As Risk Managers we feel it is important to keep our clients updated on insurance industry news. We are all feeling the effects that inflation has had in just about every aspect of our lives. Unfortunately, insurance rates are following suit. We would like to take a moment to explain the 2 main factors in the increased rates. We also wanted to provide some things that you can do to reduce premium and mitigate risk. Even if you have not filed claims, rates are affected by national weather events. We are all in this together. We hope you find this blog informative and helpful.
The 2 Main Reason for Rising Rates
1) Average Cost Per Claim – Recent news articles have indicated that the average cost per insurance claim has increased 25-50% over the last 2 years. This highlights what is happening throughout the industry. The hyper inflation that occurred after COVID has driven up the cost of materials and labor to heights that no one could have predicted in a short period of time.
2) Claim Frequency – In that same period of time (2021 – 2023), claims frequency has increased. More claims are occurring each year and the average cost per claim has skyrocketed. Prior to 2020, carriers planned for an average of (8) Catastrophic (CAT) level losses each year. These are single events that produce over $1 billion in losses. In 2022, there were (18) CAT events. Through August 2023, there have been (23) CAT events with (3) occurring in Indiana. Below is a diagram showing the 23 CAT events that have occurred in 2023.
The Carrier Response to these 2 factors:
Insurance rates are heavily based on the prediction of losses. No one could have predicted COVID or the hyper inflation that followed. This includes insurance carriers. Insurance company losses are driving some carriers completely out of the industry. The ones who remain are having to adjust rates based on the rising cost per claim and the increase in claims frequency. If insurance companies do not take action, they soon will become insolvent and forced out of the industry as well. Early predictions are forecasting average rate increases on homeowner policies are between 20-30% in 2024. Rates will vary regionally and by carrier but most companies are making some type of rate adjustments or underwriting restrictions.
What can you do to potentially lower costs?
1. Bundle all policies with the same carrier (if possible) – Savings for bundling policies through the same carrier can be substantial.
2. Modify Deductibles – Increasing your deductibles will lower your rate.
3. Roof Year – If you have installed a new roof in recent years, make sure you let us know as discounts may be available to you.
4. Credit – Most consumers do not realize that credit is factored into insurance premiums. Taking steps to improve your credit can also help lower your insurance premiums in the future.
5. Mitigate Losses – Most losses are sudden and accidental but there are things you can do to mitigate property claims. Take time each month to inspect your home or commercial building and if you notice any maintenance issues, address them right away. This could be trimming a tree that is touching or overhanging the home or cleaning out gutters that prohibit water from escaping. Have chimney flue cleaned annually or inspect your basement after rainstorms to make sure the sump pump is operating properly. These are just a few examples but you’d be amazed at how many claims are derived from a minor issue that went unresolved.
As we mentioned previously, we are all in this together so our agency wanted to be as transparent as possible to help everyone understand what is happening in the industry. Don’t hesitate to reach out if you have any questions, concerns, etc. We are here to help!
