The insurance marketplace is tightening up and it’s happening fast. It’s happening especially fast for auto and home insurance companies. Many carriers are pulling a full hard stop on issuing any new policies both on a state and national level. Some carriers are even leaving the market altogether, selling to other carriers, and/or merging. They simply can’t operate profitably in this inflationary market. This disrupted market will affect everyone.
The cost of claims has risen exponentially in the past 2 years, resulting in carriers having to raise premiums or pull out of some markets completely. If you have an auto or home insurance policy, your rates have most likely gone up at your last renewal. This isn’t personal, and it’s not based on a claim you may or may not have had, it’s simply the cost of doing business.
Some things going on in the industry right now:
- The cost to rebuild your home is up dramatically due to the rising cost of materials and labor. The supply chain for materials 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.
- The cost to repair your car is up dramatically due to the rising cost of auto parts and labor to fix your car. In addition, parts in vehicles now include some new technology features. Replacing a side mirror or a windshield used to cost $500. Now it’s more than triple that for both.
- The cost of medical care continues to skyrocket. Bodily injury on auto accidents is off the charts.
- Litigation is expensive and settlements are rising at an unprecedented rate.
- Both the frequency and severity of auto accidents are WAY up post-Covid, along with the rising frequency of auto fatalities.
- Reinsurance (the insurance your insurance carrier buys to help cushion against catastrophic losses like tornadoes, derechos, etc) is at or approaching capacity in many markets, and the rising rates are unsustainable. This is a significant issue affecting the property and casualty industry (home/auto), and pricing corrections are anticipated at least through next year. States also require carriers to have enough assets on hand to pay for losses. This is a nice way of saying that you will see rate increases more frequently.
- Carriers are adding surcharges on new policies for a lack of carrier loyalty. This means that if you are switching companies every year or two, you’re going to start seeing surcharges for that as well. Basically, it’s a nice way of saying that unless something outside the norm has happened with your rates, try to stay put for a minimum of 3 years with your selected carrier.
We at Ovation have some solutions that can help! For starters, these are some things you can do to help manage pricing:
- Consider Higher Deductibles: This is the obvious one, but one that will nonetheless result in lower pricing for you on your policy.
- Safe Driving Telematic Programs: Telematics programs can reward you with as much as 40% in savings for good driving.
- Discount Reviews: Make sure you’re getting everything you’re entitled to. Every carrier has different discount opportunities. It is always a good idea to ask!
- Consider Tenure: As mentioned earlier, there are going to be surcharges for jumping carriers every year. I know some clients have been with 3 or more carriers over the past 5 years, and it may have made sense up to this point. This is changing very quickly, however, and it’s going to cost a lot more in the coming year to switch carriers so often. Don’t save $150 today only to see that savings turn into a $400 cost a year from now. Don’t trip over dollars to save dimes.
- Absorb small claims when you’re able. Talk with your agency before submitting a claim, especially when it looks as though it may be close to your deductible, and if you can afford to pay it yourself, do it. Don’t use your towing/roadside assistance coverage as a maintenance policy. The frequency of claims REALLY matters right now. Again, don’t trip over dollars to save dimes.
- Follow the law so you don’t get any tickets. Tickets are really adding rate to your policy and stay on your record for 3 to 5 years depending on the violation, and also depending on the carrier.
We hope you have a decent idea about how the market is and why your rates might be increasing. Following our tips can mitigate any financial strains increasing rates might bring upon you.