INSURANCE 101: Understanding How the Insurance Market Works
And do we really need to understand how the insurance market works? Just for fun, let’s explore Insurance 101 and find answers to those questions along with looking at new coverage options that are available.
SOFT VS. HARD MARKETS By nature, all industries, including insurance, experience cycles of expansion and contraction. Broadly speaking, the insurance industry cycles between periods of soft and hard markets. Soft markets are often thought of as a buyer’s market and hard markets as a seller’s market. For years now we have been in a prolonged soft market, which is great for the consumer.
AS AN INSURANCE CONSUMER, HOW CAN YOU MAKE THE SOFT MARKET WORK FOR YOU? Make sure your agent is shopping your policy to a wide range of coverage providers every three years. If you’ve been with the same insurance carrier for over six years without looking at other options, you are probably spending too much. On the other hand, refrain from bidding out your insurance every year. Underwriters take note of “window shoppers” and tend to work harder when they know there’s a real chance at winning your business.
WHY ARE WE BOMBARDED WITH INSURANCE COMMERCIALS? Consumers benefit from a soft market. For one thing, insurance companies are desperately trying to buy your business. Remember when Michael Jordan and Larry Bird shot baskets for a cheeseburger? “Through the window, off the scoreboard, nothing but net!” Back in the ‘80s and ‘90s it was McDonald’s, Coke, Nike and Wheaties spending their advertising dollars on big names and catchy themes to entice consumers. Today, it’s Peyton Manning for Nationwide, Aaron Rodgers for State Farm, and, of course, the famous GEICO gecko, just to name a few.
The soft market is about volume, which is why we are bombarded, and have been for several years, by insurance commercials and their marketing tactics.
WHAT NEWER COVERAGE YOU SHOULD BE CONSIDERING?Personal: Identity Theft Coverage Seven percent of American consumers aged 16 or older, were victims of identity theft in 2014, and that percentage keeps climbing every year. Identity theft can range from credit card fraud, theft of existing banking or finance accounts, the misuse of personal information to obtain new accounts or loans, or commit other crimes. The cost of these crimes to the consumer can be enormous. Not only can they damage financial well-being, but in some cases victims have also been falsely implicated in criminal activity.
Identity theft insurance helps protect you from the cost of restoring your identity information. It’s relatively inexpensive and may even already be included in your policy. However, it’s worth the effort to check into it and make sure the limits suit your needs.
Business: Cyber Liability Coverage Cyber liability insurance can provide businesses with protection in the event of a cyber-attack, whether valuable data is stolen by hackers or a nasty bit of malware knocks out your server. As more and more commerce is conducted online, cyber liability coverage will soon be as mainstream as auto liability coverage. In 2010, cyber premiums totaled $60,000, according to Betterley Risk Consultants. The premiums are now more than $2.5 billion. A standard general liability policy does not cover cyber losses, so be sure to speak with your agent about adding it to your policy.
The insurance industry doesn’t need to be a mystery. Take the time to find an insurance professional who suits your needs. Just like the coach and the team, work with your agent to execute a plan, find flaws, make adjustments and anticipate the future. It’s worth the peace of mind.
Jared Beam of Brier Payne Meade Insurance, is a producer with over 17 years of experience.