The Impact of Soft Insurance Market Conditions on Insurance Buyers

Insurance markets are cyclical. Periods of constrained capacity and rising premiums are typically followed by phases of increased competition, broader coverage and more favourable pricing. Many insured organisations are now operating in what is widely regarded as a softening insurance market across a number of classes of business. 

While soft market conditions can deliver immediate financial and contractual benefits, they also introduce less visible risks. This article examines the impact of a soft insurance market on insurance buyers, how purchasing behaviour and broker relationships can change, and what organisations should consider to ensure short-term gains do not compromise long-term resilience.  

What Defines a Soft Insurance Market? 

A soft insurance market is generally characterised by: 

• Increased insurer capacity 

• Heightened competition between insurers 

• Falling or stabilising premiums 

• Broader policy wordings and coverage extensions 

• More flexible underwriting approaches 

For buyers, these conditions are often perceived as positive. However, they also influence behaviour, adviser dynamics and governance in ways that are not always immediately apparent. 

Immediate Benefits for Insurance Buyers 

In the short term, soft market conditions commonly deliver: 

• Reduced premium spend, sometimes without material changes to risk profile 

• Improved coverage terms, including higher limits or reduced exclusions 

• Greater negotiating leverage with insurers 

After prolonged periods of premium inflation, these outcomes are understandably welcomed. However, an exclusive focus on premium reduction can obscure broader risk and governance considerations. 

Changes in Buyer Behaviour 

Soft markets frequently influence how organisations approach insurance purchasing. Typical behavioural shifts include: 

• Premium reduction becoming the primary measure of success 

• More frequent market testing or insurer switching 

• Reduced emphasis on insurer quality, claims capability and financial strength 

• Less scrutiny of policy wording changes and sustainability of coverage 

While rational in the short term, these behaviours can introduce unintended exposure if not balanced with longer-term thinking.  

Coverage Expansion and Sustainability Risk 

Soft market conditions often lead to gradual expansion of coverage through endorsements and extensions. Over time, this can result in: 

• Coverage that no longer aligns closely with underlying risk exposures 

• Increased complexity and ambiguity within policy wordings 

• Reliance on non-standard terms that may be withdrawn when market conditions tighten 

Buyers should be cautious about assuming that broader cover automatically equates to better protection, particularly where extensions have not been tested through claims experience.  

Insurer Quality and Claims Considerations 

Heightened competition can shift focus away from insurer quality. Decisions driven primarily by price may overlook: 

• Claims handling capability and track record 

• Financial strength and long-term commitment to the class of business 

• Experience of managing complex or catastrophic losses 

• Behavioural consistency across market cycles 

These factors tend to become visible only when a significant claim arises, often long after the buying decision has been made.  

The Client–Broker Relationship in a Soft Market 

Soft market conditions also materially affect the relationship between clients and their brokers. 

Increased Transactional Focus 

As price competition intensifies, broker engagement can become more transactional, with discussions focused on: 

• Market testing 

• Insurer competition 

• Short-term premium outcomes 

This can reduce the time and emphasis placed on strategic risk discussion, programme design and longer-term planning. 

“Added Value” Services and Buyer Caution 

In a soft market, brokers may experience pressure on commission income as premiums reduce. In response, some brokers seek to supplement revenue by offering so-called “added value” services, which may include analytics, benchmarking, consultancy or ancillary support. 

While some of these services can be beneficial, buyers should approach them with appropriate caution and consider: 

• Whether the service genuinely addresses a defined business or risk need 

• How value is measured and evidenced 

• Whether the service duplicates existing internal capability or external advice 

• Potential conflicts of interest or commercial incentives 

Not all “added value” services necessarily add value, and careful evaluation is required to ensure alignment with organisational objectives. 

Governance and Independence 

Soft market dynamics can amplify the importance of independent oversight. Brokers operate within commercial and market constraints, and favourable conditions may reduce the level of challenge applied to insurer proposals or programme structure unless governance remains strong.  

Long-Term Implications of Soft Market Decisions 

Decisions taken during a soft market often have consequences when conditions inevitably change. Common long-term issues include: 

• Retentions set too low for sustainable risk financing 

• Over-reliance on insurers that later withdraw capacity 

• Programme structures that become unaffordable in a harder market 

• Reduced organisational tolerance for premium volatility 

Without forward-looking planning, organisations may find themselves exposed when the market cycle turns.  

Maintaining Discipline in a Soft Market 

To manage these risks, insurance buyers may wish to consider the following principles: 

• Focus on total cost of risk, not premium alone 

• Preserve clarity and relevance of coverage, avoiding unnecessary complexity 

• Challenge assumptions underpinning favourable terms and conditions 

• Document decision-making and align outcomes with defined risk appetite 

• Consider the stability of insurers and long-term relationships, which can deliver resilience and continuity of support, as opposed to prioritising short-term premium reduction alone 

Maintaining discipline during favourable conditions often determines how well an organisation performs when the market tightens.  

The Value of Independent Perspective 

Soft markets are frequently when independent challenge adds the greatest value. An objective, market-informed perspective can help organisations: 

• Distinguish genuine opportunity from hidden risk 

• Maintain strategic discipline when market pressure encourages short-term thinking 

• Ensure broker advice remains aligned with client objectives 

• Stress-test insurance programmes against future market scenarios

Next Steps – what to consider

Soft insurance market conditions present genuine opportunities for insured organisations, but they also introduce subtle risks that are easy to overlook. The challenge for buyers is not simply to secure lower premiums, but to ensure insurance arrangements remain sustainable, aligned and fit for purpose across market cycles. 

JPIC has supported a wide range of organisations through both soft and hard market conditions, helping clients apply independent governance and challenge to insurance strategy, broker advice and policy terms. Experience across multiple market cycles consistently demonstrates that disciplined decision-making during favourable periods is critical to long-term resilience.