As a consumer, you may not often consider the behind-the-scenes factors that drive your insurance premiums. It’s important to remember that recently, insurance companies have been paying out more in claims than they collect in premiums. With a loss ratio of 111%, insurers are trying to offset these losses, and unfortunately, the cost gets passed down to the clients.
Many factors contribute to the rising cost of insurance, and they may be more significant than you think. For instance, while you may not have filed a claim after a hailstorm, hundreds of others in your area likely did, which impacts the overall pricing of home insurance. Here’s a closer look at some key drivers behind the price increases:
Auto Insurance Costs:
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Vehicle Theft: Car theft has been steadily increasing since 2019, with 2023 setting new records, largely due to the Hyundai/Kia theft trend.
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Rising Used Car Prices: Used car prices surged by 47.9% in 2023, affecting claims payouts for repairs and replacements.
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Severe Accidents: Larger and more powerful vehicles are leading to more severe accidents, driving up the cost of claims.
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Traffic Fatalities: The first half of 2024 saw nearly 19,000 deaths from traffic accidents, further straining auto insurance.
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Labor Shortages: The auto repair industry is projected to need 495,000 more technicians by 2027, contributing to longer repair times and higher costs.
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Technological Advances: Vehicles equipped with advanced driver assistance systems (ADAS) cost up to 37.6% more to repair, as sensors and calibration add to the complexity.
Home Insurance Costs:
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Weather-Related Losses: In 2023, there were 28 separate weather events causing over $1 billion in damages, significantly impacting home insurance rates.
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Water Damage: Water-related claims remain common, with 1 in 60 insured homes filing property damage claims each year.
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Labor Shortages: With 346,000 job openings in the construction industry as of March 2024, the cost of repairs continues to rise due to demand.
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Rising Material Costs: The price of building materials surged from 2020 to 2024, further driving up repair costs.
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Fire Losses: Over 380,000 residential fires in 2022 resulted in nearly $11 billion in damages, another factor pushing home insurance premiums higher.
The cost of insurance is affected by many factors outside of individual control. However, understanding these driving forces can help you make more informed decisions about your coverage and better prepare for future changes in premiums.
At Goodrich & Watson Insurers, we want to help you find the best insurance coverage for the best price available. Request a quote today!
