- Vignesh Burugupalli
Why is my insurance premium increasing so much?
Updated: Feb 22, 2022
The rise of the COVID-19 pandemic has led to a number of unexpected consequences, one of these being a recent increase in insurance premiums. Homeowners, car owners, and others across America have been left wondering:
“Why has my insurance premium taken such a sudden hike?”
“Is this all related to the pandemic?”
One notable byproduct of the pandemic has been the spike in material prices such as lumber. Lumber and wood prices are up by 6.2% over last year, and the price of material goods for new residential construction is up by 18.6%. This is a result of supply chain disruptions like shortages in labor. These supply chain disruptions have led to a subsequent increase in input costs, resulting in the demand for goods being much higher than the supply. In order to counteract this issue and maintain an adequate profit margin, providers have increased the prices of goods. Due to this increase, the cost of operations such as the replacement of houses has risen, subsequently forcing insurance providers to increase premiums.
Disruptions in the supply chain have negatively impacted the auto industry too. Used car prices have seen an increase of 26.4%, while the price of new cars has seen a reduced, but still significant increase of 9.8%. The COVID-19 pandemic isn't the only cause of the increase in prices in the auto industry, however. The number of fatal car accidents is up by 18.4% and over one billion dollars have been lost in 2021 due to weather disasters. Trends such as these can also attribute to the increase in auto insurance premiums, as accidents are statistically more likely to happen.
Alongside home and auto insurance, the cost of healthcare has also taken an increase. According to the Centers for Medicare and Medicaid Services, healthcare spending has increased by 9.7%. This can be mostly attributed to the continued cost of COVID-19 testing and treatment across the nation.