Due to a combination of unique market trends influenced by the pandemic and subsequent disruptive events, policyholders can expect a more significant change in the cost of their home and auto insurance when it comes time to renew their policies this year.
Insurance rates are determined based on the insurer’s assessment of the expenses involved in compensating policyholders in the event of a loss, whether it be roof damage caused by a windstorm or a vehicle totaled in a traffic accident. As you may have noticed, the costs of nearly everything have risen compared to just a few years ago.
Factors Driving Higher Home Insurance Costs
If you’ve recently visited Home Depot or Lowe’s, you’ve likely observed the considerable increase in prices for building materials. In the previous year, the cost of building materials surged by 4.7%, with significant price hikes for items such as asphalt shingles (16.2%), concrete blocks (18.5%), and drywall (20.4%).
To compound the issue, the home-building industry is facing a shortage of over 300,000 skilled laborers, leading to higher construction-related labor expenses. Coupled with the expensive construction materials and a historically low housing inventory, this situation has significantly escalated home insurance claims costs.
Factors Driving Higher Auto Insurance Costs
Persistent supply chain problems have resulted in a shortage of car parts and equipment, which were 22.3% pricier at the end of 2022 compared to two years earlier. The overall costs of vehicle maintenance and repairs have increased by 18.4% during the same period, aggravated by a growing scarcity of car repair technicians.
These supply chain issues have also diminished the availability of new and used cars since the COVID-19 pandemic, and the inventories have yet to fully recover. Consequently, the average price of new cars has surged by 20% since 2020, while used car prices have skyrocketed by 37%.
Rising medical costs are another significant factor contributing to the increase. Although the number of injuries and fatalities from car accidents has somewhat decreased since its peak in 2021, the rising cost of medical care continues to drive up claims expenses. From 2020 to 2022, the overall cost of medical care in the United States rose by 6.8%.
It’s important to note that savings can come in various forms. Opting for comprehensive coverage today may provide greater long-term savings compared to choosing the lowest premium available. Feel free to contact us for a review of your current coverage. We’ll assist you in exploring potential discounts that could help offset the higher rates during renewal.
Sources: National Association of Realtors, Federal Reserve Bank of St. Louis, Home Builders Institute, CoreLogic, Consumer Price Index, TechForce Foundation