You may have noticed that – like many other goods or services – the cost of insurance is on the rise. But it can be difficult to understand what impacts these premiums and why it is costing more to insure property like your home or auto. Let’s take a look at some of the reasons.
Costs of Goods
Parts and materials, whether it be for a car, roof, building, or otherwise, are costing more. The supply chain for many goods has been strained since COVID, and as demand rose again in 2021, supply could not keep up. Insurers are paying more to have these items replaced in claims, and that results in higher premiums to cover those costs.
Time of Repair
The average wait time for repair appointments is now over five and a half days. That’s up almost two days from 2021. This causes more for rental cars and loss of use, costing insurance companies additional money on claims.
The term social inflation refers to an increase in litigation, judgement amounts, and damages from lawsuits. As more people sue – and for larger amounts – claims and legal costs rise. There are even companies providing funding for litigation, circumstances where they pay for the legal costs in order to ensure themselves a percentage of the damages paid.
Insurance companies guard their own risks by purchasing reinsurance to protect against their losses. However, the cost of this coverage mechanism had been on the rise for several years. As companies factor these costs into what they charge, it contributes to higher premiums for the consumer.
Many consumers may feel little to no remorse for insurance companies making less money, but they are still companies that need to make a profit to survive. Actuaries from the Insurance Information Institute have reported that the property and casualty insurance sector is unlikely to turn a profit again until 2025. That may continue to push rates up, or at least keep them from falling dramatically.
Even with these rising costs, we can help you find options for your coverages. As an independent agent, we work with numerous insurance companies and can help you shop to find the right coverage at the right price for your budget.