Why insurance rates are still rising

Many of my clients express this frustration, and I get it. No one wants to pay more for insurance than they need to. Unfortunately, post-pandemic inflation is still an issue. But that's not all that's going on.

Part of my job as an insurance agent is to help my customers understand why their premiums may be increasing and what they can do to lower them. Here's what I tell them.

There are economic factors impacting your home and auto insurance premiums:

• Goods inflation. The cost of nearly everything started increasing in 2021 and accelerated in 2022. Prices for food, gasoline, and other daily consumer goods jumped as the costs to produce them rose. So did the cost to repair a home and a car.
• Labor inflation. The cost of labor has increased, driving up the labor component of many manufactured goods and most services, including repairs to damaged homes and cars.

Modern technology in cars is further impacting car insurance premiums:

• Advanced tech. Today's cars have 2,000 to 3,000 semiconductors in them, which are the key components for electronics like infotainment systems. Bumpers have sensors and cameras to warn drivers of a collision. Damaged electronics are expensive to repair.
• More electric vehicles. As the name implies, battery-powered cars have even more electronics than gas-powered cars. From what I've seen, the cost to repair a damaged electric vehicle can be 20-30% more.
• Raw materials. The price of semiconductors, sensors, cameras, and other electronic components have increased as the raw materials (copper, silicone, etc.) to make them cost more.

There are major environmental factors impacting home insurance premiums:

1. Extreme weather. Yup, natural disasters are increasing and that is not good for your insurance rate. The number of $1 billion dollar disaster events averaged less than 5 per year during the 1980s and 1990s. The last 10 years have averaged more than 15 per year, driven by a jump in severe storms, cyclones, floods, and winter storms.¹

   When extreme weather events happen, homeowners insurance claims increase, and this is happening more and more frequently.

2. Construction costs. Raw materials like lumber, oil, and steel are becoming more expensive to source. This makes building supplies like wood, shingles, and appliances more costly.

Insurance companies need to account for these costs and that can mean increasing insurance premiums for consumers. So, while you may have a clean driving record and no claims on your car or home, you are still likely to pay more in premiums.

Something that resonates with my clients is that many insurance companies have gone bankrupt due in part to underpricing their policies. Price increases are painful, but necessary with increasing natural disasters and inflation so that an insurance company can still pay out your claim.

But it's not all bad news. Here's how I can help you save money:

1. Find discounts, like a good student credit or defensive driving class completion
2. Bundle policies with one insurance carrier
3. Increase your deductible and consider self-insuring less expensive items or risks
4. Shop across multiple insurance companies to find the best value and great coverage at a fair rate. An insurance agent can do this shopping for you.

One of the biggest risks I see today is customers who are underinsured.

Unfortunately, I've been finding that inflation is playing a role in people not having sufficient insurance coverage. With the cost of replacing cars and homes higher than ever, now is not the time to skimp on insurance coverage.

A new customer came to talk to me about car insurance. I noticed he only had enough coverage to meet the state's required minimums, so I advised him to increase his coverage partly because of inflation. He agreed and raised his liability limit. Literally a week later, he was involved in an accident and was found at-fault and responsible for damages over $100,000. If he hadn't met with me and increased his liability limit, he would've had to pay out of pocket for any damages over $25,000.

Many homeowners might not even know it, but they are often underinsured after significant home price appreciation over the last few years. I have seen policies that were quoted and bought online, without an agent, that are only insured to 30% to the value of the home. Most people will not be able to cover the difference if they lost their home due to a fire, or other covered event.

If you live in Colorado and haven't reviewed your home insurance coverage recently, then please contact my team. We will work through an updated replacement cost estimate for your home that is up to date with today's rebuild costs.

My team's review process will give you peace of mind that if you are involved in a car accident, or something were to happen to your home, you are fully covered.

If you don't live in Colorado, find a Comparion insurance agent near you or learn more about the advantages of using an insurance agent.

Why use an insurance agent?

Why do I need an insurance agent when I can buy insurance online?