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Tuesday Morning Insurance Tidbit - Hard Markets


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Happy Tuesday My Friends,


     In today’s installment of the TMIT I want to talk about what it means when an insurance speaking person mentions the term “Hard Market.”  As with most things, insurance operates on cycles.  Most things in the world are cyclical, and insurance is no different.  Often times there are many good years in the insurance industry where businesses flourish, the economy is good, and losses are low.  Years without natural disasters assist in this arena very much as well.  These times are known as “soft markets”.  Insurance companies write a lot of business and the premiums are lower than normal because everything is ice-cream cones, rainbows and unicorns.  But then it happens … Dun-Dun-DAH!!!!

     Maybe natural disasters happen, one after another.  Big losses occur, or perhaps smaller but multiple losses occur within a sect or several sects of business (think Jim Beam fires, Rickhouse collapses, etc.), and the market turns!  Keep in mind, there are two types of “hard markets”.  The first is one that we have all been through if you have been around 5 to 6 years, since that seems to be the natural cycle of the insurance marketplace.  The first “hard market” type is the one where, with out any changes to your policy, your premium all of the sudden increases 10%-25% at renewal.  You are thinking, “What the H311 just happened?!?!?!?!  I didn’t change anything!?!??!?!”  You are correct, you may not have changed anything.  So, what did change?  Well, here is an InsuranceMan 2.0!!! basic insurance lesson.  Insurance is the spread of risk among many to pay the losses of a few which thereby allows the carriers to charge smaller premiums to many individuals to offset the losses of those few.  Well, in a year, or more accurately, in a succession of years where the losses are more severe, the insurance companies reassess the amount of premium being charged to offset said losses so that a “combined loss ratio” number is achieved.

     I am not going to go into the intricacies of what a combined loss ratio is at this point in time.  Suffice to say, if you are ever having trouble sleeping, give me a call and I will use my superpowers of hypnosis to put you right out by explaining this to you.  For now, let’s just say that insurance companies, like casinos, don’t build big amazing buildings with all of the losses they sustain.  Capeesh?

     It is the second type of “hard market” that I am most interested in telling you about here.  It is not the kind of hard market that jacks premiums overnight, instead it is the kind that I have spoken about in a few other postings here on the forums.  In a way, it is a much more insidious type of hardening of the insurance market.  The kind where premiums don’t necessarily go up, rather, the underwriting guidelines change, become more stringent, and it is just harder to get a carrier to provide coverage that isn’t for some “main street mom & pop nothing shop”.

     Distilleries have never technically been an “easy sell” for an agent to approach a carrier with.  Trust me, I know!  I was the first guy ever to develop an insurance program for distilleries and it took years and years of getting doors slammed in my super-face.  Anyway, distilleries have always been a “high risk” in the world of insurance, which is so stupid!  I don’t want to get off on a tangent here for the next hundred lines of text, but you all know what you are doing, you are highly regulated (by many governmental agencies, both local and nationally, as well as you highly regulate yourselves.  This is your livelihood and your soul, you never want to see anything bad happen.), and you are all very safe.  So, this is just a stupid concept that I have fought to prove for dang near the last decade.  Hey, I am here for you and on your side.  See?!?!??!!  Here I GO!!!!!!  OK, back to the topic at hand.

     Distilleries have never been an easy sell, we got that.  However, they had been easier in the past than they are becoming now.  What do I mean?  Just what I mentioned above.  We are entering into a hard market cycle where it is becoming more difficult to place distillery clients with “Standard” carriers.  If you don’t now what that is, go find my post on “Standard vs. E&S” … Oh, just let me do it for you, here! 

     The long and short of it all is this, we are certainly trending toward a hardening market whereby it is becoming a much harder sell for most agents to get standard carriers to look at good distillery clients.  However, if a GOOD insurance agent can get a GOOD distillery client in front of a GOOD insurance carrier, and they know what they are doing, BAM!  They will still write the account which means less in the way of premium and more in the way of coverage.  If you want to know what you need to do to be considered a GOOD distillery that can be written with a GOOD insurance carrier, then you should be contacting a GREAT insurance superhero.  Let’s see, who comes to mind?!?!?!  Hummmm …..  This is a tough one!  NO IT IS NOT!!!!!!!!  IT IS ME!!!!!!!!!  InsuranceMan 2.0!!!  I can walk you through what you need to do to better your chances, increase your coverage, and lower your premiums.  I love to do what I do, I love to get great distilleries placed with great insurance companies that provide great coverage with great premiums.  It is all just “GREAT”!!!!!!!!

     Want to be “GREAT”?  Great!!!  Let’s all be great together.  Call me, email me, text me, PM me here, shoot the InsuranceMan 2.0!!! beacon against the clouds from your distillery … whatever it takes, but get in touch with me.  Until next time dear readers …


Stay Vigilant,


Aaron Linden

a.k.a. InsuranceMan 2.0!!!


aaron@roaringforkins.com or insuranceman2.0@yahoo.com

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