Agents and brokers have experienced the highs and lows of market cycles before, having lived through market softenings where pricing is dynamic, competition more critical, and commissions are not keeping up with the cost to support policyholders. . But still, the soft market hits differently this time. The market has been in a hard cycle since the COVID pandemic, and in the years since the global shutdown in 2020, technology has advanced dramatically across the insurance ecosystem from quote to claim. Today’s soft market effects pricing, but it also exposes systematic inefficiencies that were easier to ignore when hard market pricing was in effect and renewals were plentiful. With less revenue per account, but more submissions, more remarketing, more carrier discussions, and more client communication, brokers are already feeling the impact of the softening market, and these effects will only be magnified as the soft market cycle continues. For many small commercial teams, the workload increase is significant to remain competitive.
The reality is that working harder will not save profitability in this soft market cycle.
Inefficiencies can be more difficult to notice in a hard market, but they still exist and have formed the baseline for many brokers. Operational challenges remain even though they are often masked by the lack of options, higher premiums, and longer renewal cycles that exist in a harder market. But when the market softens, pain points are magnified and inefficiencies become friction, making operational challenges obvious.
During the soft market, brokers are expected to do more while earning less. Some of the challenges introduced by the softening market include:
requoting accounts that have remained continuous for years
meeting faster turnaround times to win business in a competitive market
managing higher submission volumes without increasing staff
communicating more often with policyholders and potential clients
focusing on customer retention as other options become plentiful and cost-effective
Alone, each of these tasks adds complexity. Once added together, they exacerbate any existing systematic slowdowns and process inefficiencies. And when systems and workflows aren’t optimized for speed and adaptability, complexity amplifies quickly.
The result is that producers waste time chasing information buried in legacy systems, account managers duplicate efforts across systems, and leadership isn’t informed about real-time changes. And while the soft market doesn’t create these problems, it makes them more visible and gives brokers who overcome these issues a competitive advantage.
Some firms try to solve these challenges by relying on an internal team to manage small commercial operations, but this approach is full of fixed costs which are difficult to manage. An external approach with a variable cost structure is best for managing profitability and efficiency.
The productivity gap is widening between brokers who have been modernizing behind the scenes and those who have remained committed to legacy workflows. Instead of adding headcount, these brokers are investing in technology stacks delivering connected systems and intuitive workflows. And while it is unknown how long the soft market will last, brokers can’t afford to continue relying on outdated processes when competitors have rebuilt their operations based on resilience and speed that outlasts market cycles.
Legacy technology was designed for a very different time in insurance. Agency management systems, spreadsheets, and email-based processes worked well during slower cycles when there were fewer data and consumer demands. And while competition is nothing new in the broker world, a soft market adds more complexity with competing brokers focused on selling savings and servicing new customers. But in today’s fast-paced digital world, these traditional tools create fragmented information, poor visibility into pipelines, repetitive work across teams, increased E&O risk, and human error. When renewal volumes and quote submissions increase as the market softens, these technological limitations become operational liabilities.
While many brokers know their tech stack isn’t ideal, modernization often remains low on the priority list when things are manageable during harder market cycles. But the problems quietly add up as slow turnaround causes retention dips and missed acquisitions, burned-out staff leave for firms with modern technology, and operational risk and inefficiencies lower firm valuations. Technological maturity has become a critical sign to partners, carriers, and potential buyers about the overall scalability and flexibility of the firm.
Soft markets create challenges and opportunities for those brokers who are prepared to modernize their systems to enable growth and protect margins. Digital broker platforms, like Layr, are designed to meet the needs of broker teams and how they work today with:
automated workflows that remove repetitive tasks
intuitive policyholder self-service tools
optimized submission and renewal workflows
quality data that supports fast decision-making and client communication
seamless transition of legacy business without policyholder disruption
its own licensed staff operating in a white-labeled experience to free up agencies and brokerages key employees
The industry has outgrown traditional solutions constrained by repetition, errors, and patches fixing critical system issues. Modern, broker-first solutions like Layr have replaced legacy workflows, giving brokers who act now to digitize their systems a competitive advantage with stronger operations and happier employees as the market cycles.
The only lever brokers have during these soft markets is the cost-to-serve, which can only be reduced through technology. Centralizing and automating workflows has become a necessary part of broker management—and those brokers who invest in modernization during soft cycles will find even more efficiencies when the market swings and pricing hardens again. The risk isn’t the soft market; rather it is standing still while others modernize.
Partner with Layr to make your small commercial book profitable and efficient.
Contact us today for your demo and more information.
External Links:
1. https://ar.casact.org/an-insurance-soft-market-landing/