08/10/2023
Now is a good time to address the turmoil in the insurance business. We hope that you find the below information useful, and we hope that it helps explain the problems in the insurance world today. It doesn't matter which insurance company is your carrier; this situation is an industry issue.
The insurance marketplace is contracting and it's happening fast. It's happening especially fast for home and auto insurance companies. This is regardless of which state you are in; however, California, Florida, Louisiana, and Texas are being hit especially hard. Carriers are instituting a stop on issuing new policies across the country. Carriers that have not put a moratorium on binding new coverage are leaving the market, or they are selling to other carriers/merging. They simply can't operate profitably in this market. Daily, we are hearing about a pause on new business, or a carrier putting a full stop on writing new policies. Some carriers are requiring *full premium payment* up front for new business or requiring a 20 to 30 day hold on new applications. Carriers may shift underwriting guidelines, so they only want preferred business... no claims within 5 years (not 3 anymore), home and auto bundles, etc. Some carriers will not reinstate coverage if it lapses, no matter the reason.
The market is disrupted, and it will affect you. If it hasn't yet, it will. We have personally seen premiums double and triple compared to 2022.
The cost of claims has risen exponentially in the past 2 years which has resulted in carriers being forced to raise premiums or abandon some markets. In many states, carriers have applied for rate increases; if they cannot get the rates approved, they simply shut down for new business.
If you have an auto or home insurance policy, your rates have gone up, and if they haven't increased, they will. If you have not gotten a rate increase, be prepared for one at your next renewal, if you get renewal terms at all.
The single biggest reason for premium increases is severe weather; our areas of operation in Northeast Texas have seen 3 major storms in 2022, and 1 major storm in 2023. When these storms are combined with normal expected losses, the payment of claims skyrockets.
Other reasons for increased premiums include:
➡️The cost to rebuild your home is up dramatically due to the rising cost of materials and labor. The supply chain for materials continues to be an issue. We can all agree that everything has gone up in price. Carriers simply can't survive paying these higher prices without charging more themselves.
➡️The cost to repair your car is up substantially due to the rising cost of auto parts and labor. In addition, parts in vehicles now include technology features that increase the cost of repair. Replacing a side mirror or windshield was $500 - now it's more than triple that amount.
➡️The cost of medical care continues to increase. Bodily injury claims involving auto accidents are off the charts.
➡️Litigation is expensive, and settlements are rising at an unprecedented rate.
➡️Both the frequency and severity of auto accidents is higher post-COVID along with the rising frequency of auto fatalities.
➡️Reinsurance (the insurance your insurance carrier buys to help cushion catastrophic losses) is at or approaching capacity in many markets; there is limited supply of reinsurance, and there is great demand. This lack of supply of reinsurance causes the premiums paid by your carrier to increase, and this increase is passed along to you.
This is a significant issue affecting the property & casualty industry, and pricing correction is anticipated at least through 2024. It won't be for forever, but it is here now.
There are some things you can do to help get through this current insurance market:
✅Consider Higher Deductibles. This will help save some money on your policy.
✅ Safe Driving Telematic Programs. Telematics can reward you by giving you a discount for good driving.
✅Discount Reviews - make sure you're getting everything you're entitled to. Every carrier has different discount opportunities. Make sure you go over those discounts with your agent.
✅Do not let your policy cancel or lapse for any reason. Carriers are not reinstating coverage as easily as they once did. If it does cancel, they may require premium in full before reinstating. This is across the board for every line of coverage.
✅Bundle your Auto and Home for more discounts and more stable pricing. Bundled/Packaged policies most always include better coverage and benefits, and the savings is usually 10-15% (or more) on each policy. Many business risks can also bundle options.
✅Consider tenure - jumping companies too often will hurt you in the long run. In addition, some carriers won't take you as a new client if you have less than two years with a carrier. More importantly, carriers are getting off of some risks if a claim happens in the new business term or for the number of claims in a 3-5 year window. Tenure matters with a carrier.
✅Follow the laws so you don't get any tickets. Those tickets really add rate to your policy and stay on your record 3-5 years depending on the carrier.
✅Absorb small claims when you're able and save coverage for catastrophic losses. Talk with your agent and let them claims counsel you should a loss happen. Stop using your towing or roadside assistance as a maintenance policy. Frequency of claims matters.
Lastly, please remember that we are agents for the carriers. We don't make the rules; we don't have control over the rates, and we don't make the decision if your policy is cancelled by the carriers. We are here to help educate, make sure you have the best insurance for your situation, manage your account with the carrier, and claims counsel when needed. We are doing our best to manage carrier changes with client needs.
On September 1, 2023, our agency will have been in existence for 49 years. None of us have experienced such a difficult market; insurance premiums and underwriting moves in cycles. We will cycle into a better market; as always, we will be here for you in good times and bad times.
