Rising Insurance Premiums and What You Can do About It
Why are my insurance premiums going up?
There are several factors that can cause an increase in insurance rates. Typically, a rate increase is based on the individual experience of the client and whether they have had insurance claims frequently or of a severe nature. Another reason a customer’s rates can rise is the overall experience the insurance company has had in that territory or region. Over the last 18 months we have seen these and a growing number of other factors greatly impact the rates being charged for both home and auto insurance, as well as more restrictions on eligibility and availability.
Intensified Storm Activity
The increasing number of significant weather events across the country – including tornados, damaging winds and hailstorms, flooding, and a significant uptick in wildfires – have added a new dimension of risk for insurance companies and, in some cases, challenged their long-term ability to pay claims in the future. In 2023, there were over 30 events costing over $1 billion1; previously, it took a period of ten years to reach that amount. This change in weather events has made for more frequent and severe types of claims, which are inherently reflected in the rates insurance companies charge.
Rising Inflation
Economic factors can also have an impact on insurance rates. Over the past six years the cost of building materials (lumber, copper, roofing, etc.), labor costs, and supply chain delays have increased by 33-55%, which has a direct impact on the number of dollars paid out by insurance companies.
Increasing Auto Repair Cost
With auto insurance, the cost of repairs has skyrocketed, as well as the value of used cars. In 2018, the average auto claim cost $4,821.2 But with all the technology included in today’s vehicles and the training and material cost for replacement parts, the average claim has gone up 24%3. Not to mention an increase in the frequency of auto claims since the end of the pandemic, as more people began driving again.
Overall, insurance companies have not been able to keep up with the frequency and cost of these increases based on the rates that they were charging three to five years ago. This is one of the primary reasons why everyone is seeing higher costs for their insurance coverage. In addition, the restrictions in eligibility for new policies is an attempt to slow down how much risk insurance companies are assuming until they can get their pricing to better reflect the costs they are incurring.
All of these factors contribute to rising rates and harder-to-find coverage and are one reason you may have heard the term “hard market,” since it is harder to find the coverage you need at an affordable price lately.
How do I find affordable coverage during a hard market?
During a hard market, it is especially important to shop from several companies to find a policy that best fits your needs and budget. There are still options available out there for most people but taking the time and effort to review each one can be frustrating and time consuming. Using an independent insurance agent/broker is a great way to shop and compare a wide range of insurance company options. Unlike a “one-company agent” like State Farm, Geico, Liberty and others, an independent agent/broker works for you and can shop and compare with multiple companies now and in the future to make sure your rates stay competitive year after year. They are also trained to not only know insurance coverages but also key elements of plans such as billing options, technology services, claims reputation and other areas that should be considered when reviewing options.
How do I select an independent insurance agent?
Look for an agent that is large enough to shop dozens of companies to find you the coverage you need, but also committed to a level of service that is exceptional in the industry. They should be a reputable and stable company whose sole focus is on meeting the needs of their customers.
That is why Dave Ramsey, a well-known personal finance expert, radio show host, and author, uses and recommends Zander Insurance to his 30 million listeners as an independent agent that possesses all these qualities. “I have used Zander personally for all my insurance needs for more than 25 years. They shop hundreds of companies to get me the right coverage at the best price.”
Conclusion
A hard market in the insurance industry can make finding affordable coverage more difficult, costly, and time-consuming. While we can’t avoid the challenges a hard market brings, the good news is an independent agent, who works for you, can still find you great coverage and great rates, even in a hard market.
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