Prepare and Adapt to the Evolving Property Market
It’s safe to say that “optimistic” isn’t a word associated with the property insurance market right now. I don’t want to downplay the genuine concern and uncertainty around this particular sector, but I think it’s time to take a different approach. Instead of dwelling on the negative, let’s shift our mindset and consider how to adapt to the current reality of the market and what that could mean for its future.
So, what can you do to prepare?
Accept the Unpredictable
We all wish we had a crystal ball that could tell us what will happen next with the property market. Though artificial intelligence (AI) has come pretty far, it can’t quite predict the future yet, so the best we can do is look to the data we have to identify trends and inform decisions.
Take natural disasters, for example. We have a general idea of when to expect hurricanes, floods, and tornadoes, but a look at the statistics will show you that we’re having more and larger natural disasters than ever before. The insurance market has been clearly impacted by these dangerous and damaging events, paying out more in insurance claims than taking in premiums.
As the kids say, “the math isn’t mathing.”
We’re seeing the results of this imbalance now and can anticipate that it will only increase as natural disasters continue to strike. This means a tighter market with higher premiums, worse deductibles, and less capacity. Now what?
As an insurance agent, I often refer to my role as that of a problem solver. The property market has been a tough problem to solve, but I believe a few things:
- This might not be what you want to hear, but companies must take on more risk. The market will push you to take on higher deductibles or get more skin in the game. Choose wisely.
- More not-so-great news — premiums will continue to rise. Think about how you can adjust your budget to adapt.
- The value of insurance isn’t going away. Keep the volatility of Mother Nature in mind and insure your property for what it would cost to rebuild.
You might be thinking, “Jake, you said not to dwell on the negative, but this seems pretty negative to me.” I don’t think it’s negative to be realistic about the situation while also taking the time to think strategically about how to make the best decision for your property, business, and clients.
The Knowledge You Need to Succeed
So, what’s next? I can’t say I have the answer, but sitting back and waiting for the chips to fall isn’t an option. One of the easiest and most effective approaches we’ve seen with our clients is to get ahead of the market by taking on more risk now.
A higher deductible, though not ideal for everyone, means more premium savings you can invest to earn interest income. If and when you experience a loss, use those dollars to cover the costs. The return on investment may not be immediate, but after a few years, you’ll find your spot in the market more manageable than you would without the willingness to risk and invest.
Alright, so maybe this blog didn’t end up being as optimistic as I hoped, but I hope it challenged you to think outside the box when it comes to the market and property insurance. We will continue to see changes in the years ahead, and Holmes Murphy is here to help you navigate this new terrain.
Ready to learn more? We’d love to connect with you. Reach out today and let’s get started!
Published on: 10.05.23