The property and casualty insurance industry is currently undergoing a significant tightening process, with carriers across the country halting new policies and leaving the market. The challenges posed by the inflationary environment have made it increasingly difficult for insurers to operate profitably. As a result, consumers are experiencing rising insurance rates and a sense of uncertainty. Let’s explore several factors contributing to this situation and offer some practical suggestions to you weather the storm.
Understanding the Rising Costs:
1. Rebuilding/Home Repair Costs: The cost of materials and labor required to rebuild homes has dramatically increased.
2. Auto Repair Expenses: The cost of auto parts and labor necessary for car repairs has also surged over 30%
3. Soaring Medical Care Costs: The cost of medical care continues to escalate, impacting the settlements for personal injury claims.
4. Escalating Litigation Expenses: Litigation costs have reached unprecedented levels, forcing insurers to pay substantial amounts in settlements. The Phoenix metro area has a significantly higher number of litigated auto accidents than other US cities.
5. Increased Frequency and Severity of Accidents: Post-COVID, the frequency and severity of auto accidents, along with fatalities, have risen significantly. US Traffic deaths in 2022 hit a 20 year high. Arizona was #2 in the nation in 2022 for Pedestrian vs vehicle fatalities.
6. Reinsurance Challenges: Reinsurance, which acts as a safety net for insurance carriers in the event of catastrophic losses, is approaching capacity in many markets. Rising rates in reinsurance are unsustainable and further impact insurers & ability to maintain stable pricing.
Adapting to the Changing Landscape:
Given the current challenges in the property and casualty insurance industry, consumers can take certain measures to mitigate the impact on their insurance premiums and coverage:
1. Consider Higher Deductibles: Opting for higher deductibles can help reduce insurance premiums. However, it is important to evaluate your financial capabilities before making this decision.
2. Safe Driving Telematic Programs: Enrolling in telematic programs offered by insurance carriers can provide discounts based on your driving behavior. Safe driving habits & low mileage can result in lower premiums.
3. Bundle Auto and Home Insurance: Bundling your auto and home insurance policies with the same agency/carrier can often lead to discounts and more stable pricing. Additionally, bundled policies usually offer better coverage and benefits.
4. Consider Tenure: Avoid frequently changing insurance providers, as it can negatively impact your long-term premiums. Demonstrating loyalty to a single provider (at least for 2-3 years) may yield benefits in the form of lower rates. Jumping from carrier to carrier every year will hurt your long-term tier/rating.
5. Maintain a strong credit score: Credit scoring is a huge factor in your insurance rate.
6. Absorb Small Claims: Evaluate the financial impact of making small claims and consider absorbing the costs independently when feasible. This can help prevent future rate increases.
7. Avoid Glass Claims: If you have a glass chip, we strongly recommend paying out of pocket (usually only about $50 to get it filled) before it spreads and requires a replacement. Glass replacements are costing between $1000-2000 for many newer cars and insurance companies are looking at your glass claims when determining rate & eligibility.
8. Work with an independent insurance agency like Premier Choice Insurance. Independent agencies like ours represent 50+ companies to find our clients the best value without sacrificing important coverage. When you have a potential claim, you can talk to us and we can guide you on what to do – before a claim is opened (affecting your rates).
