In last month’s article, we touched briefly on the hard market in relation to Professional Indemnity Insurance. Now we want to explain more about what a hard market is, and how it can affect the insurance costs for protecting your business.

Let’s start at the beginning, what is a hard market?

The insurance market is cyclical. It is not unusual for the market to be faced with ups and downs with each cycle taking place over a number of years. These fluctuations are often referred to as ‘hard’ and ‘soft’ markets. Soft market conditions occur when insurance losses are low and prices are very competitive. Hard market conditions occur when insurance losses are above expectations and reserves are no longer able to cover all losses.

The characteristics of a hard market in the insurance industry include:

  • Increasing rates leading to higher premiums
  • Stricter underwriting controls, with insurers asking for a lot more information about your business
  • Coverage restrictions such as reduced limits, increased excesses, and more exclusions
  • Reduced capacity, meaning that insurers will reduce their appetite to certain trades or even completely withdraw from markets

What causes a hard market?

A hard market isn’t caused by a single event, but rather a combination of factors that all place increased pressure on the insurance industry. There is, however, often a catalyst which speeds up the process. As well as coronavirus, there were a number of other factors already coming together before the pandemic struck. These included the following:

The Ogden rate

Set by the UK government, the rate is a calculation used to work out how much compensation insurers should award someone who has life-changing injuries to cover them for loss of earnings and any care costs. Recent changes to the rate mean that insurers are paying out more on settlements resulting in increased premiums for policies covering Public and Employers’ Liability as well as Motor, Household and Travel.

Property rates

At least 20 serious fires costing more than £10 million each occurred in the second half of 2019. The overall outcome is that insurance companies are now seeking significant increases in property rates.

Catastrophic losses

The frequency of natural disasters related to climate change is increasing, leading to significant pay-outs for the global insurance industry.

In the first half of 2020 alone, there were more than 200 natural disasters across the world, including Storm Dennis and Storm Ciara in the UK. The storms we faced at the beginning of the year lead to an estimated £425 million in claims payments.


The global pandemic has naturally had an effect on the market, compounding everything. The pandemic has accelerated the hardening of the UK insurance market, with rates being pushed up as insurers make efforts to respond to the crisis.

Low interest rates

The economic consequences of Covid-19 mean insurance companies will not be able to rely on investment earnings to help cover their underwriting losses.

Reinsurance rates

Reinsurance is essentially a form of insurance for insurance companies, provided by reinsurers. As a result of all of the above factors, the cost of buying reinsurance is rising significantly and insurers will have no option other than to reflect these increases in their premiums.

Is there any good news?

Yes, our strong relationships with the insurers who sit behind our long-established and exclusive specialist Business Premises, Motor, Cyber and Professional Indemnity policies for funeral directors, means that we are able to shield our clients from the worst effects of the hard market, and keep rate increases low. And to provide you with further reassurance in these uncertain times, when protecting your funeral directing business, we only work with UK based insurers who have been awarded an ‘A’ rating by leading credit rating agencies. This is in recognition of the exceptional financial strength of the insurers we use, along with their superior ability to settle claims quickly and fairly.

We like to think of ourselves as a champion for funeral directors out there in the insurance marketplace, whether it is in a hard or soft cycle we always work hard to provide you with the best cover for your business. For funeral directors already insured with us, we will get in touch well ahead of your renewal date to explain how any changes in the insurance cycle will affect you.

About SEIB

SEIB’s experience with the funeral directing industry goes back over 40 years, and we have recently been described by a client as a “funeral director’s best friend”.

The funeral directing community has made a huge effort to meet the challenge of the pandemic. We want you to know that our team are here to help, and our goal as always is to provide funeral directors with the insurance protection they need at affordable premiums.  To find out more about safeguarding your business with SEIB please contact us by calling 0345 450 0648 or emailing