Hard Market vs. Soft Market

Hard Market vs. Soft Market


While every business and industry is impacted by shifting economic conditions, for the insurance industry that ebb and flow will result in what are called “soft markets” and “hard markets.” Macroeconomic conditions force changes in the insurance industry that will either increase or decrease prices for both existing and prospective insurance buyers and will impact everything from the availability of products to coverage limits and almost everything in between. Both insurance buyers and providers should understand these differences and how they impact what insurance products are available in the current market, how difficult it will be to obtain those products, and how much those products will ultimately cost. 

Hard Market vs. Soft Market: Key Differences


Soft markets and hard markets are characterized by many differences, but for insurance buyers, in particular, there are 4 key impacts that impact the cost of your insurance product:


  • Underwriting criteria or standards
  • Policy availability
  • Changes in claim handling
  • Premium pricing


In a soft market, insurance buyers and policyholders will find:


    • Looser or more lenient underwriting criteria. In a soft insurance market, insurance providers may write more policies and will be more willing to take on the risks associated with writing insurance products. 
  • More insurance products are available. In a soft insurance market, insurers will expand the number of types of insurance products they offer.
  • More lenient claim handling. In a soft insurance market, insurance providers are more likely to approve claims.
  • Premiums are lower. Soft markets are highlighted by lower premiums for both new policyholders and those renewing existing policies. 


Insurance buyers will find the exact opposite situation in a hard market:


    • Stricter underwriting criteria. Hard markets are characterized by more difficulty in acquiring insurance products as insurance providers scrutinize buyers more heavily. 
    • Fewer insurance products are available. The increased risk of writing policies in a hard market results in both fewer providers writing policies and fewer policy types available. 
  • Fewer claims approved. Hard markets cause insurance providers to have a stricter approach to claims approval.
  • Higher premiums. In a hard insurance market, insurance premiums rise as a result of all of the other factors, especially product availability and underwriting risks to insurers.


Importantly, insurance providers still write policies during hard markets. However, insurance buyers should anticipate generally higher prices for insurance products, fewer options, and more difficulty getting claims approved. 


The property and casualty insurance market is currently in the hardest market in a generation that’s impacting buyers across the U.S. and especially in California. Insurance rates are not likely to drop any time in the near future, meaning buyers should be shopping for the best rate possible. 


Start that shopping process right here. Give us a call at 650-873-1255 and we’ll be happy to answer any questions you have about rate quotes and premium discounts.