There’s something significant happening in the insurance industryright now that affects us all. I want to share some useful information with you, so please take a moment to read this. I have included numerous links to articles throughout this article that reference all the information I’m giving. You can click any of the underlined text for additional resources.
The insurance market is going through a rapid tightening. Recently we’ve seen some carriers in many states put a complete halt on issuing new policies. Some insurance companies have even exited the market or stopped accepting new clients because they can’t sustain profitability in this inflationary market. Things are getting tough out there, and this disruption will have an impact on you, regardless of your insurance provider.
Over the past three years, the cost of insurance claims has skyrocketed. This has led insurance companies to increase premiums and withdraw from certain markets (not offer coverage in certain areas that are prone to have claims due to weather and other circumstances). These changes are not personal and are not solely based on your individual claims history. It’s simply the cost of doing business in this current environment.
Here are some key factors contributing to the rising costs:
Home and property insurance: The cost of rebuilding homes and buildings has significantly risen due to the increased prices of materials and labor. Supply chain issues further compound the problem. As we all know, prices have gone up across the board, and insurance companies cannot absorb these higher costs without passing them on to policyholders.
Commercial Auto insurance: Repairing vehicles has become much more expensive due to the rising costs of auto parts and labor. Additionally, modern vehicles often incorporate advanced technology features, which further drive-up repair costs. For example, a simple side mirror replacement used to cost $500, but now it can be more than triple that amount. Some clients are even experiencing months-long waits for parts to repair their vehicles. If the insurance company is covering the cost of a rental the total cost of the claim goes up significantly.
Medical costs: The cost of medical care continues to escalate, with bodily injury claims from auto accidents reaching unprecedented levels.
Increasing litigation: Legal settlements are rising at an alarming rate, and certain states, like Texas and California, are particularly prone to expensive lawsuits.
Post-COVID impact: The frequency and severity of auto accidents, along with the number of fatalities, have significantly increased.
Road Construction: The number of auto accidents increases significantly when a road is under construction. Detours, bumps and other distractions simply cause more accidents, causing your insurance to go up. As you know there is a LOT of highways under construction in our area. These facts cause the cost of auto insurance to increase.
Reinsurance challenges:Reinsurance, which insurance carriers purchase to mitigate catastrophic losses, is nearing or has reached its capacity in many markets. The rates for reinsurance policies are increasing by 50% annually, which is unsustainable.
8. Slow rate approvals: The Department of Insurance has been sluggish in approving rate increases. During the COVID period, they withheld approvals for nearly 24 months, causing insurance companies to operate at a loss in many states. Companies can only sustain deficits for so long before they must make changes.
This situation significantly affects the property and casualty industry, and pricing adjustments are anticipated to continue through 2024. Consequently, you can expect more frequent rate increases in the future.
However, there are steps you can take to navigate this challenging insurance market:
✅ Consider raising your deductibles to save money on your policy.
✅ Review available discounts to ensure you’re maximizing your savings. Each carrier offers different discount opportunities, so discuss them with your agent.
✅ Bundle your auto and home insurance whenever possible to unlock additional discounts. Bundling your policies typically leads to savings of approximately 20% on each individual policy. (Note: please be aware that, given the current market conditions and carrier restrictions, bundled carrier options have become more challenging to obtain.)
✅ Observe traffic laws to avoid tickets. Traffic violations can significantly raise your insurance rates and stay on your record for three years. If you do receive a ticket, GO TO traffic school to prevent accumulating points on your record (You do NOT want 2 points on your record), which could limit your insurance options in the current market.
✅ Absorb small claims when possible. Consult with your agent to determine if filing a claim is necessary. Frequent claims can have a substantial impact on your insurance rates.
✅ Purchase insurance from an experienced insurance agent who can offer multiple options and guide you through this challenging market while ensuring you have adequate coverage. Lowering your coverage limits may end up costing you more in the event of a loss.
✅ Avoid policy cancellations. Many carriers now have mandatory waiting periods before issuing a new policy, meaning you may face delays of 10 days or more.
✅ Pay your insurance payments on time, not late. Insurance companies are increasing rates for clients that have a history of late payments. Making your payments on time will help lower the total rate of increase on your renewal premium.
Please remember that insurance agents like me work on behalf of you, not the carriers. We don’t establish the rules, control the rates, or decide whether your policy gets canceled. Our role is to educate you, ensure you have the best insurance coverage for your situation at the best available rate, manage your account with the carrier, and provide claims counsel when needed.
Many Insurance companies are adding barriers to doing business. For example, requiring electric bills or only writing 6-month auto policies or requiring all policies to be paid in full (no monthly payment options). I have also seen a company offer a quote only to cancel because the homeowner would not replace a roof in good condition that was 10 years old. The homeowner had a roofer complete an inspection and sign off it was in good condition and did not need to be replaced. This client’s policy was canceled flat and had no coverage for 1 month, which caused them to pay much higher premium than they would have because now they were declined coverage and had a gap in coverage.
With this in mind, we are often recommending our clients to stay with the insurance company they are with even though the premium has gone up significantly. All the insurance companies are following practices like these and no one is exempt. It doesn’t matter that you have excellent credit and no claims or not.
White Slate Insurance predicts we are in for another 18-24 months of this.
I hope this message sheds light on the ongoing changes in this fluid insurance market. Please remember to be kind to your insurance agent—they are facing the same rate increases, navigating carrier transitions, and doing their best to assist you during this challenging time. We will get through this together.
