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 Car Insurance Costs
Car insurance premiums are on the rise due to several factors. First, 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. Second, the overall cost of maintaining and repairing vehicles increased 18.4 % over the same timeframe – exacerbated by a growing shortage of car repair technicians which has increased labor costs.
The same issues depleted the supply of new and used cars during the COVID-19 pandemic, and inventories have not yet fully recovered. As a result, the average price of new cars has risen 20% since 2020, while used car prices have skyrocketed as much as 37% in some cases.
Rising medical costs are another key factor of increasing car insurance rates. 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%. Unfortunately for consumers, auto insurers are increasing rates to cover these significant increases.
What to Expect In The Future
Despite some inflation cooling, home and auto insurance prices are expected to continue rising during 2023. Home and car owners could expect to see higher rates if they have not already. Your insurance company may have sent you notification about the issues outlined above. While the insurance industry as a whole is facing these challenges, now is a good time to talk with an independent insurance agent who can help you understand your options.
Contact a Brooks, Todd & McNeil Agent Today
If you’re looking to review you current car insurance or homeowners insurance policies, a dedicated independent insurance agent at Brooks, Todd & McNeil can help you. While rates are increasing across all home and car insurance companies, our agents can help identify ways to save money – for example, you may be eligible for additional discounts. Our team can also identify whether your current insurance coverage program is covering all of your exposures, assets and insurance needs.
Whether you’re looking for homeowners insurance, car insurance or any other insurance policies (life, health, business, umbrella, renters insurance, Medicare and more!), we can help. As an independent insurance agency, we will compare policies from multiple carriers (we work with 87!) to customize an insurance program that meets your current needs, and as life circumstances change (i.e. a new home, new car, growing family, starting a business), we will assess your emerging exposures and recommend coverage to protect you accordingly.