What is a "soft market" and what does it mean to the consumer?

You may have heard that insurance is in a "soft market." A soft market means that insurance rates in one or more areas are declining. For a number of years, we have been in a soft market and in general, property and casualty rates have been declining, with a few notable exceptions.

What does this mean for the consumer? It means that the consumer has more options, because more insurance companies are competing more vigorously for business. This could lead to lower prices, better terms, and better availability of insurance. If you have had the same policy for at least three to five years and have not received any discount on the same exposure (same gross receipts or property value) than it is time to evaluate your options. Talk to your broker, ask them why your rates haven't gone down in several years. If they can't give you a good answer, talk to another broker. You have options today that did not exist five years ago.

But why are rates better today then they were some years ago? Insurance and reinsurance companies have a surplus of capital. Quite simply, more people want to invest in insurance companies than are required. As long as there are surplus dollars chasing static decreasing premiums, rates will fall. Rates will fall until the extra surplus dollars are driven out by unacceptable returns.

Most of the decreases are cyclical, and will turn into increases at some point in the future. The only decreases here to stay are those that are driven not by surplus capital, but by lowered underwriting costs (company efficiency) or fewer claims.

Enjoy the savings while they are here. Indicators show rates won't be going back up for at least another year...if not longer.