Home and auto insurance renewal increases of 30-40% or more are not uncommon in 2023.
It’s October 2nd, 2023, and if you’ve received your insurance renewal bill at some point in the last 6-9 months, you’ve probably seen the dramatic increase in your home or auto insurance rates. If you haven’t yet, chances are you will soon.
Whats causing premiums to go up so high, so fast?
It’s a tired song and dance, but the short answer is still…. COVID & INFLATION!
Let’s take homeowners insurance for example.
No matter where you live, If you’ve shopped at a Home Depot or Lowe’s lately, you’ve certainly seen that the price tags on building materials have gotten pretty expensive. Last year, the cost of building materials rose 4.7% overall, reflecting a particularly strong uptick in prices on the most common building materials like asphalt shingles (16.2%), concrete blocks (18.5%) and drywall (20.4%).
To make matters worse, the home-building industry is facing a shortfall of more than 300,000 skilled laborers, which is driving up construction-related labor costs. Naturally, less skilled labor, and increased demand for labor, subsequently increase the price paid for labor.
Combined with the high cost of construction materials and historically low housing inventory, this has been making home claims much more expensive for insurance companies. What was a $4,000-$5,000 claim two to three years ago, is now a $10,000 or more claim.
Whats up with car insurance rates?
The same issues depleted the supply of new and used cars during the COVID-19 pandemic, and inventories have not yet recovered. As a result, the average price of new cars has risen 20% since 2020, while used car prices have skyrocketed 37%. Rising medical costs are another key factor. While the number of injuries and fatalities from car accidents has somewhat declined from its peak in 2021, the rising cost of medical care continues to drive higher claims costs. Between 2020 and 2022, the overall cost of medical care in the U.S. increased 6.8%.
Remember all those container ships stacked up for weeks longer off the coast of California? Or the shortage of computer chips we’ve all heard about? Ongoing supply chain issues are driving a shortage of car parts and equipment, which were 22.3% more expensive at the end of 2022 than they were two years earlier. The overall cost of maintaining and repairing vehicles increased 18.4 % over the same timeframe – exacerbated by a growing shortage of car repair technicians.
All of this backlog is STILL working its way through the supply-chain.
Our agency has had many different clients who’ve had their auto repairs scheduled out months in advance due to the shortage of parts, and the qualified labor crunch.
Simply put, all of these additional costs translate to higher insurance premiums for consumers.
But I haven’t had any claims, why are my rates going up?
By design, insurance is a pooling of money for future claims, and whether you’ve made a claim or not, we all share in the cost of insurance.
Many people don’t think about the critical role insurance companies play in our society. When a major weather event or natural disaster occurs, a significant portion of the rebuilding costs are paid from insurance payouts. And when a particularly large disaster occurs, in order to remain solvent and in business, insurance companies are forced to make a claim on their own reinsurance policies.
Thats right, even insurance companies have to buy insurance, and these reinsurance premiums have risen as much as 50% in some cases.
What can you do then to save money on your insurance premiums?
Keep in mind that savings come in many forms. The value of the coverage you choose today may save you more in the long run than the lowest possible premium. For example, in many cases, carrying higher coverage limits on your policy actually leads to lower rates when shopping than if you just carry what the state requires. Contact us to review your current coverage. Carriers have gotten creative with discounts, so talk to your agent about which discounts you may qualify for. We’ll help you explore opportunities that could offset higher rates when it comes time to renew.
As agents, we completely understand the sense of frustration and sticker shock that comes with a dramatic premium increase; after all, we have to pay for insurance too. Working with an independent insurance agency that shops multiple companies to find you a policy, is a powerful tool when it comes to finding the best value for your insurance dollar.