The Volatile State of the Insurance Industry and What That Means for You

Over the past few months, the number one call we have gotten in our agency is, “why are my insurance rates going up?  I haven’t filed a claim.”  We hate to be the bearer of bad news, but it is nothing personal.  It’s the volatile state of the insurance industry as a whole.  We pride ourselves, as your insurance agents, on educating you and making sure you have all the information to make the most educated insurance decisions.  So, let’s dive into what is going on!

Since 2020, the insurance industry has been hit with:

• Steep inflationary increases on building materials,
• Vehicles costing more to repair and replace regardless if they are new or used,
• Increased bodily injury payouts – think vehicle accidents and liability claims (dog bites, trip & fall, etc.)
• Nuclear verdicts being awarded by juries, and
• Increases across the board with labor costs when it comes to claim repairs.

Compounding on these issues, natural disasters are becoming more severe.  According to weather.com, there have been 15-billion-dollar weather disasters this year alone as of August 8, 2023.  On the day that article was published, the fires in Hawaii started, and the property damage alone from those fires is estimated to be $1.3 billion according to CNN.  We are also in the thick of hurricane season, and there were two storms in the Atlantic that weather centers were keeping a close eye on just this week.  These catastrophic storms cause catastrophic losses that insurance carriers pay claims on. 

But like you buying insurance to transfer your risk, insurance companies buy insurance to transfer their risk when it comes to major losses.  That insurance is called reinsurance.  Reinsurance helps insurance carriers reduce their risk of a total financial loss in case of a major disaster.  This is how insurance carriers are able to pay out a large number of losses due to a catastrophic event and still stay afloat.  With the increase in storms/natural disasters, the reinsurance carriers are having to raise their rates and tighten up their underwriting guidelines, which is in turn the insurance carriers are having to raise their rates and tighten up their underwriting guidelines to be able to keep their reinsurance contracts and to be able to continue to pay your claims. 

As such, the insurance carriers are having to take a hard look at all insureds regarding their claims, payment history, and upkeep of their properties (carriers are scrutinizing inspections and insisting repairs are made on items they may not have cared about as much in the past).  Carriers are making difficult decisions to keep customers and/or raising rates to offset rising insurance costs.  For example, we have one carrier that will no longer write homes if the roof is over 10 years old.  Another carrier won’t insure a customer if they have had any type of loss within 5 years. 

Our insurance carriers are not the only ones having to make significant adjustments in this market. 

In June, Nationwide “[began] nonrenewing monoline auto policies, starting with late-September effective dates. However, there will be state nuances based on legal statutes or regulations involving monoline business. Also, effective June 30, Nationwide will pause new writings for habitational and lessor’s risk countrywide.”…“State Farm posted a $13.2 billion underwriting loss for its 2022 property-casualty business, which was the largest underwriting loss in its 100-year history.”   Farmers Insurance also pulled out of the state of Florida.  These are just the carriers that made national headlines.  There are carriers leaving our state because they cannot be profitable as well. 

With all of the market effects of the 2020 pandemic and the extreme weather we have had, we as agents are hunkering down to weather this insurance storm.  We wish we had a crystal ball to see into the future to see how long this hard market will affect us, but unfortunately, we do not.  Some market experts are predicting a hard market until 2025.  What we do know is we are here to help our customers be educated on the ever-changing market and to make sure we are helping you stay insurable and keeping you with stable companies. 

Unfortunately, there are more rate increases coming from all the insurance carriers, help us have the ability to provide you other insurance carrier options by not filing low dollar claims, increase your deductibles if feasible, keep your properties well maintained (cut back tree limbs, remove debris from your yard, make sure your plumbing is insulated and maintained, etc.), and pay your bills on time.  All of these will help you get the most competitive coverage and pricing available.  We are here to help!  Don’t hesitate to reach out with questions at 803-791-1120.