As a local independent insurance agent, I thought I would take a few minutes of your time to explain why you may see your insurance rate increasing for your home and auto insurance when it comes time to renew your policies this year.
What’s driving higher home insurance costs?
If you’ve shopped at Home Depot or Lowe’s lately, you’ve certainly seen that the price tags on building materials have gotten expensive. Last year, the cost of building materials rose 4.7%, reflecting a particularly strong uptick in prices on things like asphalt shingles (16.2%), concrete blocks (18.5%) and drywall (20.4%). To make matters worse, the home-building industry is facing a shortfall of more than 300,000 skilled laborers, which is driving up construction-related labor costs. Combined with the high cost of construction materials and historically low housing inventory, this has been making home claims much more expensive for insurance companies.
What’s driving higher auto insurance costs?
Ongoing supply chain issues are causing a shortage of car parts and equipment, which were 22.3% more expensive at the end of 2022 than they were two years earlier. The overall cost of maintaining and repairing vehicles increased 18.4 % over the same timeframe – exacerbated by a growing shortage of car repair technicians. Additionally, the average price of new cars has risen 20% since 2020, while used car prices have skyrocketed 37%.
What is the industry’s reaction?
A HARD market. That means increased rates, strict eligibility criteria, and a higher percentage of existing clients being non-renewed. Most insurance carriers are changing their guidelines for prospects they will accept for auto and home. Lastly, many companies have gone as far as requesting approval from the state of NJ for rate increases ranging from 7% to 35%, which is unprecedented.
What does that mean for YOU?
For auto insurance, the payment plans are becoming less flexible, such as requiring more money down and many companies are only looking to take on “better” clients. For example, they want clients with excellent insurance scores and those who have zero accidents or violations.
For home insurance, all carriers are placing restrictions on the type of business we can write. For example, they are scrutinizing older homes, roofs over fifteen years or older, and won’t accept
clients with prior claims. Whenever we write a new policy, the company will perform home inspections. These inspections have been very critical of new policies, which can produce a laundry list of expensive repairs they require to prevent possible claims.
How can your agent help YOU?
When it comes time to renew your policy, if you feel the rate increase is too steep, please contact your agent to review your current coverage. They may find there are ways to save you some money with your current insurance company or at the very least, they will be able to explain to you the reason for the rate increase. After a review of your policies, they may suggest it is best for you to stay with your current carrier, even with a rate increase, until the market becomes less volatile. You don’t want to risk switching your policy only to have the insurance company require updates to your home, which will cost much more than your prior policy’s rate increase. Keep in mind that savings come in many forms. The value of the coverage you choose today may save you more in the long run than the lowest possible premium. No matter what, communicate with your agent to find a reasonable solution or advice.
*SOURCES: National Association of Realtors, Federal Reserve Bank of St. Louis, Home Builders Institute, CoreLogic, Consumer Price Index, Tech Force Foundation