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That’s right loyal readers, the days of unicorns, rainbows, and soft markets are coming to an end. Despite 2007 and 2008 being some of the most profitable years ever for insurance companies, bad investments and overvalued stocks have many industry insiders agreeing that right now is the end of the soft market. This doesn’t mean that if your insurance program renews tomorrow that it’s going to be exponentially more expensive than it was last year, but it will most likely be the last time you see a price decrease for several years.
When is this supposed to happen, and how will I be affected?
Word on the street is that the market is going to be hardening during the 4th quarter of this year or the 1st quarter of 2010. You will be effected by higher prices. However, there are ways to beat the pricing cycle. None of these ideas are meant as legal counsel, just some ideas you can ask you agent/broker about.
1. Alternative risk financing. Ask your agent if they have access to any Group Captives. Captives are a type of financing where you control your premium dollars spent by actively controlling/eliminating your losses. This type of program is usually available to companies who pay at least 200K in annual premium.

2. With the amount of layoffs taking place around the country, payrolls are dropping at an exponential rate. Less payroll=less worker’s comp premium. Obviously, no business owner wants to lay off employees to save $$ on their insurance. But if you have to, at least you have one slight positive coming out of it. And, the last thing you want to do,not to mention the legal ramifications, is start paying employees under the table for work comp premium savings. When considering this scenario, think of the worst “on the job” injury that one of your workers could have, then imagine paying for it 100% out of pocket.

3. Look at your coverages. Are you carrying extremely high liability limits that you have historically never come close to reaching? Some cost savings can be instantly realized if you cut back on some of the liability limits that you bought cheaply during the lulls of the soft market, but knew you would probably never ever ever use.

Hard markets are good for insurance agents. Most insurance agents are compensated on a % of money you pay to the insurance companies. Higher premiums=higher commissions. Therefore, they have little to no incentive to lower YOUR costs or help prevent injuries. Be mindful of this if you are approached by other agents that want to compete for your business. Ask them what kind of loss control and claims management services they offer. If they look at you like you have a 3rd eye, you might want to look elsewhere. Keep in mind if you just read that, that I am a construction risk advisor, and my clients face huge work comp exposures not seen in other industries, but the information above can be applied to most any industry. And if you have any general questions, feel free to ask them in the comment space below.