As agents, we field a lot of calls pertaining to rate increases. We don't mind these calls as we want to make sure you know what you are paying for. We understand rate increases are difficult to swallow (believe us, we know as we pay insurance, too!). That's why as insurance professionals, we are here to help explain. Rate increases occur for any number of reasons: vehicle changes, accidents, violations, aging, youthful drivers (darn kids!). These are the most common - but what about when you have a clean record, no kids, etc. Why are they increasing then? Let's see if I can answer that below.
Driving behavior changed dramatically due to Covid-19, especially at the onset of the pandemic. Fewer miles driven meant fewer accidents and therefore, lower overall costs for auto insurers. The industry responded quickly by issuing refunds/credits to customers, lower rates or both. I know, I know - I'm supposed to be talking about the rising rates. Please keep reading...
In recent months, driving behavior has nearly returned to pre-pandemic levels and so has the frequency of accidents. And let's not mention the entire month of May and storms causing sever damage to homes and autos. As the number of claims returns to (and then surpasses) pre-pandemic expectations, insurers' costs follow. To pay the increasing claims, insurance rates must then also return to (and then surpass) where they were before the pandemic. Still not the answer you want? Yep - keep reading...
Rising Repair and Replacement Costs (severity)
Ahh, here is what you are looking for... When accidents occur, auto insurers pay for the parts, labor and other costs associated with repairing or replacing the damaged vehicles. Since the start of the pandemic, supply chain disruptions and labor shortages have driven these costs up substantially.
The Bureau of Labor Statistics reports that average expenditures for vehicle repairs have risen more that 4% over the last year, while used car and truck prices have skyrocketed by more that 40% over the same period! Initially, the reduction in accidents off set the rising vehicle repair and replacement costs. That is no longer the case. Driving behavior has returned to normal and yet these costs continue to escalate. And your homeowners? Same principle applies. Labor and material costs continue to skyrocket which in turn increases the replacement cost on your home, which in turn increases our premiums.
Insurance rates will always fluctuate with the market. Adjusting rates to cover increasing costs. I don't know a person alive that likes rate increases (if you exist, please come find me as I would love to chat!) however, when we can understand or relate, it's an easier pill to swallow. So we see the rates increase, we see the discounts for the pandemic being removed as we try to "return to normal".
So, as you watch everything around you start to increase in price and continue to climb, we are no exception to that rule. Increasing rates will have an effect on all lines of insurance. When your renewal comes and you take notice of the rate increase at least there is an explanation as to why. Don't hate on your agents! We strive to make sure we are offering you the coverage you need at the best premium possible. What's important to you is important to us and we still want to protect you!