Opinion: Soft market set to showcase true service standards

The winter season of hardening is finally blooming into a soft spring, as the cyclical nature of the insurance market emerges from a period of transition.

According to Paul De’Ath, head of market intelligence at consultancy Oxbow Partners, rates tentatively started softening as far back as late 2023, however more noticeable and consistent rate changes “started in earnest in the second half of 2024”.

He told me: “Financial and professional lines have been weak for some time. Casualty rates moved slightly lower only in Q4 2024, whereas property rates saw declines starting in Q2 2024.

“The softening we are seeing is fairly broad, but property seems to be particularly in the spotlight, along with cyber and continued softening in financial and professional lines.”

A soft market – described by Investopedia as “a market that has more potential sellers than buyers” – throws up a number of challenges for insurance firms.

From a broking perspective, March’s cover star and group chief executive at The Clear Group, Mike Edgeley, noted that soft conditions “make the market slightly more competitive”, which can impact on firms’ organic growth figures.

Another broker leader, speaking anonymously to Insurance Times, agreed: “The soft market is taking hold at a rapid pace. That’s catching a lot of brokers out because they are predominantly commission-based businesses and that softening of rates is having quite an effect on income.

“A soft market means heightened competition because every broker is scrambling to keep their clients while others try to win them over. Even if a client renews with you, they’ve likely been approached by multiple competitors, which means more pressure on margins and retention.”

For Edgeley, brokers also face difficulties when trying to explain “significant rate loading and then significant softening” to clients, which can subsequently affect the “trust and confidence” customers have in their broker of choice.

This wavering of trust can additionally affect brokers’ ability to tempt back clientele that opted to self-insure during harder market conditions due to high cover costs – despite the allure of today’s more affordable, softened premiums.

However, amid these challenges, arises opportunity.

Charles Boorman, chief executive at financial and professional lines MGA Kayzen Specialty, told me recently that because the soft market eliminates price as a differentiator – because capacity is typically in abundance to counteract hard market losses where “scared” capacity was limited – the driver behind customer attraction and retention is, therefore, the ability to provide a high quality, in demand service.

An increased focus on service from all parts of the insurance market – brokers, insurers and MGAs – is no bad thing and certainly aligns with the good customer outcomes that the FCA wants to see.

The soft market may have thrown down the gauntlet to differentiate on service, but sector firms must be proactive in order to see this through successfully.