Understanding What Is Causing Insurance Costs to Rise
Understanding the Forces Behind Rising Insurance Costs
By StormsAnchor.com
As a customer, you may be wondering why insurance costs are on the rise and options seem limited. From severe weather events to widespread inflation, several factors contribute to the increasing costs of insurance. This comprehensive article will seek to explore some of these forces in detail.
Keynotes
Historic weather events in 2023 have led to unprecedented damage costs.
Inflation has significantly increased building and repair costs.
Labor shortages contribute to higher costs for repairs and maintenance.
Proactive steps can help mitigate the impact and costs of extreme weather and economic forces.
Historic Weather: An Unseen Enemy
Thunderstorms and tornadoes were more destructive than ever in 2023. The cost of repairing and replacing homes and autos damaged by hail, wind, and water related to these storms is historically high.
Severe Storms: The #1 Reason for Homeowner Claims
$66 Billion in damage from severe regional storms.
2 storms alone cost $17 billion in damage.
More common, more costly: The number of severe weather events that caused $1 billion+ in damage has increased:
1980s: 33 billion
2000s: 67 billion
2010s: 131 billion
New record in 2023: 28 billion (that is in one year not a decade)
2023: The Hottest Year on Record
Rising temperatures intensify extreme weather and make wildfires more destructive, adding to the cost of insurance.
Widespread Inflation
Building and construction costs have snowballed, with a 33% rise since the pandemic started. Inflation impacts every aspect of the economy, and the insurance industry is no exception. For example, a 33% rise in building and construction costs on a $200,000 home increased over $66,000. As you can see, that amount of money adds up quickly and it has to be paid by insurance companies in the event of a total loss. To cover that risk, insurance companies have had to raise the rates.
Labor Shortages
Labor shortages have driven up costs in repair and maintenance, as well as supplies and materials. According to industry experts:
Repair costs have increased by 20% from June 2022 to June 2023.
The cost of collision claims has risen by 40% since 2019.
From “Repair and Replace” to “Predict and Prevent”
While we can’t avoid extreme weather or control economic forces, we can take proactive steps to reduce their impact and costs.
What Home and Car Owners Can Do
Bundle Coverage
Look for opportunities to bundle coverage with one carrier. Storms Anchor Insurance offers a range of options for dwelling, homeowners, auto, manufactured home, recreational insurance, commercial, and many other options.
Qualify for Discounts
Work with your agent to know how to qualify and take advantage of every possible discount that may lower your premium. Storms Anchor Insurance seeks to find you every discount you are entitled to receive. For a more comprehensive view at ways to save money on insurance take a look at the article what factors impact your home insurance quote.
Invest in Preventive Care and Loss Mitigation
Seasonal Care Tips: Keep homes and vehicles from developing small problems that may grow into claim events.
Specific Damage Prevention: Diminish potential damage caused by hurricanes or wildfires. Storms Anchor Insurance works hard to make sure you’re aware of these tips.
Specialty Insurance
Make sure you’re not paying for features that aren’t relevant or won’t cover unique situations. This is what specialty insurance is for.
Consider Quality of Coverage
Switching carriers might not provide much cost relief since all carriers face the same weather and inflationary barriers. Consider the quality of coverage and ensure the insurance is designed for your unique needs.
What Insurers Are Doing
Loss Mitigation Initiatives and Incentives
Water Sensor Program: Buy an approved smart water sensor and receive a premium discount or product purchasing discount.
Smart Sensors: Detect moisture, alert homeowners, and help prevent severe water damage in case of a leak or burst pipe.
Support and Resources
Providing support and resources, including loss mitigation tips and proactive communication before or during catastrophic weather events.
Streamlined Claims Process
Digital Claims: Streamlining the claims process with digital claims.
Self-Service Solutions: Introducing self-service solutions such as virtual property inspections. A more efficient claims process is a less expensive claims process.
Data Utilization
Using data to improve the ability to predict and evaluate risk.
Collaboration with Lawmakers
Working with lawmakers and regulators to update building codes and construction methods to improve the resiliency of homes.
Article Sources
Agent Perspectives Report; American Modern; Sept 2023.
Auto Insurance Customer Satisfaction Plummets as Rates Continue to Surge; J.D. Power; Jun 2023.
Commercial Lines Continue to Perform Better Than Personal; Insurance Information Institute; Jan 2024.
When Higher Pricing ≠ Underwriting Profit or Double-Digit Returns; Carrier Management; Jan 2024.
Record Thunderstorm Losses and Deadly Earthquakes: The Natural Disasters of 2023; Feb 2024.
Homeowners Insurance Affordability: Countrywide Trends and State Comparisons; Insurance Research Council; Nov 2023.
The Cost of Insurance is Rising. Here’s Why; Frankenmuth Insurance; Jan 2024.
