As you may have noticed in the last few months, many of the changes that we have discussed in previous blogs are starting to take hold. Carriers are increasing rates by 20-40% as well as limiting coverage or exposure in a few different ways. Let’s dive into these changes so you can understand how they may or may not impact you.
Insurance companies are now raising deductibles for all types of property losses. This means that in the event of a claim, you will be responsible for paying a higher out-of-pocket amount before your insurance kicks in. It's important to review your policy and budget accordingly to ensure you're prepared for these higher costs.
In addition to general property losses, deductibles for wind and hail damage are also on the rise. These specific increases reflect the growing frequency and severity of such weather events. Homeowners in areas prone to wind and hail should particularly take note and consider additional protective measures or savings to cover these potential costs.
Another significant change is the shift from covering replacement costs to covering the depreciated value for wind and hail damage. This means that instead of receiving enough funds to fully replace damaged property, you'll only get a payout based on the current, lower value of the items. Understanding this change is crucial for planning your finances and ensuring you have adequate coverage.
For more details on each of these changes, check out our blog on the subject.
Insurance has become a significant conversation with all of the changes in the marketplace. First, let’s dispel one huge myth we all continue to hear. With a 20-40% increase, people assume that insurance carriers are making a ton of revenue on these rate increases. While it is true that their top-line revenue is up, insurance carriers continue to struggle with profitability, especially with personal insurance.
On the homeowner side, frequent storms and subsequent damage have led to another difficult year. While the companies have made changes to both premium and product, it takes an entire year to bring that change to the marketplace because they can only implement it at the renewal of the policy. For example, if they introduce a change in product or price on January 1, 2024, it would take until December 31, 2024 to impact their entire book. While increased premium and coverage changes will impact results along the way, the full impact of a change in the example above would not take hold and impact results fully until Jan 1, 2025.
Auto insurance continues to show extreme volatility with large liability losses. Jury verdicts have been extremely inflated leading to increased rate pressure on that side of the product. Inflation remains which leads to higher costs for vehicle repairs as well.
Carriers continue to show negative results through Q2 2024. Many are losing 20-30 cents for every dollar of premium that they take in on personal insurance products. They are hopeful that the changes described above will start to turn the results around.
The point in all of this? Even with the unprecedented rate increases, the insurance industry continues to lose money. We are hopeful that things will level off once the rate increases and changes have had a chance to cycle through, beginning in late 2024 and early 2025.
As rates increase, the deductible changes usually net more savings. You may have looked previously and found a very small savings, if rates go up 20-40%, the savings would typically follow that track and it might be worth doing. We have also seen carriers tighten their underwriting which means prior claims will end up creating more rate. Our agency is going to steer you away from filing smaller claims which means we might as well increase the deductibles to save some of the premium up front.
We have many carriers that will not take or significantly increase rates when there are prior claims involved. Even towing, glass, and other smaller items that may not have been considered in the past can have a significant impact on rates.
With increases, it may make more sense than ever to eliminate the physical damage coverage on older vehicles. We have had many conversations over the years with clients where they are willing to keep paying a few hundred dollars to have full coverage on older vehicles. Those costs are escalating and it will make sense to review in many cases.
When the market tightens, carriers will offer significant discounts to write all of your business and severely surcharge policies that are monoline (only covering one thing). We typically try to bundle auto and home together to get you the best pricing. With the tightened underwriting, that can become difficult as many carriers will only take clear driving records, or roofs that are less than 10 years old — but we try to put them together whenever we can. We've had several calls with coverage split between direct writers (American Family, State Farm, All State, etc.) where the home or auto went up significantly and they only want a quote on that piece. We are very seldom competitive in those cases. Chances are a policyholder will be best off with everything in one place.
A market like this is unprecedented, with rates up 20-40% across the board and carriers continuing to lose money. If you have any questions or concerns, as always, your agents are here to try and help.
We thank you for your continued trust in our agency to protect your families.
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