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Understanding a Soft Market in the Insurance Industry

What is a Soft Market in the Insurance Industry?

Insurance office with smiling agents interacting with happy clients, surrounded by colorful brochures and signs, depicting a welcoming and competitive environment typical of a soft market at Huff InsuranceIn the insurance world, terms like “soft market” and “hard market” are often used to describe different conditions in the industry. Understanding these terms can help you make better decisions about your insurance needs.

What is a Soft Market?

A soft market in the insurance industry happens when there are more insurance companies competing for your business. This leads to lower prices, better coverage options, and more flexibility for you as a customer. Think of it like a big sale at your favorite store where many stores are trying to get you to buy from them.

Why Does a Soft Market Happen?

A soft market occurs for a few reasons:

  1. Economic Conditions: When the economy is doing well, more people and businesses buy insurance. This increases competition among insurance companies.  It also increases the returns on the investments that an insurance company makes with their reserves.  This allows them to offer lower premiums.
  2. Low Claims: If insurance companies aren’t paying out a lot of claims (money paid to customers after an accident or loss), they have more money to spend on getting new customers.  Plus, the lower loss ratio (losses paid devided by premiums collected) allows them to lower their premiums for their customers.  In fact, in these cases, the state insurance regulators will encourage the companies to adjust their rates downward if they have a sustained period of lower claim payments.  We ae seeing this now with workers compensation insurance.
  3. Increased Capacity: When there are many insurance companies with lots of money to insure people, it drives prices down.  If insurance companies are making money in a state or with a product, other companies will want to join in and make money too.  With increased competition comes lower prices.

Benefits of a Soft Market

  1. Lower Premiums: Premiums are the money you pay for insurance coverage. In a soft market, insurance pricing is generally lower because companies want your business.
  2. Better Coverage: With more competition, insurance companies often offer better coverage options. This means you can get more for your money.
  3. More Flexibility: Companies may be more willing to negotiate terms and conditions to meet your needs.  Companies are heavily regulated by the state insurance commissioner, so there may not bee too much room for negotiation.

Drawbacks of a Soft Market

While a soft market has many benefits, there can be some downsides:

  1. Short-Term Benefits: The advantages may be temporary. If the market changes, prices and coverage could adjust quickly.
  2. Stability Issues: Some insurance companies might lower prices too much and then struggle financially if they have to pay a lot of claims.  We have seen this many times.  A company will come in with very aggressive pricing, only to grow too fast.  When they grow too fast, they can find themselves paying claims at a higher rate than before.

How to Make the Most of a Soft Market

  1. Shop Around: Compare offers from different insurance companies to get the best deal.  If you deal with an independent insurance agent like Huff Insurance, we can do the shopping for you.  We represent over 20 insurance companies.
  2. Review Your Coverage: Make sure you’re getting the right coverage for your needs. Don’t just go for the lowest price.  Don’t get caught up in the saving money at all cost hype.  The object of insurance is to protect your money and savings.  So, cutting coverage to save money could actually cost you more in the long run should you have an uncovered claim.
  3. Ask Questions: Don’t hesitate to ask your insurance agent about any discounts or special coverage options available during a soft market.  The agents at Huff Insurance have been in the business for a long time.  So, they have seen a thing or two in this business and will be able to answer almost any question you may have.


A soft market is a good time for customers because it means lower prices, better coverage, and more flexibility. By understanding what a soft market is and how to take advantage of it, you can make better choices about your insurance.

Give us a call here at Huff Insurance.  We are a local, family owned indpendent insurance agency.  We have been around since 1960, so we have seen every type of market the insurance industry has thrown around.  So, whether it is a soft market, a hard market, or a perfect market, our experienced agents will make sure you are getting the right coverage for the right price.

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