Rising Insurance Premiums: A Comprehensive Guide on Why and What Next?

Rising Insurance Premiums: A Comprehensive Guide on Why and What Next?

December 01, 2023
Navigating the labyrinth of insurance premiums can be challenging, especially when rates are on the rise and market dynamics are constantly changing. Are you puzzled by the recent surge in your home and auto insurance premiums? Or perhaps you're wondering how to mitigate these escalating costs? Welcome to our comprehensive Q&A guide, designed to demystify the current shifts in the insurance market. We'll delve into the root causes of these premium hikes, explore restrictive underwriting practices, and offer practical advice on how to respond. Whether you're a homeowner, car owner, or both, this guide aims to equip you with the knowledge to better understand and navigate the changing landscape of insurance premiums.

What is causing higher home and auto claims costs?

Premiums are rising because Insurance companies have paid out far more in claim costs recently than historically.  A summary of key reasons:
  • Increased catastrophic claims frequency (number of claims)
  • Increased catastrophic claims severity (total $ paid in claims)
  • Specifically in 2022-23, Kentucky had more tornadoes, hailstorms, windstorms and excessive freezing vs. many prior years combined
  • Increased costs of construction materials, supplies, furniture & tech
  • Delays for new and replacement parts (shortages and supply chain)
  • Labor shortages and higher labor costs for a full range of workers
  • More auto claims due to distracted driving and riskier driving behavior
  • Higher vehicle repair costs with more technology (cameras, sensors)
  • Higher vehicle replacement costs from low inventory & high demand
  • Higher Loss of Use/Rental Reimbursement costs due to repair delays
  • Costly medical care driving up claims for auto accidents with injuries
  • Higher 'reinsurance' costs for insurers drive up consumer premiums, driving some to exit the market (Kentucky National, United Home)
  • Fraud and scams which deflect money from valid insurance claims

What is the impact on personal insurance premiums?

Home insurers are adjusting premiums in 2 ways: 
1) Base rates up ~3% to 25% due to the higher costs outlined above
2) Required coverage up ~3% to 15% due to home values and inflation
Auto insurers are adjusting pricing ~5% to over 30% to cover increased vehicle values and claim costs, also as described above.

What restrictive underwriting is taking place?

New applicants are now more routinely declined for a history of claims, cancellation for non-payment or a roof over 10 years old.  Some insurers only offer coverage for an older roof based on Actual Cash Value (ACV), which depreciates (reduces) the value, as opposed to actual Replacement Cost.  You MUST carefully review ‘competitive’ offers if you have an older roof. Limited ACV coverage will cost YOU significantly more ($5-$10-$20,000) at the time of claim if you must repair or replace a damaged roof.

What does Schwartz Insurance Group do to help me save?

First, we secure competitive bids for you.  We represent YOU not the insurer – many agents only access 3-4 options - we bring 12+ competitive companies. Rely on us to shop the market and find the lowest cost.
Second, we help you find premium discounts.  Insurers offer a range of savings opportunities – here are a few great examples:
  • Higher deductibles to reduce premiums
  • Payment plans (semi-annual, annual or EFT)
  • Auto telematics (tech to prove safe driving habits)
  • Credit re-scoring, since yours can change over time
Third, we care enough to protect you properly.  Your Personal Advisor brings market expertise and a commitment to doing what’s right.  We help you better understand your coverage and most importantly, to maintain the right protection. Allow us to review cut-rate offers that may put you at risk. 
Our mission is to cultivate trusted relationships. We love every opportunity to deliver on our promise to help you keep insurance simple and save.