Behind the Rise in Home and Auto Insurance Costs

May 30, 2024 | Commercial Insurance, Personal Insurance


Here are some insights into the reasons behind the recent surge in home and auto insurance premiums and what it might mean for you.

Recently, homeowners and drivers have noticed a significant uptick in their insurance premiums. This trend is not isolated to any one region but is rather a widespread phenomenon affecting millions of consumers, with multiple factors contributing to the rising costs of home and auto insurance premiums.

Here are some insights into the reasons behind this surge and what it might mean for you.

Climate Change and Natural Disasters

One of the most significant drivers of increased insurance costs is the impact of climate change, which has led to a rise in natural disasters such as hurricanes, wildfires, and floods. These events not only result in a higher number of insurance claims but also more severe and costly ones. For instance, the past decade has seen some of the worst hurricanes in history, which have caused extensive property damage covered under homeowners’ insurance policies. Similarly, regions prone to wildfires have experienced unprecedented destruction, leading to massive payouts by insurance companies. As these natural disasters become more frequent and intense, insurers are forced to raise premiums to cover the resultant claims.

According to NPR, there were around two dozen severe storms in the U.S. in 2023 with billion-dollar price tags, spreading lightning, hail and damaging winds through many parts of the country.

And the Insurance Journal reports that a survey by Redfin, a U.S. real estate broker, found that just over 70% of Florida homeowners said that they or the area in which they reside have been hit by higher insurance costs or changes in coverage. In California, some 51% of respondents have seen rising premiums or reduced coverage for their homes or others nearby, the Redfin report noted.

Inflation and Rising Repair Costs

Inflation affects all sectors of the economy, and the insurance industry is no exception. The cost of repairs and replacements for homes and vehicles has skyrocketed, primarily due to increases in the prices of materials and labor. For example, global supply chain disruptions have led to higher costs for building materials such as lumber and steel, directly impacting home repair costs. Similarly, auto parts have become more expensive, increasing the overall costs associated with vehicle repairs. Insurers pass these increased costs on to consumers through higher premiums.

NPR reports that while state regulators have some power to limit those price hikes, insurance companies tend to get their way. Regulators know that if they move too aggressively to limit premiums, insurance companies might stop offering coverage altogether.

While technology has made vehicles safer and more efficient, it has also made them more expensive to repair. Modern cars are equipped with advanced features like sensors, cameras, and other electronic components that are costly to replace in the event of an accident. Even minor collisions can result in significant expenses due to the need to replace or repair sophisticated technology. Consequently, as cars become more complex, insurance premiums rise to reflect the higher repair costs.

Insurers Withdrawing from the Market

The Insurance Journal has reported that State Farm in California will be cutting about 72,000 policies in July, just nine months after announcing it would stop offering new coverage, for reasons including increased risks from wildfires and inflation. Several other companies have either paused new policies or will no longer offer new ones, including Allstate Corp., Farmers Insurance and United Services Automobile Association. The Hartford recently said it will discontinue writing new homeowners’ policies in California.

What Can Consumers Do?

You can take several steps to mitigate the financial impact of rising insurance premiums, including:

  • Shopping around for the best insurance rates once a year to get competitive quotes
  • Increasing deductibles
  • Improving home and vehicle security
  • Maintaining a good credit score to help lower insurance costs
  • Staying informed about the factors influencing insurance rates
  • Advocating for policies that help manage costs

Let the GTM Insurance Agency Provide a Quote

To combat rising insurance premiums, the GTM Insurance Agency can provide competitive quotes on a primary or second home, multiple vehicles, or additional properties. We’ll work with top carriers like Chubb, The Hartford, Travelers, and many others to determine the right amount of protection for you and your belongings.

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