Navigating a Hard Insurance Market
Since 2019, the insurance market has firmed, creating many challenges for the insurance industry. It’s been a difficult time for the insurance industry as a whole, and like other insurance companies, Farmers Alliance is making changes that affect both our policyholders and agents. We’re doing our best to make sure our agents are informed about the changes we are making and why we have to make them so that they can communicate that with their customers. Here is some general information we’re sharing with our agents to prepare them for those conversations.
What is causing the hard insurance market?
The insurance industry has been experiencing many unprecedented changes simultaneously over the past several years.
- Weather events over the past five years have generated record losses for the insurance industry, and the premiums collected were not adequate.
- Farmers Alliance 2023 results: $268M Premium, $35.8M Underwriting Loss, $11.5M Investment Gain, $19.6M Net Loss.
- The reinsurance companies that have provided the backstop for large losses have seen the same results and are unwilling or unable to continue to provide coverage. Retention levels have increased by 50%.
- The inflation rates for repairing damaged property have grown exponentially over the past several years, adding to the cost of losses. This is estimated at 30%+ over three years.
- The financial markets, including interest rates and equities, have been very volatile, reducing the income needed for insurance companies to offset the increase in losses.
How long will the hard insurance market last?
The insurance market will likely remain in its current state for several years.
How is the hard insurance market affecting policyholders?
Insurance companies must shift more of the exposure to loss to policyholders by means of higher premiums and coverage reductions.
- Explain to your customers that the frequency and severity of weather events over the past several years, combined with the growing cost of repairs due to inflation and volatility in the financial markets, has generated a record number of losses for the insurance industry.
- These challenges are not limited to just a few insurance companies but are systemic throughout the industry.
What can FAMI agents do?
- Sell the value of yourself, your companies, and the coverage provided. Let your customers know you will continue to do the best job of providing them with a superior product from a great company.
- Take the time to explain the value provided by the coverage they are buying.
- Thoroughly explain deductible options and loss settlement provisions (Actual Cash Value ACV).
- Since all companies are dealing with these challenges, it may not be in the best long-term interest of your insureds to chase a lower premium when facing renewal increases.
- Encouraging your customers to renew their policies helps to build a positive history with the insurance company, which can help them retain their coverage following a loss.
What can policyholders do?
- Talk with your insurance agent about your coverage and your options
The employees at Farmers Alliance are committed to continuing to offer you a superior product with a fair premium and unmatched customer service. We know some of our changes are difficult for you and your insureds, but we are doing what is necessary to continue to provide you with a great business partner for many years to come. We know it is going to be tough, but we will be here to help when we can.