What’s Going On with Insurance Rates?

This is a common question we hear on a daily basis. Every company out there is experiencing rate increases. Is it the Marshall Fire’s fault? Not entirely, though it played a large part in this change. You can see the reasons all around you: the price of gas has increased; the cost of groceries has skyrocketed; the cost of homes has increased; businesses are understaffed; specifically, the cost of everything related to both autos and homes has increased. Couple those costs with the fact that we’ve seen some of the most catastrophic weather events in history over the last several years and it’s easy to understand why everything is costing more.

For example, when it comes to auto insurance, labor shortages for mechanics and body shops have caused an almost 9% increase in wages. Drivers are driving worse than ever, distracted and overly aggressive, causing higher than average liability claims. The number of fatal car crashes is up 15% from 2020 to 2022, not to mention vehicle body work costs are up 12%, repairs went up 15% from 2021-2022.

Some auto insurance companies are also tightening their underwriting, which can make getting new insurance difficult. Because of the higher and more frequent payouts, insurance companies are generally not inclined to offer policies with State minimum liability coverage anymore. (State minimum coverage isn’t helpful anyway and usually causes financial trouble.) People with tickets or violations will also have trouble getting new insurance, at least at lower rates.

As far as home insurance, there were 15 separate loss events from weather, at over $1 billion as of October 2022. A labor shortage in the construction industry has left over 400,000 job openings, which translates to much higher labor costs. Material goods for new construction has gone up 14% in the October 2021-October 2022 time period. Asphalt roofing materials rose 14.5%. A local Colorado roofer told me there were six price increases in 2022. Six! In addition, prices for lumber and wood products rose 6.2% in that same time period. Insurance companies need to be prepared and have the cash reserves for these kinds of prices, which forces an increased cost of home insurance.

Many companies, including the mainstream ones, have now implemented higher percentage deductibles to help lower the rates, but those can often hurt clients. Other companies have implemented “roof payment schedules” where it may appear you have a low deductible, but the insurance company only pays a small portion of the roof’s value (based on actual cash value), then you, as the insured, still are required to pay more. A roofer told me last week a client of his ended up paying over $12,000 because his insurance company was not open about the type of deductible he had. That client was furious.

We only write replacement cost policies here. That simply means: if there is a claim, you pay only your deductible, and the insurance company pays the rest. Period. We don’t use percentage deductibles and we don’t write roof payment schedules unless you request it. The value in the insurance we write here is designed to take care of you and minimize financial stress, not increase it.

Will insurance costs decline?

Based on the economy most would answer ‘no’ for the short-term but they should subside in about a year assuming there are fewer catastrophic events and inflation comes down. But count on the higher rates to stay around.

What can you do?

The great thing at Rocky Mountain Insurance Center is that we have options and we have the best insurance coverages in the industry. If the rates go up – and they will – we have the ability to re-shop and find something else while retaining strong coverages. We’re always here to help you so that YOU benefit from your insurance.

If you have any questions about the rates, your coverages, or what’s going on in the insurance industry, always feel free to reach out to us at the office, at 720.335.6872. We’re here to help and are happy to do so!