The Soft Market is Over!

Officially, the Soft Market was declared over in November 2011. In the insurance industry the markets cycle between soft and hard based on available capacity. It is even possible to have cycles within a specific niche of the market that run counter to the overall industry. The soft market began sometime in 2005 and has been one of the longest running in the past century. During the soft market rates for personal and commercial lines were depressed based on excess available capacity in coverage by insurance carriers. This led to stagnate premiums and in some cases lower premiums among some carriers specifically in the commercial industry. Even though the economic bubble burst in the homeowners market in 2008 the insurance industry was recording a slow down as early as 2005. This led to a false sense of security among policy holders and agents that during the recession insurance premiums would remain stable.

Now that the industry has resolved the extra capacity with companies leaving specific markets and tightening underwriting objectives we will begin to see a hardening market with increases in premiums across the board. We are already seeing rate increases among homeowner’s policies nationwide and in specific commercial segments. As time goes on we will also see rate increases in auto and many of the ancillary coverages in personal lines. This will prove a challenge for policy holders and agents as the public struggles with incomes that are still most flat from the recession and higher insurance costs. I am not advocating that you should move your insurance at each rate increase as that would be counter intuitive to your long term goal of getting the best coverage for the premium paid. However, it is important to know where you stand within the market and your insurance agent should be communicating with you at least every 24 months as to how you compare and what your options are.

Why I Believe In Insurance Agents

With all of the questions regarding the relevance of insurance agents in the modern era of the internet here is a powerful testimonial in why I believe in insurance agents:

How An Added Homeowner’s Coverage Can Protect You For What You Say!

If you explore all the options with social media and participate in conversations with any regularity you know that sometimes what you meant to say on Facebook, a Tweet or in an E-Mail is taken by someone else differently. Sometimes this leads to hard feelings which can be corrected with an apology. Sometimes it leads to a lawsuit that results in the expense of hiring and attorney to defend you. The reason that I am pointing out social media is the thought process and implementation is so much faster than placing a printed letter. It is much easier to communicate what you are thinking online and hit send than it is to type a letter in a word processor, review and mail. Mistakes happen and comments are made that can lead to offense and after you hit send it is impossible to take it back.

It is hard to believe that there is a coverage that adds on to your homeowner’s policy that can extend liability coverage for things that you say and print that lead to libel, slander, defamation of character and invasion of privacy. The coverage is either called “Personal Injury” or in its more proper term “Personal Offense”. The coverage is not automatic, you have to have it added on and it ties into the personal liability on your policy. It is also not a silver bullet to protect you from all things that you say or print but for the price of $5 to $15 per year it is an excellent value.

Here is how it works: If you have $100,000 for personal liability on your homeowner’s policy you would then get up to $100,000 for personal offense. Hopefully, you are carrying at least $500,000 in personal liability (which I highly recommend to all my clients) – you would then have up to $500,000 for personal offense. Contact your insurance agent or insurance company for more details on this important but relatively unknown coverage and have it added to your policy.

How Does Credit Affect My Insurance Rates?

Insurance companies are increasingly using credit as a function of calculating risk for personal lines insurance. Insurance companies can do this because statistically they can show that credit has a correlation in claims. Several states have challenged credit as a factor in insurance rates however the courts have generally upheld credit as a statistical factor. What this means for the average insurance consumer is each company is creating greater breadth of tiering for their clients. Where a company may have had 10 to 15 rating tiers several years ago now has 50 to 60 rating tiers based in part on the credit level for each client.

Clients with lower credit scores will pay higher premiums than those with higher credit scores.

Unfortunately, this process hurts good people who pay their bills on time but have had a drop in their credit score because they took on debt due to a health emergency, lost a job, purchased a home, had a death in the family etc. I don’t see changes in this process anytime soon and I expect to see insurance carriers continue to expand their tiering structures to become more competitive in premium for those who are in the highest credit tiers. Another consideration is the older consumer who paid cash their whole lives and rarely, if ever took out credit. I realize that there are not as many of these consumers who were products of the depression era but I do occasionally come across them. They have no credit to speak of and may not be getting the best rates even though they are the most frugal of consumers.

Have you ever wondered who is really saving all that money in price comparisons shown on TV commercials and in the mail you receive? Those rates shown are based on the highest tiers of which the vast majority of the public do not qualify. For now, credit is here to stay and the best way to influence your insurance premiums is to protect your credit and credit rating. Be sure to request your free annual credit report each year and review it carefully. If you find any inaccurate information report it immediately. You can access your free credit report at:

https://www.annualcreditreport.com/cra/index.jsp