The Entertainment Insurance market has been getting soft, and in 2010 will likely remain soft or get even softer. A soft market is generally good news for the insurance consumer. Simply put, a soft market means premiums are cheaper. The hardening and softening of insurance markets is a phenomena as old as insurance itself. It’s natural, and often caused by nature., i.e. the homeowner’s insurance market in Florida hardens after a particularly bad hurricane season, but there are a lot of reasons any particular market would harden or soften.

While there has been an overall softening of the insurance market due to the economy, what is happening in the entertainment market is different. The entertainment industry endured the writer’s strike and actor’s strike threat in 2008, which dried up demand for insurance. The market began softening then. Next there was the severe recession of 2009, which further dried up demand for insurance. Entertainment Insurance premiums have been softening twice as long as insurance premiums in general.

There is also something happening in the Insurance Industry, more and more insurance companies are starting to write entertainment Insurance, it’s getting crowded. Over the last 25 years, the insurance companies that understood and wrote entertainment policies were few. Two to four major carriers would be writing entertainment insurance at any one time. The companies were fairly consistent over the years, comings and goings were infrequent.

In 2010 no less than three new Insurance carriers will enter the market, and two major carriers entered the market in 2009. Why does this further soften the market? When new suppliers enter into a market, prices decline as the new players “horn in” by offering lower prices to take market share from others. In many ways this is happening in the entertainment insurance market, but the reasons for the softening of the market are a bit more subtle and complex than that. Insurance pricing is so regulated that it usually can’t be changed without filing new forms, in all 50 states in many cases. An insurance company can’t test the waters at one rate, then simply change it on a whim. If they decide to enter a market with a product at a rate lower than their competitors, they usually set a dramatically lower rate, because they can’t lower it a month after launch if the initial results are not what they hoped for. This results in exaggerated lowered rates.

So how does this effect you, the consumer of Entertainment insurance products? In almost every sense, it’s good news for you. There is very little down side. The worst effect is on the actual agent or broker you purchase a policy from. Agents and Brokers earn a commission on a policy’s premium. If the price for that policy drops in half, the agents commission drops in half, but the amount of work required of the agent is the same, or even greater because the agent now has to shop the policy to many more markets.

At our agency, we’re considering new agency fees to offset the drop in our revenues. My guess is that you as the consumer will start seeing this, especially for the more difficult and complex policies where the agent’s expertise is crucial in obtaining a policy.