Florida and California - The Hard Market May Be Starting

One of the hallmarks of what I consider the start of a hard market is when one of the major players in the Workers Comp business pulls back on writing coverage. A few articles this week have pointed out that Liberty Mutual (R) has begun to not write as much coverage in one state with a possibility of doing the same in another state.

I have always considered the moves by Liberty as the direction the market is headed in a certain state. They are now reported to not write as many polices in California. Liberty has also considered Florida as a state to watch closely to see whether a pullback is in order. Over the years, this seemed to be the start of a hard market in a certain state.

A hard Workers Comp market usually begins when there are less insurance carriers competing to write policies in a certain state or region. The carriers will no longer undercut one another to get the business on the books. This leads to the underwriters become much more stringent in deciding to cover a risk.

This is a heavily debated point as some insurance gurus will refer to investment income, negative insurance laws or court decisions, or a change in a state's business environment as the reason for a hardening. I have stuck to the basic supply and demand theories. When a product is still desired by the same number of people/companies and the supply is restricted, the price increases quickly. This happened in CA in the early 1990's. If there are any more updates, I will post them as I see them.