We are in unprecedented times. We at Mansfield insurance agency think it’s time for unprecedented communication. This is going to be a long one, forgive me for that. However, I do think it will help to explain some of the things we are all dealing with in the last three years. We continue to see raising premiums (especially this year in home policies). The insurance industry has continued to have to adjust to unforeseen factors affecting their financial stability. The three main factors are hyperinflation, claims frequency, and severe weather patterns. I want to address the first one, hyperinflation, in this editorial.
We are receiving information from our eight different insurance carriers it seems monthly. Many are changing their rates to adjust to what is happening. Some have gone further and adjusted how their policies are organized. Increasing minimum deductibles, changing new business eligibility, and in some cases how they are responding to wind/hail claims are all steps we are navigating. These increases and policy changes are not carrier specific. They are industry wide. I don’t know of a carrier that has not increased their premiums significantly in 2023. Most (if not all) plan to make similar increases again in 2024.
This insurance market is the most volatile in our agency history. In this editoriall I’m going to address hyperinflation. I will plan to write a series of pieces that address each of the major factors affecting the insurance industry.
Hyperinflation and Insurance
Insurance rates are designed by insurance companies based on what they think it will cost to make the policyholder whole at time of loss. This includes things like roof damage during a windstorm, cleanup after a water or fire loss, repairs to a home or auto, or replacing a vehicle after an accident. These repairs or replacements have increased dramatically. The overall cost to maintain and repair a vehicle is up 19.5% according to the Consumer Price Index. Replacing a vehicle has not been any better. The average price of a new car has risen 20%, while used cars have gone up an astounding 37%.
Building materials are a similar story. In 2022 building materials were up 4.7%, another increase that followed a 14.7% increase in 2021. These increases have all led to higher costs per claim for insurance carriers.
The numbers above are countrywide. To give you a more local look at these factors I’m offering a look at our agency numbers. In our agency alone we saw our cost per claim rise 35% this past year. Going from $7500 per claim to $10,100 per claim. The graphic below shows claims numbers from our system between 2020 – 2023. It’s a good illustration of the increases we have seen in just our communities.
I show you these numbers to illustrate that not only are we seeing factors throughout the country, but we are seeing them in our local communities as well. Again, we are in unprecedented times. We at Mansfield Insurance Agency want to be transparent about the issues our industry is facing.
What can you do about it?
In the next edition of The Beacon I will cover part two of this series: claims frequency. We will plan to continue to monitor all of our carriers and their unique decisions over the course of 2024. Ultimately, we want what is best for our clients. If you have any questions, please reach out to me or one of our agents at 812.637.2300.
We value our relationship with all of our clients and don’t take advantage of the trust put in us to be an advisor.
