost.

Moratoriums on New Business

As hard as it is to believe, several insurance companies have told their agents to put a hold on writing new business over the past year. In some of those cases, there has not yet been an announcement on when these moratoriums will be lifted.

These moratoriums have been put in place to allow insurance carriers a chance to “catch up” on the amount of money they’ve paid out in claims in recent years. This might sound strange to a lot of people but think of it like this:

Insurance companies are businesses, and a business needs to be profitable to survive. If an insurance company is no longer profitable, they have two choices. They can either stop doing business, or they can put a freeze on part of their operations to allow themselves a chance to recoup the funds that have been lost. In this case, through the pay-out of claims.

Thanks to the rough claims environment in recent years, resulting from larger than ever insurance company pay-outs due to an increased number of claims, lawsuits, and natural disasters – consumers are feeling the effects of this part of the Hard Market every time they receive their payment statements.

Insurance Companies Leaving the State

Another hard to believe reality in the hard market is that there are insurance companies who are completely pulling out of various states. While its common to hear of this scenario in states like Florida and Texas, where natural disasters often cause insurance companies to pay out unfathomable amounts of money – the past year has seen a handful of insurance companies announcing that they will be leaving New York, and other states where no longer offering coverage is a totally uncommon practice.

How does this affect insureds? When an insurance company leaves a particular state, their policy can no longer be honored. Thus, the agents representing that insurance company need to find new companies to place these soon-to-be disenfranchised insureds. While this is not necessarily difficult for those of us that represent multiple insurance companies, like we do at J. Hoffman Insurance, the hardship could potentially come in when the insurance company that most closely mirrors an insured’s existing coverage is quite a bit more expensive than what they are currently paying. Unfortunately, no other insurance company has to honor another’s rates. So, while the coverage itself can be replicated and replaced; the premium (cost) might not be.

Strict Changes to Underwriting Guidelines

In 2023, and so far in 2024, insurance companies have tightly constricted their underwriting guidelines. When this happens, it not only creates cause for rates to be raised, but for insurance companies to drop certain insureds because they no longer fit the criteria put forth by the company.

For example, some of the constricted underwriting guidelines that have been most prevalent in insureds being non-renewed by their current insurance company include…

• The age of the roof on their homes (20+ years old)
• Homes with structural issues, maintenance, and/or liability hazards that could result in a claim
• Lapses in coverage and/or a history of non-payments
• Problematic driving records and/or claims histories

While the Hard Market is proving challenging in many ways, the good news is that it can’t last forever. We hope that this blog has provided some valuable insight on what’s going on for the time being, so when the Hard Market comes to an end, you will not only be a more educated consumer when it comes to your insurance coverage, but one that navigated this unprecedented time with an understanding of how best you could do so for your household.

Please don’t hesitate to reach out if we can be of help: 845-239-4787 or vicki@jhoffmaninsurance.com.