We are in the craziest and most difficult insurance market that we have seen in decades. Rates are rising, underwriting is getting more strict and your options as a consumer are shrinking. This blog will help you know what you can do to properly protect yourself and get yourself into the most ideal insurance situation.
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3 Things Happening In The Insurance World
First, let’s talk about the three main things that are occurring in the insurance world. There are many other things occurring that are leading to higher insurance rates, however, these 3 things we’ll discuss will give you a good idea of what is happening.
Carriers Are Leaving States Completely
The first thing is insurance companies are leaving states completely. They are shutting down business packing up shop and saying we do not want your business in this state. We are not going to allow you to place business with us.
This is happening because insurance companies are realizing they cannot be profitable in those states. These insurance companies go to the state insurance department and ask for certain rates hikes and are being denied. Because these insurance companies can’t charge what they need to, to be profitable, they simply decide to leave the state.
Tightening Underwriting Guidelines
The second thing that is happening is insurance companies are tightening their underwriting guidelines. This means they are making it harder and harder to place business with them. They are making you jump through more hoops if you want to get a policy with their company. Prior claims, certain type of roof, certain type of car, etc, etc. When insurance companies used to not care about a certain risk, they now suddenly care a lot and will deny you for small, seemingly insignificant things.
Raising Insurance Rates
The third thing that is happening is insurance companies are raising rates in every state on everybody. It is not uncommon to see rate increases of anywhere from 10% all the way up to 50% and above on your renewal. And this is all happening because insurance companies are currently not operating profitably and this is their solution to hopefully in the coming months and years start operating profitably. Insurance companies don’t randomly select their rates. They use data to determine how much they should be charging to be profitable. Right now, the data is telling them to raise rates on everyone.
Who Is This Effecting?
You may have already experienced this. You may get your insurance renewal in the mail and freak out and say, “why did they raise my rates? I’ve had no accidents or tickets. This is crazy!”
It’s important to understand this is not personal, it has nothing to do with you.
This is a nationwide problem. And again, the insurance companies have to do this in order to stay profitable and remain in business. You may have no tickets or accidents and be the best driver ever. It doesn’t matter, your rates will still go up! Now, we are not asking you to feel bad for these insurance companies. We are just explaining why this is happening.
Why Is This Happening?
Let’s look at some of the reasons. These are not all of them, there are thousands of factors that affect your insurance rate. However, these reasons will help you start to understand why your insurance rates are increasing so quickly.
Inflation
The first reason, it’s a very obvious reason and you’re seeing this and all of your expenses throughout your entire life. As inflation continues to skyrocket, insurance companies feel it as well. If all of their expenses increase, they have to raise rates in order to stay profitable. Just like someone selling balloons: if the price of helium goes up, they’ll have to charge more for each balloon in order to continue to stay in business and make a profit.
Cost Of Materials to Rebuild Home & Repair Vehicles
The cost to rebuild your home is up dramatically, again due to inflation and due to the rising cost of materials and labor. This also plays in the cost to repair your vehicle.
The cost to repair your car is up dramatically due to rising cost of auto parts and labor to fix your car.
Supply chain issues are also affecting the cost of materials. Supply chain issues, which stem from covid also hurt insurance companies as this increases the price of materials. It also leaves insurance companies on the hook to pay for rental cars much longer as they wait for parts for their clients vehicles to come in so that the vehicle can be fixed.
Medical Care
The cost of medical care continues to skyrocket. Litigation is also expensive and settlements are rising at an unprecedented rate. The hire cost of medical care and law suits means insurance companies are paying out more in claims. The more they pay out in claims means the more they need to charge for insurance premiums.
Auto Accidents
Both the frequency and the severity of auto accidents are also way up post covid along with rising frequency of auto fatalities. More people are getting in accidents and more people are getting in severe accident. More accidents that are more severe means more money the insurance companies pay out. This means they have to raise rates to continue to be able to pay these claims.
