Soft vs. Hard Market in Professional Indemnity Insurance

The professional indemnity (PI) insurance market moves in cycles, typically oscillating between soft markets and hard markets.

These cycles influence premium costs, coverage availability, and underwriting standards. Understanding the differences can help professionals manage their insurance renewals more effectively.

What Is a Soft Market?

A soft market is characterised by increased competition among insurers, resulting in:

• Lower premiums

• Broader coverage

• More flexible underwriting terms

In these conditions, businesses may find it easier to secure PI insurance with minimal exclusions and favourable policy wording. In some cases, policies may even be offered for longer-than-annual terms, locking in attractive terms for an extended period.

Soft markets generally occur when insurers have ample capital, claims levels remain stable, and there is a strong appetite for writing new business.

What Is a Hard Market?

A hard market is marked by:

• Stricter underwriting

• Higher premiums

• More restrictive policy terms

These conditions typically arise from increased claims activity, economic uncertainty, or regulatory changes that heighten insurers’ perception of risk. During a hard market, some insurers may exit specific sectors altogether, reducing competition and making it more difficult for businesses to secure cover.

How Market Cycles Impact Professionals

In a soft market, professionals benefit from lower costs and wider policy terms, enabling them to negotiate competitive deals.

In contrast, a hard market demands a more proactive approach to risk management. Securing PI insurance may require:

• Demonstrating robust risk management procedures

• Providing detailed claims histories and financial statements

• Working closely with specialist brokers to source optimal terms

• Assessing risk appetite, such as opting for higher policy excesses to reduce premiums

Keeping an eye on market trends allows businesses to plan ahead and ensure continuous, cost-effective cover. Partnering with an experienced broker can also offer insight into expected shifts and how best to respond.

So, Where Are We Now?

At present, the PI insurance market is firmly in a soft phase.

This is particularly advantageous for businesses with a strong claims history and sound risk management, including the use of tight contractual agreements that limit liability where possible. Now is an excellent time to approach the right markets for competitive pricing and enhanced terms.

To make the most of current conditions, we recommend initiating any market exercise well in advance of renewal — at least two months ahead for standard cases, and longer for complex ones.

Insurers are currently inundated with quotation requests. The more time they have to assess your submission, the greater your chances of securing the best possible deal.

Let’s Talk

If you’d like a no-obligation alternative look at your Professional Indemnity Insurance, please don’t hesitate to contact the team at Preston Insurance Brokers — we’d be more than happy to help.

Your Business.

Your Insurance.

noel.preston@prestonib.co.uk

www.prestoninsurancebrokers.co.uk