The cost to insure a home in Colorado has risen by 50% over the last three years. In addition, it’s becoming harder to find coverage, and we’re seeing premiums rise on other types of insurance.
Part of knowing how to choose an insurance agent involves understanding the changes in the market. These changes will impact you, and your agent needs to know how to navigate a complex insurance marketplace.
Keep reading to learn how the market is changing and how an agent can help you with buying insurance at an affordable cost.
The State of the Insurance Industry
The current state of the insurance industry is changing quickly. Changes are far-reaching, and it doesn’t matter what carrier you are with. This is an industry issue.
It is happening to homeowners, auto, and commercial property owners.
It also does not matter what state you live in. However, states like California, Colorado, Louisiana, Texas, and Florida are seeing the biggest changes.
Some insurance companies are entirely stopping issuing any new policies. For example, Allstate and State Farm are no longer writing new homeowner policies in California.
If the company isn’t putting a moratorium on new coverage, they may actually just be leaving the market. We’re seeing other companies selling or merging with other carriers.
We’re living in an inflationary market. This is making it hard for these companies to operate profitably.
Changes to Who Is Covered
Some carriers require a full payment upfront for new business. Others are placing a 20 to 30-day hold on new applications.
Insurance companies may also change underwriting guidelines. If they do, they’ll only sell to preferred businesses with no claims within five years instead of the previous requirement of three years.
If your insurance lapses, some companies will not reinstate your coverage. And the reason for the lapse doesn’t matter.
Changes to the Cost of Coverage
Premiums are double and triple what they were the year before. Car insurance premiums alone have increased by 19% in the past year. This is the biggest increase in car insurance premiums since 1976.
Over the past two years, the cost of claims has risen significantly, and because of this, insurance companies have raised premiums. In some instances, they’ve even pulled out of markets.
In states where carriers have applied for a rate increase but have not been approved, they’ve shut down for new business. You’ve likely seen your commercial property, home, or auto insurance policy rate rise. If you haven’t, you will.
The rate increases aren’t about you, and it’s not about a claim you may or may not have had. It’s the cost of doing business.
If you haven’t received a rate increase, be prepared for one at your next renewal.
Cost to Rebuild Your Property
Due to rising labor and material costs, rebuilding your property is more expensive than ever. Reconstruction and replacement costs increased by 55% from 2019 to 2022. In addition, the supply chain for materials continues to be an issue.
Car Repair Costs
Anyone who has taken their car into the shop recently can attest that the cost to repair your car is up significantly. This is due to the rising cost of labor and auto parts to fix your car.
In addition, cars with advanced technology have higher repair costs as well.
Both the frequency and severity of auto accidents are up as well. In 2021, around 42,915 people died in car accidents. This is a 10.5% increase from 2020.
Cost of Litigation
The cost of litigation is considered one of the most significant factors in increasing costs. Nuclear verdicts where rewards exceed $10 million are among the biggest contributors to social inflation.
Many markets are near or at reinsurance capacity (insurance your insurer purchases to help cushion catastrophic losses), and rising rates are unsustainable.
This is a significant issue affecting the property and casualty industry, and pricing corrections are expected through 2024 at least.
How to Handle Rising Costs
When choosing your insurance agent, talk to them about ways to reduce your costs.
There are some things you can do to help get through this current insurance market:
Consider Higher Deductibles
This will help save some money on your policy. However, at the same time, ensure it’s a deductible you can afford if something happens.
Safe Driving Telematic Programs
Are you a good driver? Telematics can reward you for safe driving behaviors.
However, not every carrier offers this type of program. Talk to an insurance agent about how to take advantage of this.
Every insurance company has different discount opportunities. Make sure you go over those with your agent.
Don’t Let Your Policy Lapse
We can’t say this enough: DO NOT let your policy lapse. Carriers are not reinstating coverage as quickly as they once did.
If it does lapse, they may require a premium in full before reinstating. This is across the board for every line of coverage.
Bundle Your Insurance
Bundle your insurance for more discounts and more stable pricing. Bundled policies almost always include better coverage and benefits.
The cost savings are usually 10-15% (or more) on each policy.
Jumping companies too often will hurt you in the long run. In addition, if you have been with a carrier for less than two years, some carriers won’t take you on as a new client.
Long-term policyholders can even receive discounts from some insurance companies.
Follow All Driving Laws
Tickets increase the cost of your policy. In addition, they stay on your record for 3 to 5 years, depending on the carrier.
Absorb Small Claims
Do you have a small ding you can afford to fix without insurance? Absorb the cost.
Save your insurance for catastrophic losses. If this situation occurs, you can talk to your agent about the best decision.
Don’t Use Your Roadside for Maintenance
Your claim frequency matters a lot. While roadside assistance is good to have in an emergency, you shouldn’t use it as a maintenance policy.
Know How to Choose an Insurance Agent
Knowing how to choose an insurance agent comes down to finding someone who can navigate this complex market.
Veta Enright is Your Insurance Lady. She’s been helping people get insurance coverage in Colorado since 2010. If you’re looking for exceptional service, request a quote today.