You may have heard from your insurance agent that your premiums are increasing, even if you haven’t had a claim in a while. In the past, going without a claim for a few years typically meant your rates could go down at renewal time. Now you are being charged higher premiums, seemingly without better coverage, and it feels like you’re being duped.
Yes, prices are going up for the same level of coverage. No, it’s not price gouging on the part of the insurance carriers. The reality is that this is what we call a “hard market” in insurance.
What Does a Hard Market Mean for Insurance Rates?
A hard market happens when insurance is not only more expensive, but it can even be difficult to obtain. If you’re in the process of spinning your adult children out onto their own plans, they might run into some difficulty finding an affordable policy with reasonable coverage.
We are also seeing many people trying to shop around for better rates with another carrier or local agent, only to find that they are unlikely to find much that can compete with their existing coverage. In a hard market especially, it’s a good idea to build up longevity rather than shop around for better rates.
The broad reason for this hard market is that the funds to cover existing and projected claims are well below the levels they need to be.
As we all know, insurance is kind of like a communal fund that we all pay into. When one of us has a claim, money comes out of the communal fund to pay for it. Since we assume that more money is going into the fund than actually needs to be paid out, there’s plenty in there to pay claims and the expenses of the insurance companies and agents.
At the moment, the money coming out of the communal fund is too high to sustain. This means more money needs to go into the fund, and insurance carriers really need to start controlling how much money can come out of the fund.
What Factors are Creating this Hard Market in PA?
We haven’t experienced a hard insurance market in Pennsylvania in a long time. That’s one of the reasons this current situation is so frustrating to most consumers. It also doesn’t help that the economy has been very fluid for the last few years.
Honestly, every factor impacting this market right now is interconnected:
Covid – When we all stayed home, car insurance claims plummeted. This actually caused many carriers to issue refunds to customers. That
was the right thing to do at the time, but now that claim amounts are higher, there is less to pay out.
Cost of materials – One reason claims are higher is that the cost of materials is going up. Some of this is due to the supply chain disruptions during Covid and the fact that production has not fully resumed in all industries. But these costs are also rising due to the next two items on our list.
Inflation – The economy has been in inflation for the last few years, which means prices are up on everything. It simply costs more to buy the materials we need to fix cars or houses or to pay rent for emergency housing.
Weather – From hurricanes to floods to wildfires, weather events have wiped out facilities and slowed down the labor in many different supply chains.
Unfortunately, since there are so many layers to this phenomenon, it’s going to take some time for things to settle down. Local agencies are working hard to help our clients balance their insurance needs with their budgets.
What Can I Do as a Consumer?
Consumers are understandably frustrated. Premiums are not the only higher costs in the average household, and all of it hurts. When it’s time for your annual review on your home, auto, or business insurance, make sure you can have either a phone or face to face conversation with your agent.
While you may see your premiums go up no matter what, a local experienced agent will help you identify what coverage you can reduce, live without, or possibly drop for a while. Resist the temptation to switch carriers for a minimal amount of savings, as that tends to create future premium increases. Finally, make sure to take good care of your property, drive safely, and get ahead of risks. Preventing a claim is one of the best ways to control costs for everyone long term.
If you are just getting an updated policy with higher pricing and no explanation, it may be time to speak with a different agent, like those of us at Smyrl Insurance. You can always reach out to us for a no obligation review and to get your questions answered. At Smyrl Insurance, we educate, nurture, and empower individuals to make the best decisions about their coverage even in a difficult market. Contact us to review your existing policy and determine how to get the best possible coverage for your budget and actual needs. We serve clients for auto, home, liability, and business insurance in Hatfield, Lansdale, Souderton, Harleysville, and throughout Montgomery County, Pennsylvania.