I want to share some insights on the state of the insurance industry and the factors driving the premium adjustments you might see in your renewals this year. Unfortunately, this is an industry-wide issue that many consumers are seeing.
The truth is that no matter where you live, certain factors have disrupted the market, leading to rising rates and difficulty finding coverage. Factors leading to the disruption include:
- Higher rebuilding costs: The cost to rebuild your home is up dramatically due to the rising cost of materials and labor. The supply chain for materials also continues to be an issue. We can all agree that everything has gone up in price. Carriers simply can’t survive paying these higher prices without charging more themselves.
- Higher vehicle repair costs: The cost to repair your car is up 20% due to the rising cost of auto parts and labor to fix your car. In addition, parts in vehicles now include some technology features, which are harder and more expensive to repair.
- Higher medical costs: The cost of medical care continues to skyrocket. Bodily injury in auto accidents is off the charts.
- Higher and more frequent litigation costs: Litigation is expensive and is rising at an unprecedented rate — increasing 30% in 2022 alone.
- More frequent and more severe auto accidents: Accidents are way up post-COVID, along with auto fatalities.
- Higher reinsurance costs (the insurance your insurance carrier buys to help cushion catastrophic loss): Reinsurance is at or approaching capacity in many markets, and rising rates are unsustainable.
The good news is there are some things you can do to help you weather the current insurance market. Here are a few to keep in mind:
- Consider higher deductibles. This is not a good idea for everyone, but in some cases, it can make sense. If you’re interested, I’m happy to discuss whether it makes sense for your specific situation.
- Don’t let your policy cancel or lapse. Unfortunately, carriers are not reinstating coverage as easily as they once did. If your policy lapses, they may require your premium in full before reinstating—or, depending on the carrier’s risk assessment, your policy could even be canceled. This is across the board for every line of coverage, so make sure to pay your premiums on time or in advance just to be safe.
- Don’t overlook tenure. Switching companies too often can hurt you in the long run. In addition, some carriers won’t take you as a new client if you have less than two years with a carrier or have filed a significant number of claims in the past.
- Absorb small claims when you're able and save for catastrophic losses. Claim frequency is a huge factor in your coverage rates.
I hope this provides context for what is happening in the insurance marketplace. As always, reach out if you have questions or want to discuss this or other related topics.