Why home and auto insurance rates are continuing to rise in 2023
Thanks to an unusual convergence of market trends, ushered
in by the pandemic and followed by other disruptive events,
you may see a bigger change to the cost of your home and auto
insurance than usual when it comes time to renew your policies
this year.
Insurance rates are based on what an insurer thinks it will cost to
make you whole in the event of a loss – whether it’s roof damage
during a windstorm or a vehicle totaled during a traffic accident.
As you’ve likely noticed, pretty much everything costs more
than it did even a few years ago.
What’s driving higher home insurance costs
If you’ve shopped at Home Depot or Lowe’s lately, you’ve
certainly seen that the price tags on building materials have
gotten pretty expensive. Last year, the cost of building materials
rose 4.7%, reflecting a particularly strong uptick in prices on
things like asphalt shingles (16.2%), concrete blocks (18.5%) and
drywall (20.4%).
To make matters worse, the home-building industry is facing
a shortfall of more than 300,000 skilled laborers, which is
driving up construction-related labor costs. Combined with the
high cost of construction materials and historically low housing
inventory, this has been making home claims much more
expensive for insurance companies.
What’s driving higher auto insurance costs
Ongoing supply chain issues are driving a shortage of car parts
and equipment, which were 22.3% more expensive at the end
of 2022 than they were two years earlier. The overall cost of
maintaining and repairing vehicles increased 18.4 % over the
same timeframe – exacerbated by a growing shortage of car
repair technicians.
The same issues depleted the supply of new and used cars
during the COVID-19 pandemic, and inventories have not yet
recovered. As a result, the average price of new cars has risen
20% since 2020, while used car prices have skyrocketed 37%.
Rising medical costs are another key factor. While the number
of injuries and fatalities from car accidents has somewhat
declined from its peak in 2021, the rising cost of medical care
continues to drive higher claims costs. Between 2020 and
2022, the overall cost of medical care in the U.S. increased
6.8%.
Focus on value as you explore ways to save
Keep in mind that savings come in many forms. The value of
the coverage you choose today may save you more in the long
run than the lowest possible premium. Contact us to review
your current coverage. We’ll help you explore opportunities
for discounts that could offset higher rates when it comes
time to renew.
Sources: National Association of Realtors, Federal Reserve Bank of St. Louis, Home Builders Institute, CoreLogic, Consumer Price Index, TechForce Foundation