When determining insurance premiums, insurance companies look at a variety of factors including industry trends like number of claims and costs to repair vehicles and homes. If those costs increase, the price of insurance premiums will likely increase as well.
Unfortunately, due to inflation these costs are increasing. Building materials for homes are more expensive, there’s a chip shortage driving up the cost of cars, and there’s also a labor shortage. These factors mean the cost to repair your home and vehicle have increased in the event of an insurance claim.
Why did your insurance rate go up this year?
Here are the challenges facing the insurance industry today that are contributing to increased costs:
- Housing material and labor costs have increased
Lumber and other construction materials have spiked in price due to less availability making the costs to repair and build homes more expensive. At the same time, we’ve also seen an increase in the cost of skilled labor and the construction industry is down about 200,000 skilled trade workers1. These factors have likely increased your property insurance costs.
- The chip shortage
A crucial component of cars built today, fewer available chips results in more expensive cars, and as the cost of cars rise, so does the cost to repair if an accident occurs.
- Auto repair and labor costs have increased
With the chip shortage, more people are keeping their old cars on the road longer, needing more repairs. The increased demand for car parts combined with supply chain issues, are leading to inflated car part costs. Auto repair shops are also experiencing staffing shortages and increased labor costs which are also driving up the costs of repairs.
If your insurance costs are increasing due to inflation, you may be wondering, how can I lower my premium? The good news is that AICPA endorses Liberty Mutual and AICPA Members can benefit from several home and auto discounts.
How can I lower my premiums?
How to save on your home insurance:
- Get rewarded for being a safe homeowner by remaining claims-free for 5 or more years2
- Explore payment options like automatic payments or paying for the year in full
- Bundle with your auto insurance and save
How to save on your auto insurance:
- Maintain a good driving record or participate in a safe driving program like RightTrack
- Explore payment options like automatic payments or paying for the year in full
- Bundle with your home insurance and save
If you’re not a Liberty Mutual customer, get a quote or ask your insurance company how they can help you save.
Keep in mind, with Liberty Mutual you get customized insurance so you only pay for what you need.
FAQs
Periods of high inflation can result in insurance companies experiencing higher claims payouts and operating costs, leading to more expensive premiums for the consumer.
Is homeowners insurance going up because of inflation? ›
Homeowners are facing rising insurance and increasingly limited options for carriers in some locales, and the problem is likely to worsen, warns a new report from Insurify, a virtual insurance company. The report blames severe weather, inflation and rising homebuilding costs.
How does the economy affect insurance rates? ›
Recessions can mean higher car insurance rates
Over the last few years we've seen a sharp rise in the cost of premiums for auto insurance driven in part by inflation, specifically higher labor costs for repairs and higher replacement costs for vehicles as well as component parts when repairs are needed.”
How does inflation affect life insurance? ›
Life insurance is chosen based on how much financial protection you believe your family will need upon your passing. If inflation takes an unexpected turn, your beneficiaries may not have as much coverage as you'd like.
Why is insurance so expensive right now? ›
Inflation. Nobody in America will be surprised to learn that inflation has spread to all areas of the economy, including car insurance. As vehicles become more expensive to repair and replace, car insurance rates climb as well. The price of both new and used cars has soared over the past few years.
What is the inflation option in insurance? ›
Key Takeaways. Insurance inflation protection is a feature of some insurance policies whereby future or ongoing benefits to be paid are adjusted upward with inflation. The goal is to ensure that the relative buying power of the dollars granted as benefits do not erode over time due to inflation.
Does insurance do well in a recession? ›
Is the insurance industry recession proof? While every industry can experience boom and bust years, insurance tends to fare better than others when times are tough. This is an often-touted benefit of working in insurance, and it's due to the nature of the products the insurance industry sells.
Will auto insurance rates go down in 2024? ›
Nationally, the average cost of full coverage car insurance rose to $2,543 in 2024, an increase of 26 percent over last year.
How do rising rates impact insurance companies? ›
During periods of rising interest rates, cash flows from assets and liabilities can be badly mismatched, exposing insurers to losses from potentially pressured asset sales, for which they would receive market value, to meet current obligations to policyholders.
How does inflation affect policy? ›
Inflation Targeting
If prices rise faster than their target, central banks tighten monetary policy by increasing interest rates or other hawkish policies. Higher interest rates make borrowing more expensive, curtailing both consumption and investment, both of which rely heavily on credit.
Issue: Social inflation is a term that describes how insurers' claims costs are increasing above general economic inflation. This is generally thought to be due to a trend in increasing litigation costs brought by plaintiffs seeking large monetary relief for their injuries.
Is health insurance affected by inflation? ›
Because insurance companies spend most premium income on medical goods and services, the prices of these goods and services have a large impact on total-premium inflation. Chart 3 shows the year-over-year changes in the indexes for noninsurance medical goods and services.
Are health insurance premiums going up in 2024? ›
– The CalPERS Board of Administration today approved health plan premiums for calendar year 2024, at an overall premium increase of 10.77%. Basic (non-Medicare) plans will increase 10.95% overall.
Why did my homeowners insurance go up? ›
Increasing construction costs and labor shortages play a role, too. “To help pay for these higher costs, insurers have increased policy premiums on homeowners in both high- and low-risk areas,” says Pat Howard, a home insurance expert at Policygenius.
