Liability Insurance Contributing Columnist


Softening The Blow of a
Hard Insurance Market

Hard cheese is great, a
Hard insurance market…not so much

Jim Brunker,CPCU, CIC, AIC
Partner, Senior Account Executive Property & Casualty
M3 Insurance

October 16, 2020

It seems there is no shortage of headline grabbing news — from wildfires in the West to hurricanes hitting the coasts, to historic swings in cheese prices. One situation critical to dairy processors of all sizes (more commonly covered in trade journals than the mainstream media) is the hardening insurance marketplace.

In my 30 years in the insurance business, this is the hardest market cycle that I’ve personally experienced and I predict it will probably last longer than others in the past — at least into early 2022. Almost every line of insurance coverage has been affected by multiple years of natural disasters, the pandemic, rioting, and civil commotion.

Hard markets are characterized by quickly rising insurance premium costs from all insurers at the same time coupled with shrinking capacity by insurers. By capacity, I’m referring to the dollar value of risk a particular insurer can absorb or reinsure.

Dairy processors, in comparison with other industry sectors, typically have high property values that represent more risk to an insurer suffering a large loss.

Three areas where a dairy processor may feel the impact of a hard market when renewing their insurance include:

1) Premium Increases: Possibly the most obvious sign of a hard market to the insurance buyer is the increase in premiums for the same amount of coverage. According to the Council for Insurance Agents & Brokers, the insurance market continued to harden in Q2 2020, with premiums increasing by an average of 10.8 percent across all sized accounts.

Dairy processors may have already experienced premium impact as this quarter marks the 11th consecutive quarter of increased premium pricing across all-sized accounts. Large and medium-sized accounts were hardest hit, recording average increases of 14.2 percent and 11 percent, respectively, while small accounts experienced an average increase of 7.3 percent.

2) More onerous underwriting: Expect closer analysis of your operations and more stringent underwriting procedures. Dairy processors should expect to have underwriters looking more closely at fire protection, financials, safety programs, and loss history. Hard market cycles are also characterized by increased “class underwriting”. They avoid classes of businesses that produce big claims, so, even if your dairy operation had none, they will look to their insurance company experience in your sector.

3) Reduced limits/Higher Deductibles: Paired with increasing premiums, some insurance carriers are increasing deductibles, denying blanket coverage on property, and offering lower limits. Umbrella limits have been especially hard hit in this market cycle, forcing dairy processors to accept a layered umbrella approach to achieve the desired limits.

Here are four tips every dairy processor can consider to help soften the blow of the hard market:

1) Avoid filing small claims
In a hard market, it is better to budget for small claims rather than to submit the small claims to insurance. This will help keep your loss-ratio low, which in turn helps make your business a more attractive risk to the insurance company — potentially mitigating premium increases.

2) Start renewal processes early
Starting the renewal process early will give you and your broker time to identify how the hard market may impact both your premium and coverage capacity. Developing a strategy 120 days prior to renewal is a better business approach than scrambling to obtain coverage a month prior to renewal.

3) Pick up the house, company is coming
Putting your operation’s best foot forward is more important than ever. In this tough insurance marketplace, underwriting requirements are becoming more stringent due to increasing reinsurance demands. If you haven’t done so already, now is a good time to work with your broker to shore up your workplace safety programs and highlight any capital improvements, especially those that would reduce the severity of a loss. For example, adding fire doors, heat sensors, or sprinkler systems.

Underwriters are looking closely at not just the brick-and-mortar operations but also cyber security programs. An increase in attempted and successful cyber breaches in 2020 is driving the cyber-security scrutiny. For example, this summer, not one but two major cyberattacks on the Australian dairy company, Lion, crippled their operations. The hackers threatened to sell Lion’s confidential financial and personnel data on the dark web if not paid a reported $1 million ransom.

4) Ask your current insurance broker for a budget six months in advance of your renewal
Whether your organization makes decisions via an insurance committee or board approval, we all need to be held accountable to someone. Organizational changes often occur when premiums spike and you don’t want your organization to be one of them. If your broker won’t give you a budget, find one that will.

Like all market cycles, this one will come to an end. In the meantime, let’s focus on what we can control to reduce our risks in order to become more insurable.

For more information, call (800) 272-2443 or visit


Jim Brunker

James Brunker CPCU, CIC, is a Partner and Senior Account Executive at M3 Insurance. M3 Insurance offers insight, advice and strategies to help clients manage risk, purchase insurance and provide employee benefits.
For more information, call (800) 272-2443, jim.brunker@m3ins.comor visit

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