Why are my insurance rates so high suddenly? This is a question that everyone’s asking!
There are many pieces to the insurance rate puzzle, and the first and most evident is economic inflation. The U.S. is experiencing its highest levels of inflation in four decades. Rising costs of groceries along with that for labor, and medical care. Higher prices for vehicle parts and home repairs, as well as new and used car prices from total loss. Insurers did not anticipate these additional costs, therefore, did not price premiums appropriately. U.S. auto and homeowner insurance premiums lagged the inflation rates in 2020 through 2022, laying the groundwork for premium increases occurring now.
Two More Puzzle Pieces: Rising Material Costs and Skilled Labor Shortages
Even if general inflation is to level off, labor and materials costs are a factor. The aftermath of the pandemic played a significant role that was outside anyone’s control. As the cost of goods and services has gone up, so has the cost of protecting customers’ homes and vehicles. COVID caused supply shortages and lost jobs yet to be refilled. The demand for qualified technicians has led to higher labor costs, and strained supply chains have caused prices for auto parts and vehicles to spike as well.
Stay-at-home orders and social distancing had fewer drivers on the road leading to below average claims. As pandemic restrictions were lifted and more people have returned to the workplace, more drivers have returned to the roads, and roadway accidents have increased. Risky driving behavior has pushed traffic deaths to a 16-year high in 2020, with both speeding-related crashes and alcohol-related crashes climbing, despite fewer drivers on the road.
The National Centers for Environmental Information has recorded nine major weather- and climate-related events in 2023 causing over $1 billion in damage. As climate disasters increase, insurance rates will increase. Natural disasters are a major factor for reinsurers to raise their rate, which affects the premiums that everyone pays.
Insurance for insurers costs have increased. The insurance industry reported that rebuilding and replacement costs surged 55% between 2019 and 2022. Reinsurance, the type of insurance that is used by insurers to limit their risks, has gone up between 30% and 40%. As you can see, there are several factors affecting today’s insurance premium hikes. The professionals at Charles Leach are available to make sure you have the insurance you need at the best possible price.