From the Perspective of Independent Agents States with the Highest Home and Auto Rates in the U.S.
Prices for homes and automobiles are expected to be among those that go up between 2022 and 2023.
The national average for the cost of homeowner’s insurance in the United States has increased by 2%. However, in other states there have been increases of up to thirty percent. 7
Since the beginning of this year, our professionals in property and casualty insurance have been tracking the gradual rise in insurance prices, and we’ve been advised that the trend is not likely to end very soon.
Because of factors such as rising inflation and the increased risk of natural disasters, as well as the impact the pandemic is having on supply chains, each carrier is responding to the demands in a unique manner.
Some insurance companies have implemented flat rate increases of 30% for both homeowners’ and drivers’ premiums. Some analysts anticipate that there will be “step” rate rises of 12% over the course of the following three years.
As we continue to monitor the policies and premiums of our customers, we are seeing that policy renewals are coming back with big shifts in the dwelling value as well as massive hikes for the wind and hail deductibles.
If you are aware that your rates are about to increase, you may use this information to plan your next renewal and look for alternative methods to save money.
List of topics covered
- Insurance for the home
- Auto insurance
- Advice on how to cut costs on property and liability insurance
- Why are premiums for homeowner’s insurance going up?
- The ever-increasing prices of both labor and supplies.
Insurance companies deduct the cost of claims from the premiums they collect from their customers. If the cost of the typical claim rises up, insurance companies will need to raise rates to compensate for the more money they will need to pay out to settle claims.
A rise in replacement costs, often known as the amount that it would cost to rebuild your home, is the root reason of the present increase in rates.
The interruption of supply chains brought on by COVID and geopolitical unrest in Ukraine and Russia have contributed to an increase of 17.7%2 in the cost of building materials as compared to the previous year.
There is currently a lack of approximately 430,000 construction employees, and this number is only likely to expand in the coming years. The shortage of labor is not exclusive to the building industry, which is also experiencing major difficulties.
All of these factors have combined to create the ideal conditions for skyrocketing home reconstruction costs and, as a result, increased premiums for homeowner’s insurance to cover repair and replacement costs.
a rise in the frequency of natural disasters and the severity of temperature extremes.
In a timeline of increasingly severe natural disasters, Hurricane Ian is merely the most recent occurrence. Wildfires, unusually high or low temperatures in certain regions, and an increase in the number of hailstorms and windstorms have all contributed to the rise in the number of claims filed over the past few years.
In comparison to the 20-year average of 11.6 incidents, the United States has had an average of 17.8 billion dollars’ worth of natural disasters per year during the past three years.
Insurance firms will raise premiums to compensate for the greater possibility that they will have to settle a claim on a certain policy as the risk of adverse events rises.
Losses on homeowner insurance policies as a result of cause
Why are insurance premiums getting higher?
Temporary savings on auto insurance because to the pandemic are being eliminated.
As a result of people not driving as much as usual because of shelter-in-place policies, many insurance companies offered discounts. If people drove less, there would be less opportunities for collisions, and hence, the insurance companies would have a lower likelihood of having to settle claims.
However, as soon as travel got back to normal, those reductions disappeared, and on top of that, premiums went up, which left millions of customers in a state of sticker shock.
After the epidemic, people are driving faster, which results in larger loss claims.
Even if the number of cars on the road decreased as a result of the epidemic, the number did not reach zero. In addition to this, the wide roads encouraged vehicles to drive at higher speeds, which in turn led to larger damage claims in the event of an accident.
Even while the number of drivers has returned to the levels seen before the outbreak, the speeds are still significantly higher than usual. Because of this, the typical cost of filing an auto insurance claim has gone up by 20%. 5
Insurance companies are raising premiums in order to compensate for the greater number of claims filed.
The cost of auto repair is driven up by factors such as a lack of available labor, rising wages, and a restricted supply of parts.
Auto repair shops, just like many other types of businesses in the United States, are having trouble finding qualified employees. At the same time, the current workforce is pushing for higher wages for themselves.
On the material side, limited component availability as a result of strain on the supply chain are driving up costs for both suppliers and repair shops. This is driving up the overall cost of the product.
Once again, rising costs to repair on each claim are pressuring carriers to hike rates in order to cover their expenses.
The rising value of vehicles is a direct result of the thriving auto market.
