Motorcoach operators have heard a lot recently about todays 'soft' market for liability insurance. But what do the expressions 'hard' and 'soft' market really mean?

In a hard market, insurance coverage is more difficult to place; certain coverages might have lower limits, higher deductibles or might not be available at all, and premiums are quite high. br>
In a soft market, coverage is more readily available, underwriters might be more amenable to negotiating, and premiums are either stable or falling. br>
There are a variety of factors that influence the status of the insurance market at any point in time. These factors include economic downturns, catastrophic events, insurance industry claim reserves, and old-fashioned supply and demand. br>
Supply is tied to the amount of policyholders surplus (the amount over and above liabilities available for an insurer to meet future obligations) in the industry. Demand, on the other hand, is the appetite or willingness of the motorcoach operator to transfer risk in a multitude of different ways. br>
The above factors account -- in large part -- for the cyclical nature of the insurance industry. There are a number of factors that motorcoach operators should consider and be aware of as they make their insurance choices. br>
The issues that determine insurance pricing are really the only consistent part of these up-and-down cycles. Those factors include -- first and foremost -- claims activity and history, geographic location, area and scope of operations, hiring, training and maintenance protocols, as well as day-to-day management/ownership involvement and commitment. br>
Its essential to never lose sight of the fact that history has taught us that market cycles, hard and soft, never last. br>
Many insurance buyers lower their own standards during a soft market because insurance costs are generally lower, coverage is more readily available and their emphasis on safety seems to be of less significance. This is almost never a formula to assure long-term viability. br>
I recently visited with a motorcoach operator who, during a recent soft market cycle, had purchased his coverage from a new 'player' in the industry. He said the price was the overriding motivational factor in his ultimate decision. br>
Simply put, this new 'player' offered premiums markedly lower than anything else he found. He went on to tell me that during that particular policy year, one of his coaches had been involved in a serious incident. br>
The insurance carrier he had chosen had subsequently been declared insolvent and that put the coach operator in the unenviable position of looking to his home state guarantee fund (a 'fund' established to protect the insurance buying public in the event their insurance carrier has no funds to fulfill their claim obligations) to step in. br>
Unfortunately, the guarantee fund could not defend him or indemnify any injured parties either because previous insolvencies had rendered the fund essentially bankrupt. It is worth noting that more than one state is in a similar situation and others have shrunken funds. br>
This operator, in hindsight, wishes he had maintained the status quo in the soft market and not changed carriers just to save what amounted to a few dollars in the short term. br>
Now, he faces serious financial issues. He is left with the responsibility of defending himself and putting in serious jeopardy the assets he has worked his entire professional career to acquire. br>
The lesson here is that cheap insurance can turn out to be quite expensive. There is only a handful of insurance carriers and brokers who have the resources, experience, expertise and commitment to call themselves experts in the highly specialized field of providing for and servicing the needs of the motorcoach industry. br>
It is best to remember this during all the insurance cycles. History has shown that many carriers that have tried to become experts, only to fail, litter the landscape. br>
Very simply, they underestimated their exposures and didnt have the claims handling expertise and financial resources to deal with the inevitable issues that confronted them. A quick fix in the short term rarely works in the long run. br>
Peter R. Cohen is regional vice president and director of transportation marketing for Capacity Coverage Company in Mahwah, N.J.