What Can You Do About Increasing Insurance Rates Due To Inflation?
Updated: Sep 21, 2022
Chances are if you have filled up gas over the past couple of months, you’ve noticed a substantial hike in prices. This spike in prices can be attributed to the increase in inflation in The United States. Gas is not the only affected area, however. Inflation has impacted a multitude of industries, including the insurance industry and rates, negatively affecting Americans across the board. The impact on the insurance industry is caused primarily by a couple of factors.
The prices of construction materials (lumber, plastic, etc.) have seen a sharp increase due to a tight labor market and supply chain disruptions. As a result, the cost to build or repair houses has also increased.
Similarly to construction materials, supply chain disruptions have led to a major shortage of microchips for automobiles. This shortage directly increases the price of automobiles, therefore also hiking up the price of automobile repairs.
Although inflation has decreased from its historical, four-decade high reached in June of 2022, inflation is still an ongoing problem. In fact, just last month, U.S. inflation rose by 8.3%, leaving many across the country wondering:
How is inflation affecting my insurance rates?
Due to market volatility and lower competition as a result of inflation, insurance markets are hardening. A hard market is caused by an upswing in insurance industry cycles which essentially increases insurance premiums but decreases supply. In a hard market, insurers face a decrease in profit and are less likely to take risks. This makes it significantly harder for consumers to acquire coverage. Furthermore, consumers also face stricter underwriting, once again impacting their ability to get covered. As discussed previously, the hike in prices in areas such as microchips and construction materials has also been another cause of increasing insurance premiums.
So, what are some ways that you can lower your insurance costs?
Bundling personal lines (home, auto, etc.) can give you a multi-policy discount.
Increase deductible in order to decrease premiums.
Taking a defensive driving course can also help decrease premiums.
Working with independent insurance agencies, like Fenix Risk Management, to shop with multiple carriers. This helps to lower rates and improve coverage.