42 Nebraska Cattleman November 2023 NCIG By Todd Bartek FNIC Senior Vice President and Director of Ag Why Are Insurance Rates Going Up? Understanding the Hardening Insurance Market We’ve all been experiencing the rising costs of… well … everything, from groceries to gas and insurance. While I do not have any coupons or fuel points for insurance, I can guide you through this challenging period known as a "hard market” where we experience premium hikes, coverage restrictions or the prospect of securing insurance in an increasingly challenging landscape. In this article, I’ll share the why, what and how of this insurance marketplace and equip you with strategies to navigate it. What Is a Hard Market vs. a Soft Market? First, let's demystify the jargon. In the insurance industry, we often hear about "hard" and "soft" markets. Understanding the difference between the two is crucial. A soft market typically characterizes a time when insurance is readily available, premiums are competitive and insurers are more lenient when underwriting policies. Essentially, it's a buyer's market. A hard market, on the other hand, is the opposite. During a hard market, insurance becomes scarcer and more expensive. This means higher premiums, coverage restrictions or exclusions and, in some cases, coverage may no longer be available in your area. Insurers scrutinize underwriting more rigorously, leading to non-renewals and a more challenging landscape for policyholders. What Is Causing Our Current Hard Market? Several key factors are contributing to the current hard insurance market, making it a tough environment for businesses and individuals alike. • Weather: Climate change is increasingly manifesting itself through severe weather events such as hurricanes, wildfires and floods. These catastrophic events result in massive insurance claims, causing insurers to reassess their risk exposure and increase premiums. To help visualize the severity of these events, the National Oceanic and Atmospheric Administration (NOAA) recently announced that the United States has already experienced a staggering 23 weather and climate disasters that have exceeded $1 billion dollars each in damages in 2023 alone. This figure surpasses the previous record set in 2020, which saw 22 such events. The financial toll of these 23 disasters in 2023 is estimated at a staggering $57.6 billion, according to NOAA. These statistics underscore the profound impact of catastrophic weather on our lives and the insurance industry's response to this escalating risk. • Inflation/Supply Chain Disruptions: Inflation, cost of labor and disruptions in the supply chain have driven up the cost of repairing or replacing damaged property, which directly affects insurance payouts. This, in turn, causes the insurance carriers to adjust their pricing to cover these elevated costs. • Reinsurance: Insurance companies often purchase reinsurance to mitigate their own risk. When reinsurance costs rise, insurers pass these expenses onto their policyholders, further contributing to the hardening market. What Can You Do? While it might seem like navigating a hard insurance market is an insurmountable challenge, there are CONTINUED ON PAGE 46
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