Indicators Suggest End of 'Soft Market' For Insurance Rates

by Gwen Moritz  on Monday, Oct. 13, 2008 12:00 am  

(Click here to see a pdf of the largest insurance agencies in Arkansas. Click here and here to see the largest property and casual insurance companies.

Spreadsheet versions of the list are also available for the largest insurance companies and for the largest property and casual insurance companies.)

The "soft market" that has brought fire-sale pricing to some lines of commercial insurance will likely end in 2009, according to insurance executives in Arkansas.

That's good news for insurance agents whose commissions have been depressed with the insurance rates, but not so good for the businesses that have enjoyed a respite from inflation in that budget line item.

"The casualty lines have been on sale in Arkansas for quite a while," said Tim White, who oversees the four Brown & Brown of Arkansas offices. "Everybody in the last three renewal cycles has seen flat to decreasing rates, depending on what business you are in. It's certainly not been going up."

Insurance insiders talk about hard and soft markets as if the terms were self-explanatory, and that's only half true. A hard market is what it sounds like: a period in which it is harder to find a company willing to write coverage for a given risk and then harder to pay for it.

A soft market is the opposite: Insurance companies are eager to take in premium and relax prices and underwriting standards to lure it in. And that's what the U.S. insurance industry has been in for quite a while – as long as five years by some estimates, though Arkansas insurance customers probably didn't notice it until 2007.

Recent events, from Hurricane Ike to the federal bailout of Wall Street, make it likely that the market will change for the harder, agents agree.

"If nothing else, probably prices will stabilize," White said.

"I think we're in for some hard times to come for a while," said David Grimes, treasurer of American Management Corp., the Conway insurance wholesaler.

"We think in the next 12 to 18 months, certainly, something will happen," said Ron Adams, president of Hoffman-Henry Insurance of Little Rock.

On Sale



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