Storms & Natural Disasters
Another reason is the frequency and severity of storms and natural disasters has increased over the past few years. More severe storms cause much more damage. Which again, means the insurance companies have to pay out more money. If they don’t raise their rates and charge more for insurance, they wont have enough money to pay out on these claims.
How Long Will This Last?
We’re predicting that these problems will only continue to get worse throughout the rest of 2023 and into 2024. Insurance companies are content with not taking on new business . This is why they’re pulling out of states, raising rates, and tightening underwriting guidelines. They prefer to sit idle, raising rates on existing clients while they try to get profitable again.
This is not good news for you, the consumer. So what can you do?
What Can You Do?
We’re going to go over a list of things that you can do to make sure you’re in the right policy at the right price. The first thing you can do is consider higher deductibles on both your auto and home insurance.
Higher Deductibles
Higher deductibles means lower monthly and annual premiums. Along with that consider not filing small claims for small scratch and dents. Accidents that do not involve other people that you can easily pay for out of pocket, small things that occur around your house that you can easily absorb and pay for out of pocket.
Consider doing so and not filing a claim. Remember, more claims on your policies equals a higher premium. Most claims will stay on your record for five years and raise your premiums because of it.
Telematics
The third thing is consider safe driving telematic programs. Most companies now have an app you can download. If they don’t have an app you can plug something into your vehicle. They track your driving habits for six months and then give you a discount after they monitor you, based on how good of a driver you are. Everyone says are a good driver. But these programs let you prove you’re a good driver and then they give you a discount for the life of the policy after you allow them to track your driving habits.
Policy Reviews
In our agency, we send out an email and a text to every client asking them to please schedule a review with our review specialist. We do this each year when their policy is renewing.
And we go through to first make sure all of our clients have the correct coverage, but we also review all of their discounts to make sure that they have the right discounts and are not paying too much for their insurance. This is essential! If your agent doesn’t do this, ask them to or find an insurance broker that does.
Bundle
The next thing you can do is bundle your auto and home insurance. You hear it on all the commercials, probably the progressive commercial with Flo, but bundling your auto and home insurance and any other insurance products that you have will give you better coverage and better pricing.
Stop Changing Every Year
The next thing you can do is stop jumping around to different insurance companies. In most cases, insurance companies will reward you for sticking with them. Now, this isn’t always the case and you should work with a broker that can make sure that you are in the right policy with the right carrier, but don’t try to jump every six months or every year. In the long run, you’ll end up paying more money.
Keep A Clean Driving Record
The next thing you can do, it sounds obvious, but it’s something that you can do, is keep your driving record clean. If you get in an accident or if you get a ticket and they give you the chance to go to driving school, go to driving school. So that that ticket does not show up on your record again, tickets will show up on your record for 3 to 5 years and your rates will be raised because of that.
Use An Independent Insurance Broker
And the last thing you can do and probably the most important thing you can do is buy your insurance from an experienced insurance broker. Insurance brokers have options and they can help you again. Make sure you find the right coverage, the best coverage at the best price.
How Do Insurance Companies Set Rates?
Insurance companies don’t just pull rates out of thin air.
They use data and lots of data to set rates and to decide what premium to charge you. Unfortunately, most insurance companies are reactive to data rather than being proactive and this is what you are seeing right now. Many insurance companies got burned the past few years and are now reporting huge losses over the past few years.
So now they’re having to be reactive and shut down operations in certain states and raise rates as much as the state insurance department allows them to. This puts you in a bad situation. However, in the things we just covered, if you can do all of those, you will put yourself in a much better situation again to make sure you have the right coverage at the right price.
Now Is The Time To Get The Right Coverage
Now is the time to get the right coverage with raising rates. People are reducing or dropping insurance coverage altogether. So that means there are a lot of bad drivers with bad insurance out there on the road, you need to protect yourself from them. Do not sacrifice coverage to save a couple dollars each month.
If one of these people hits you, you will regret it. Make sure you speak with us if you’re one of our insureds or with your insurance broker to make sure you have the correct coverage to properly protect yourself.