Inflation is something that consumers worldwide have had to deal with for some time now, whether that’s paying higher prices on large purchases like cars and houses or having to be more selective at the grocery store. Unfortunately, home and auto insurance rates are also continuing to rise in 2023. It can be hard to understand why this is, so in this blog piece we will give you some reasons why you may see a higher-than-usual increase in the cost of your insurance premiums this year.
What Are Insurance Rates Based On?
In most areas of the market, prices are reflective of supply and demand. When there’s a larger demand for something - like housing in Kent County - there are more people competing for the same scarce resources, and the price goes up. The cost of insurance does not vary so much based on demand for insurance, but replacement costs of items damaged or lost.
Your homeowner’s policy and premiums are based on what your insurer calculates it will cost to make you whole if you have a loss. That might mean replacing stolen items or repairing roof damage from a snowstorm. The same is true for auto insurance. In the event of an accident, your car will need to be repaired or replaced. Unfortunately, the price of almost everything, including building supplies to auto parts, has gone up significantly in the past several years.
Due to the COVID-19 pandemic, many manufacturers were forced to shut down for periods of time and persistent supply chain problems developed. This meant delays and higher costs for many staples like building materials, including steep increases for asphalt shingles, concrete blocks, and drywall. There is also a shortage of skilled workers in construction and higher gas prices mean shipping costs are also much higher. As a result, home claims have become much more expensive for insurance companies.
Auto claims are more expensive as well. So many auto parts have become difficult to get, making repairs more expensive, and this industry has experienced a shortage of repair technicians as well. Car parts and equipment were 22.3% more expensive at the end of 2022 than they were in 2020, and the cost of car maintenance and repair is up 18.4% in the same time period.
New cars are harder to come by as well. Consistent demand, coupled with far less supply during and after the pandemic, depleted new and used car inventories. The cost of a new car is up 20% since 2020, and the cost of a used one has increased a staggering 37%. Medical costs have also risen, and those have to be factored into auto insurance premiums as insurance companies are responsible for paying for medical care for people injured in traffic accidents.
What To Do About Rising Insurance Rates
Bear in mind that the value of your coverage may very well save you money in the long run, in the event of an emergency or loss. However, if you are concerned with how rising insurance rates will affect your premiums on your auto, homeowners, rental, business, or other policies this year, that’s very understandable. Please do not hesitate to contact us at Navisure Insurance Group. We can explore ways to offset higher rates when it comes time for you to renew your policy, including telematics and other discounts. We are always available to talk about your insurance needs, so please call us with any questions you have.
COREY VANDERMEER | PRESIDENT
Corey started his insurance career in the claims department for a national carrier and learned the basics of insurance coverage and how it’s applied. From there he decided to take the jump into sales and joined an independent insurance agency. Here he learned how to build coverage around the needs of each individual and cater to every client. When Corey decided to start an insurance agency he did so with the intention of simplifying the process of getting insured. With a focus on technology and simplicity; his goal was to create an insurance agency that was different from those currently dominating the market place.
When he’s not working, Corey enjoys golfing, fly fishing and spending time with his wife and kids. Together they enjoy traveling to Northern Michigan and to his wife’s hometown of San Francisco.