Navigating the soft market for optimum client outcomes

Karen Allen, Managing Director - Property, Casualty, Motor and Financial & Specialty at Bridge Specialty International, shares strategies, insights and how to achieve the best outcomes for customers in a soft market.

The insurance market is inherently cyclical. The last hard market of 2018-19 feels firmly in the rear view mirror, with soft market conditions here to stay. Remember, the last soft market started in 2001 – some 17 years previously. Abundant capacity, competitive premiums and relaxed underwriting standards present unique challenges and opportunities for insurance brokers and their clients.

For the most skilled brokers, who understand how to navigate these cycles, soft market phases can be leveraged to deliver substantial value and optimum outcomes for clients. Yet, success is not merely a matter of negotiating lower premiums; it requires strategic foresight, careful diligence, and a willingness to look beyond the surface advantages that softer conditions may present.

Why a soft market occurs

Soft market conditions typically arise when insurers enjoy strong capital positions and loss ratios are favourable, leading to increased competition and aggressive underwriting practices. In such climates, premiums tend to decrease, coverage terms broaden and carriers may be more willing to entertain new business or risk profiles they would typically avoid in harder market conditions.

While customers may welcome the immediate savings and expanded coverage, brokers must remain vigilant to ensure that these apparent benefits do not conceal longer-term risks or missed opportunities.

Risks and pitfalls in a soft market

Soft markets tempt both clients and brokers to focus on price at the expense of adequacy and consistency of coverage. The following risks are particularly prevalent:

Coverage erosion: In the drive to compete on price, some carriers may quietly restrict coverage or include exclusions in less obvious places. Brokers must scrutinise policy wordings to avoid unwanted surprises at claim time.

Reduced insurer scrutiny: Less rigorous risk assessment can lead to mismatches between client needs and the protection offered, especially for complex or emerging risks. A short term solution is provided, which stores up problems for future placement.

Long-term sustainability: Ultra-competitive pricing may not be sustainable. When market conditions harden, clients could face abrupt premium increases or non-renewal.

Security quality: MGAs with unrated or low rated paper or complex front solutions often present issues with claims handling and general underwriting support in the policy period.

Being aware of these risks enables brokers to champion their clients’ interests, ensuring that short-term gains are not undermined by future vulnerabilities.

Strategies for navigating soft markets

To achieve optimum client outcomes in a soft market, insurance professionals should deploy a multi-faceted approach that balances opportunism with caution.

Prioritise Coverage Quality Over Price Alone

While premium reductions are attractive, brokers should focus on maximising coverage breadth and depth. Now is the time to negotiate enhanced policy terms—such as higher limits, sub-limit removals, or the inclusion of valuable extensions—without compromising core protections.

Conduct a thorough review of existing policies and identify areas for improvement or expansion.

Negotiate bespoke endorsements tailored to client needs, leveraging the flexibility carriers may offer.

Ensure that any reduction in price is not achieved by sacrificing essential cover.

Secure Long-Term Agreements Where Appropriate

Soft markets present opportunities to lock in favourable terms and rates for multiple years. Consider negotiating multi-year agreements, particularly for clients with stable risk profiles, to protect against future volatility and ensure continuity of coverage.

Multi-year deals can shield clients from abrupt market corrections.

Such agreements also foster stronger relationships between client, broker, and carrier, potentially leading to smoother claims handling.

Leverage Market Competition Wisely

With many insurers vying for business, brokers have substantial leverage. However, a careful balance must be struck to avoid damaging existing relationships or inadvertently exposing clients to less stable carriers.

Conduct a rigorous market exercise, inviting competitive quotes while assessing insurer reputation and financial strength.

Educate clients about the importance of carrier stability, not just price.

Use competitive dynamics to negotiate better terms, but retain loyalty to partners who deliver consistent value.

Prepare Clients for Market Cycles

Educate clients about the cyclical nature of the insurance market. By setting realistic expectations and planning for future hardening, brokers can help clients budget for potential increases and avoid being caught off guard.

Discuss the likelihood of premium rises and coverage tightening when conditions change.

Encourage clients to invest in risk management practices that will pay off when underwriting scrutiny returns.

Document all negotiations and decisions, laying the groundwork for renewal discussions in harder times.

In conclusion, navigating the insurance market during soft conditions requires more than simply securing the lowest premium. It is an opportunity for brokers to deliver optimum outcomes by balancing short-term advantages with long-term sustainability, negotiating improved coverage, and fostering robust client education.

Brokers at Bridge Specialty International work vigilantly and proactively for customers. We are committed to clients best interests, ensuring that, whatever the market cycle may bring, our clients are protected and empowered for the future.

This is a guest article shared by Bridge Specialty International. These contributions reflect the views and expertise of the respective contributors and do not necessarily represent the views of Hedron Network or its affiliates.