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State of the Insurance Industry

You know it provides a valuable service, and helps you sleep at night, and protect the things you hold most dear---but in case you haven't realized, the insurance industry is not immune to the affects of our current economy. While it certainly might not make you feel any better, we wanted to share some insights on the state of the insurance industry and the factors driving the premium adjustments you might see (or have already seen) in your renewals this year. Unfortunately, this is an industry-wide issue that many consumers are seeing this year and just like the insurance industry isn't immune to economic seems that none of us are immune to the changes in premium.

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.

While these are frustrating, and likely beyond our control---there are some things you can do to help you weather the current insurance market. Here are a few to keep in mind:

  1. Consider higher deductibles. This is not a good idea for everyone, but in some cases, it can make sense. It also typically won't make a huge difference in premium, however, we're always happy to discuss whether it makes sense for your specific situation.

  2. 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.

  3. Don’t overlook tenure. Switching for a few dollars here or there typically won't work to your advantage, companies like to see long tenure with prior carriers and that won't happen if you move around at every renewal. Also, policy benefits like diminishing deductible start over once you leave a company.

  4. Absorb small claims when you're able and save for catastrophic losses. Claim frequency is a huge factor in your coverage rates. Keep this in mind when looking at those smaller claims.

We know this certainly doesn't change the fact that we can add insurance to the list of items that is putting a squeeze on our budgets, however, we hope this provides context for what is happening in the insurance marketplace. And as always, reach out if you have questions or want to discuss this or other related topics.

*Content provided in partnership with Levitate.

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