Inflation = Rising Insurance Rates

2022-03-28
By: MVAadmin

Over the course of the last year, our blog has provided a lot of information regarding the rise of insurance rates. We’ve done our best to keep you up to date on the industry trends and offer tips to help keep your individual rates as low as possible. Our obsession with perfecting our client’s insurance coverage is one of the things that fuels us each day. We will continue to provide insightful information as we do our best to educate each client we serve.

Rising Insurance Rates

Insurance rates have been on the rise for quite some time. In recent years we’ve experienced extreme weather causing a dramatic rise in natural disasters, inflation, challenges with the supply chain, not to mention a global pandemic. All of these has led to quite a shift in the insurance industry.
According to AM Best, an insurance industry rating and analysis firm, homeowners nationwide are paying about 8.4% more in 2021 as compared to the end of 2020 (in New York City that increase is in the double digits).

Which States Are Most Affected?

Honestly, we are seeing increases across all 50 states but there are parts of the country where the rise in insurance rates have risen more dramatically, such as: Florida, California, New Jersey, New York, Louisiana, Texas, Mississippi, and Alabama. In some cases, such as in Florida and California, it can be a challenge to find many options for coverage, if coverage can be obtained at all.

Reasons

Most everyone is aware of the increase in extreme weather including hurricanes, tropical storms, and tornados. The wildfires that often occur out west is another big factor you most likely have heard us discuss. Additional reasons include:
  • Inflation for the US is at an all-time high since June of 1982
  • In some metropolitan areas such as New York City, the aging infrastructure has resulted in an increase in water claims.
  • Increased and continued community development when coupled with increased rainfall means that homes don’t need to be in a flood zone to experience damage from flooding.
  • Increased demand for building supplies coupled with continued inflation make it more expensive to rebuild after a flood or fire and those costs are expected to continue to increase. The average increase in reconstruction costs in the US is 7.2% and in New York City, the increase was double digits.
  • The supply chain issues continue to cause a shortage in available materials which in turn causes building delays.
  • COVID has caused a reduction in the available skilled labor and dramatically increased labor costs.
  • Custom design details are more expensive to replace or restore after a loss. With inflation at an all-time high, the costs are continuing to rise.
  • Open floor plans add to the damage as a fire will spread quickly throughout the first floor.
  • Synthetic materials burn faster and hotter resulting in more damage because they burn up to 6 times faster than the materials in an older home.

Final Words of Wisdom From Your Insurance Advocate

What does all this mean for you our valued client? While we hope that rates will not continue to rise at the same trajectory we’ve been seeing, for the time being, we do have some recommendations to help you keep premium cost as low as possible.
  • Increase your deductible.
  • Do all you can to protect your home from future claims by adding features such as a water shut-off alarm, fire suppression sprinklers or a whole house generator.
  • Stick with your current carrier. Even though it may be tempting to make a switch to save money, loyalty is rewarded in the long run.
  • Only file larger claims. Multiple, small claims can be a red flag for insurance companies.
  • Make your payments on time.
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