Following last year’s trends, there are a lot of factors that continue to affect the insurance market volatility. Markets have tightened and rates have remained elevated across the board early in 2023 and many consider this the hardest market in a generation. The good news is that as an independent agent, we are here to keep you informed and to help make adjustments, where needed. Know that we’re keeping an eye on things for you.
It’s important to make sure that we stay up to date with the value of your home. Home construction materials have climbed 33.9% since the start of the pandemic and trade services are up 27%. Inflation has affected claim payouts due to increased cost in goods and labor and, in turn, has affected home and auto insurance rates.
Have you completed renovations or are you planning on starting renovations in the next few months? Let’s discuss to make sure you have full coverage and we can provide loss prevention recommendations to make sure you’re home is safe during this increased risk exposure period.
Water damage stemming from plumbing leaks continues to be on the rise displacing homeowners while renovations are being completed. Once you suffer a water loss, you are 2x as likely to suffer a second one. Consider a water leak detection shutoff device to prevent a significant loss. Let’s discuss your options and the premium benefits that come with this proactive step in loss prevention.
Weather and Climate Impacts
Weather and climate disasters are not just happening in FL and CA. It’s affecting everyone. 2022 experienced the 3rd highest number of billion-dollar disasters and it’s not on track to slow down any time soon.
- Flood insurance is never automatically in a homeowners policy and a flooding event can happen anywhere. Let’s discuss if you have concerns.
- Tornado season is off to an unfortunate strong start this year.
- High-impact snowstorms have hit record highs in many areas.
It’s important to remember that many insurance companies operate using reinsurance. Simply put, reinsurance is insurance for insurance companies. Without it, insurance companies would be forced to be far more conservative in the policies they write. An uptick in the number and severity of natural disasters causes reinsurers to charge insurance companies higher rates. These costs, over time, are passed along to residents in the form of higher yearly premiums. Some estimate that property-catastrophe reinsurance prices rose 30.1% in 2023 following a 14.8% increase in 2022.
Hurricane Ian took a major blow to Florida at the end of last year. It not only caused a significant amount of damage but also put further strain on the already tough insurance market.
If you’re thinking of purchasing a home in Florida, it is so important to discuss with your insurance agent ahead of putting an offer on the table. We can help to arm you with the right questions to ask your realtor and the seller to make sure you’re making financially sound decisions. There are many components that can impact the amount you will have to pay for insurance premium. Some things to consider:
- Is the home new or was it built prior to the current FL building codes? This can make a large impact on the premium. A wind mitigation form will give all of this information in detail for us to help you review.
- Is the home located in a high flood hazard area? This will determine if your lender will require you to carry flood insurance and also what we may make as far as recommendations and also how much it would cost to cover this type of loss from a microburst, storm surge or other surface water event. An elevation certificate will give you the information needed to review and we can help to explain in more detail.
Ian was a tell tale story about the importance of flood insurance and the need for more homeowners to have this coverage in place. It doesn’t take a hurricane to flood parts of Florida as some of the recent storms have shown us. It is a type of loss that is never automatically covered by a homeowners policy. You always have to purchase this separately and, depending on the location, the flood zone that it is in, and if it’s positively elevated or not or even how elevated it is, these can all make a difference in the annual cost to protect your home.
California continues to be a tough state from an insurance perspective. Given some of the issues plaguing the California insurance market right now, this will be helpful context as you review your policies come renewal. If you’re buying a home in California, please make sure to include your insurance agent in the discussion before making an offer. It can save you time, energy and money in the long run if your agent can help to arm you with the right questions to ask the real estate agent and seller before making an offer.
There are two main areas that are impacting the California insurance market:
- The frequency and extent of natural disasters in California
It’s no surprise that natural disasters make insurance in the Golden State difficult for residents, agents, and carriers alike. In fact, California experiences more natural disasters—wildfires, atmospheric river flooding, earthquakes, drought, and mudslides—than any other state.
Analysts estimate the winter storms of December 2022 and January 2023 alone account for $5 billion to $7 billion in economic losses and another $500 million to $1.5 billion in insured losses.
Making sure your home is ready to weather the storm is important. Work on an annual home maintenance plan to keep everything in tip top shape and your home will be more resilient for it.
- The strict regulations of California and the challenging economic climate
In addition to natural disasters, California insurers must receive approval from the state insurance department before adjusting their prices. While this is positive for consumers, some insurers are paying more in claims than they’re taking in — and have been for years.
Although regulators are easing up a little now that the pandemic is in the rearview mirror, the approved increases are hardly enough to keep up with the challenging economic climate.
In response, insurers are reducing their operating expenses (i.e., closing offices) and implementing stricter underwriting requirements. Some well-known carriers are halting their advertising efforts in the state or choosing to exit the California market altogether.
With these topics in mind, let’s talk about how to prevent losses from happening in the first place. This will help you in the long run both from a loss prevention standpoint but also for insurability.
Are you concerned about cybercriminal activity or do you own an e-bike? Let’s discuss. Many insurance companies are working to find solutions for these emerging exposures and we want to make sure they’re listed so you have coverage.
Collectors continue to diversify their portfolios and many are expecting these emerging markets to grow exponentially.
- Pre-owned luxury watch segment is expected to grow 75% by 2030. Make sure they are added to a valuable articles policy so you are not subject to sublimits or a deductible on your home policy.
- Luxury handbag collections are on the rise over the past two years.
- Sports memorabilia
- Fine wine and spirits collecting is on the rise as a result of the pandemic.
Inflation has also impacted the auto industry. The average price of a new car is up 17% from 2020. The cost of labor and materials has impacted claim payouts and the amount of time that a vehicle is in the shop. Make sure that you have agreed value, original equipment manufacturer parts, and adequate temporary rental vehicle coverage and limits, where possible.
Supply challenges have made it difficult for repairs and also for replacement vehicles making it a longer process than pre-pandemic.
Hyundai and Kia vehicle owners are going to find it harder to place coverage due to the rise in vehicle thefts over the last year that have caused some insurance companies to no longer offer coverage for certain models. Here are some helpful tips on safeguarding these vehicles.
Purchasing a vehicle? Please call us! We need to make sure we add the vehicle to your policy and can get a temporary ID card over to you until the insurance policy paperwork prints. Not all dealerships call us and we want to make sure you are covered!
Every year, the losses that we see continue to grow in size and frequency where they pierce the excess liability layer. There are multiple factors that we see at play such as the litigious society that we live in, distracted driving, and dog bite claims, to name a few. Making sure you have the appropriate liability limit is so important to protect your net worth, your lifestyle and your reputation.
If you have personal employees such as a nanny, chef, chauffeur, etc., it is important to understand what your increased exposures are and what you can do to help protect you and your employees with Employment Practices Liability and Workers Compensation coverage.
Please don’t hesitate to reach out if you have any questions or would like to discuss these topics in more detail.