The term “actual cash value” (ACV) refers to the amount of money that a vehicle is worth at the moment when it is lost. ACV has increased for all drivers since used car values have increased by more than 50 percent since February 20206; thus, all carriers are feeling the weight of those higher claims.
How you may reduce the premiums you pay for your home and vehicle
It is unavoidable that mortgage and insurance costs will go up. Even if all of the other indicators return to their previous levels, we should still anticipate a slight increase in interest rates. This is the case despite the fact that most of what we are observing is the result of the pandemic and the economic disruptions that followed.
Simply put, you should plan on paying more for your subsequent renewal when it comes around.
Even though you anticipate that premiums will go up in 2023, there are still things you can do to cut the expense of your property and casualty insurance policies.
1. Raise the amount of your deductible.
Your monthly premium will always be lower in proportion to the deductible and copayment amounts that you are willing to pay in the event of a loss. However, in the event that you suffer a loss, you will need to ensure that you have sufficient financial reserves available.
A self-insurance approach such as this one is not something that is suggested for everyone. If you want to discuss the benefits and drawbacks of this option in relation to your individual monthly cash flow and investing strategy, you should consult with a financial professional.
In the case of North Star, your financial advisor is able to generate an estimate of what the implications of this decision would be for your future financial outlook.
The present moment is probably also a good opportunity to examine your emergency savings reserves with an expert in the financial industry. Think about whether or not you should increase the amount of money that is easily accessible to you, and have a conversation about where these funds should be kept in order to minimize the amount of money lost to inflation while maximizing the likelihood that you will be able to access the money when you require it.
2. If it is accessible, take advantage of the discount that your carrier offers for using telematics.
Telematics is a method that can be used to collect information about your driving patterns as well as your mileage.
The use of real-time data to assess the likelihood of having to pay out claims is becoming increasingly popular among insurance firms. If you decide to let your insurance company know about your driving patterns, you will most likely become eligible for a discount of some kind.
If you are a safe driver, you might save anywhere from 5% to 40% on your car insurance premiums by downloading an app to your smartphone and allowing it to monitor your driving behavior for a period of up to 90 days. Not everyone will benefit from this, but if cost cutting is the primary objective, having a conversation about it may be worthwhile.
3. Separate your home and auto insurance packages.
When it comes to finding cost-effective coverage, bundling vehicle and house insurance policies is typically your best bet. Because carriers want to be able to offer you as many products as they possibly can, they believe it is profitable for them to provide discounts to customers who purchase multiple services from them.
Unfortunately, due to the significant rate shifts that have occurred this year, it is possible that it will make sense to divide your policies under certain conditions.
To find out whether or not this tactic might be beneficial to your financial situation, an independent agent can compare the offerings of a number of different insurers and policies.
4. Do some comparison shopping to determine whether or not you can cut some costs.
Property and liability insurance at Roger Welch will be handled by an independent staff that is not tied to any one carrier. When we see high renewals for our customers’ policies, we immediately start re-shopping the market to see if there is a more time- and cost-effective approach to manage their insurance.
There are instances when the only option we have is to agree to a wage hike. The client should stick with the current policy since it is in their best interest. In other circumstances, we are able to implement the changes described above to assist in mitigating the effects of those increases.
Working with a free-agent who specializes in property and casualty insurance
The Roger Welch Team is not dependent on any one insurance carrier as they are an independent entity. We are committed to our clients’ total financial well-being as our first priority, and we can provide you with price quotes from any of the leading carriers in the country of your choice.
In years when interest rates are climbing, we do everything in our power to lower our monthly expenditures while also maintaining our long-term financial stability by covering risks in a responsible manner.
At each and every renewal, each and every customer is reassessed.
even when things are going well and despite the fact that nothing has changed. When a contract is renewed, our team examines it to determine how the rates have changed and then searches the open market to see if we can discover a better alternative with another provider.
In addition to this, we are devoting more time to educational pursuits.
As of right now, many different agencies are making use of this time in order to “undercut” pricing by reducing significant coverage elements when providing quotes. They do this since they are aware that individuals will be shopping about for a better deal. This will garner attention, and as a result, many customers may switch providers without fully understanding the coverage implications of their new plans.
We want our customers to have a complete understanding of the coverage limits and the features that are most essential to them, so that they can make informed selections based on this information.
We are investigating a variety of other money-saving options.
In conclusion, we are currently considering the possible benefits of various means of savings on an individual basis for each person.
Contact us today if you have any questions.