Understanding the Soft Market: Why Attractive Pricing Can Hide Real Risk

For many businesses, insurance renewals in a soft market may feel surprisingly positive. Premiums fall, coverage appears to broaden and new insurer options seem to emerge every week. On paper, it is a win.

But as experienced brokers know, soft markets rarely tell the full story. The price may drop, but the risks behind that price often rise. At Consilium, we have seen this cycle many times and, while a soft market undeniably brings opportunity, it demands careful navigation.

Let's take a closer look at the current situation, identify potential pitfalls and explore how to make smart decisions that will protect businesses both now and when the cycle inevitably shifts.

What is Happening in the Market Right Now?

The insurance industry operates in cycles, and currently, we are in a soft market. In simple terms, this means:

• More insurers are competing for business

• More capacity is available

• Coverage is broadening

• Premiums are being pushed down

• Competition is aggressive - unusually so in some lines

For buyers, it can feel like good news: more choice, better terms and more attractive pricing.

However, a softer market can create instability, particularly in Financial Lines, Professional Indemnity, D&O, Cyber, and related classes, where the severity and complexity of claims can change overnight.

Why ‘Cheap’ Can Be Costly

Not all lower premiums signal genuine value. Sometimes, they signal compromise, and not always the kind you like to see. Some of the hidden risks buyers rarely spot include:

Narrower cover or newly added exclusions

While policies may appear similar at first glance, minor wording changes can significantly reduce protection, particularly in PI, Cyber and D&O, where precise definitions and exclusions matter immensely.

Lower quality wordings

Insurers attacking the market share often release simplified ‘no-frills’ wordings designed to appear competitive but lacking the nuance needed for complex claims.

Insufficient risk review

If a broker or insurer is not asking questions, it is not a blessing; it is a real red flag. Poor risk assessment upfront often turns into high-dispute risk at the claim stage.

Unsustainable pricing

Some insurers intentionally price below market to quickly build a book. Then, when the cycle hardens, pricing jumps, appetite changes and capacity can vanish entirely, leaving businesses with few options when they need stability the most.

Offers that ignore your business reality

A quote without understanding your operations, contracts, clients, risk profile or claims history is rarely a quote you can rely on.

How Some Brokers Behave in a Soft Market

Most brokers work with integrity. But a soft market attracts a particular kind of behaviour and businesses should recognise it. Common patterns include:

• Unsolicited calls promising sizable savings - usually with a limited understanding of your business.

• Brokers working with ‘attacking’ insurers to hit sales targets.

• Using a small panel of preferred insurers, sometimes limiting carrier options to maximise commission, not outcomes.

• Using incumbent insurers for benchmark quotes, not to renew with them, but to force the panel to drop their pricing.

• Decisions driven by sales targets rather than advice, leaving policyholders with cover that looks attractive for now but may fall apart later.

The result of this can be that clients risk moving to insurers that are inappropriate or unsuitable for their needs.

Warning Signs Clients Should Watch For

The clearest red flags a business should look out for include:

• Being guaranteed savings before any information has been gathered

• No questions about claims history or contractual exposures are asked

• No review of your existing policy wording

• Pressure to switch purely on price

• Very broad promises with no detail

• A broker takes your risk to market without your approval

• Several brokers approach the same insurers, creating duplication and confusion

When something sounds fast, cheap and easy in insurance, it usually benefits the seller, not the buyer.

Why Loyalty and Long-Term Thinking Still Matter

Switching purely for price can feel tempting, especially in a soft market. But long-term stability and loyalty often pay dividends. Loyal insurer relationships can mean more consistent pricing when the market hardens, better underwriting understanding, smoother claims experiences, broader appetite to negotiate terms and stronger advocacy when complex issues arise.

Businesses should absolutely take advantage of favourable conditions, but remember: market cycles can turn quickly and benefiting from that advantage should never be at the expense of future protection. This is where the value of a technically strong broker is crucial, because an experienced broker does far more than find the lowest price. They:

• Understand insurer behaviour through cycles

• Recognise when cheap is too cheap

• Prioritise adequacy of cover, assessing policy wordings line-by-line

• Balance short-term savings with long-term outcomes

• Advise when to stay and when to move

• Consider insurer stability, claims handling and appetite

• Advocate for clients, not insurer panels

Taking the time to gain a comprehensive understanding of a client's risk profile ensures disclosures are thorough, better protecting clients at the claims stage, with advice grounded in experience.

Practical Steps for Businesses to Protect Themselves Right Now

Below is a simple, actionable checklist every client should use before accepting an attractive premium:

★     Ask how the savings are being achieved

★     Check what has been removed from the policy

★     Ask if the insurer is sustainable long-term

★     Understand disclosure requirements (low disclosure is a red flag)

★     Consider multi-year agreements for pricing and administrative stability

★     Review your long-term insurance strategy, not just the year’s price

★     Appoint a single, accountable broker to prevent conflicting advice and duplication in the market

A More Informed Way Forward

Soft markets bring possibility, but only when approached with clarity, diligence and the right advice. Lower premiums can be a good thing. Broader wordings can be a good thing. More insurer appetite can be a good thing. But only when the fundamentals of protection are not being quietly eroded.

With the right broker, one who understands cycles, reads wordings carefully and builds long-term insurer relationships, businesses can benefit from today’s conditions without exposing themselves tomorrow. Soft markets do not last, but the smart decisions made now will.