After two years of auto and home insurance rates remaining relatively steady in addition to Covid relief from insurance companies, the time for insurance premiums to go up has arrived.
For anyone who actually pays attention to my blogs and videos, I warned several times the rate stability and premium rebates that most insurance companies were providing during Covid would be short-lived. For the past 2 years, companies have ignored data that told them that they should be raising rates for fear of bad publicity when the economy was suffering and when their competitors were keeping rates the same and in some cases lowering them. Well friends, just like so many sectors of the economy, insurance premiums are going up significantly.
I am not one who always takes the insurance carriers' side when it comes to rate increases or other decisions that they may make. As an agent, I am on the front line of talking to customers and seeing firsthand how things are tough and how rising prices are affecting everyone. I try very hard to advocate for the customer and I realize that the industry that I work in does not always appear to be fair to the consumer. This time, however, it is clear that rate increases are needed and all that I can do is try to explain why and to let our customers know that it is not only them or their current insurance carrier going up, it is everyone and every company.
Here are just a few reasons Americans will be paying more for auto and home insurance in 2022.
Some of the reasons apply to both home and car such as the supply chain issues we hear about in the news and see every time we go shopping. There were 18 weather-related disasters in 2021 which cost insurers well over a billion dollars so far. In addition, labor shortages in both construction and the auto repair industries mean higher prices for labor and those costs get passed along to insurance companies when claims are filed.
For auto insurance, used car prices are up 26.4% and new car prices are up 9.8%. No one buys more cars than insurance companies so it has really impacted the cost of replacing vehicles involved in accidents. Auto parts have risen 6% and the hourly cost of labor at collision repair shops has gone up almost 20%. Since many Americans have returned to work since the initial Covid shutdowns, the severity of auto accidents has risen sharply resulting in an 18.4% increase in fatalities from pre-Covid levels and a similar rise in the cost of auto-related medical expenses.
For homeowners insurance, the big driver in premium increases is the well-publicized rise in the cost of building materials. While it has normalized somewhat recently, at one point the price of lumber was up 1000% from pre-Covid levels and is currently up by as much as 20% depending on where you live. Other building materials continue to cost more including asphalt for roofing which is up about 16.3% in the last year. The construction industry remains one of the most hard-hit areas by the labor shortage as there were about 358,000 posted job openings at the end of 2021.
When you consider that insurance companies are the end-user for so many of the goods and services mentioned here, it does make sense that rates have to rise to keep up. At Morris Insurance Services we are seeing our preferred auto carriers raise rates by 5.9%-11% and preferred home by an average of 8%-10%. Given the fact that nearly all insurance carriers have filed for rate increases, we are really encouraging our customers to contact our agency first so that we can review their policies to see if there are ways to help offset any increase.
Here are a few suggestions we are making:
- Be sure to bundle home and car together with the same company
- Consider raising deductibles and possibly removing physical damage from older cars
- Check what other discounts you may qualify for like paperless billing, automatic EFT payments, home renovation discounts etc.
- Consider enrolling in your carriers telematics program that tracks your driving and offers big discounts personalized to you
- If necessary we will check your rate with our other carriers that we represent to see if we can find a cheaper premium or at the very least show you the price comparisons so you know you are getting our best rate.
Rate increases are never fun to talk about, but they are a part of life. Please feel free to contact us at 410-857-4550 in Westminster or 410-355-1010 in Brooklyn Park with any questions.
Check out the video below for more info!