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Education is imperative to explain the why along side of empathy but reminding them you are a consumer too and also feel the pain. Those without a claim also don’t know from experience the cost of repairs and need to know it’s not $500 fixes anymore but $6000 for hail ect. . .
I've worked in insurance before so I understand the why the premiums are up, but as a consumer I have trouble grasping the worth of the increase. For example my car insurance premium is more than my car note. Why not just buy an extra car to have around 'just in case.' If I saved my home owners premiums for a year I could afford to replace the AC unit or put a nice chunk down on a new roof. That wasn't the case just 3 years ago. I know all prices are going up, but insurance went from 'just in case' pricing to 'replacement' pricing. The issue with replacement pricing is if I DON"T replace my car or roof, I've lost money and have nothing to show for it. But insurance companies... showing record profits. Not record income, record profit.
To my knowledge at least for homeowners there’s only one company out there that offers replacement. Everybody else is cash. Or some version of it.
And it still slays me to this day how people don’t know how insurance works. Companies can’t get a rate increase unless the state approves it so go talk to your states.
As an underwriter, when I have explained things to a friend or family member I have said “it’s not about you!”
The rate is determined by the probability of a loss, which is determined by multiple factors. Your personal exposure just tells us where on the probability scale you fall.
You also have to remember the bottom line is this as somebody else stated the costs are higher for everything. Before the pandemic, a rear brake light on a Ford F150 cost over $1000 to replace because it had all the cameras with it. One light. The cost for lumbers up, laborers up, everything’s up so even though the customer knows this, they may not think it actually affects them.
One thing I always talked about was self insurance, OK your auto rate is really high. You’re a single person you have one car let’s talk about auto insurance. They ask what that is and I explained to them blow by below, let’s say you get into an accident and your car hits the car in front of you and that car hits a light pole and you’re not insured with a company now all the damages if you’re found at fault all the damages to your car plus all the damages to the other car and the damages to the light pole are all on you.
Let’s say you hit a 2024 Acura that’s a $70,000 car. Let’s say that damage is $30,000. Do you have $30,000? Of course the answer now well OK, then that’s how insurance works. You take the risk along with everyone else you’re not paying as much as if it were just you covering and paying for yourself and usually after that explanation they’re quiet.
I get that most people don’t understand how insurance works. I would hope if you’re asking this, you’re not in the industry.
Rates are rising for a lot of reasons. Increasing labor costs, parts cost, building material costs, more tech in cars and those parts are expensive to replace, ridiculous tariffs on many inputs like car parts and lumber, skyrocketing medical costs, legal system abuse, etc. And then there’s increased frequency of claims, increased losses per claim, more catastrophes, more severe catastrophes, etc. When you drive on the highways, how may people are going 30+ over the speed limit? Looking at their phones? Driving aggressively? So in general the risks pools are more risky and more expensive. That’s before you’re possibly surcharged for your own claim history. And now people are dropping out of the private insurance market and going into public last resort options, or without insurance. That makes the private risk pools weaker.
There’s a perfect storm of 💩 going on right now. It’s not insurance company extreme greed. Of the many thousands of P&C insurers in the U.S., a clear majority have combined ratios over 100%. It’s a very difficult operating environment right now.
For those that are not educated on this, a combined ratio over 100 means you are paying more in claims than you are taking in.
Remind them that their formerly 300K house is now worth 700K.
If working for a broker agency you can shop around for them with different carriers to compare rates. But if you’re working for a captive agency I would review any discounts they might be missing or consider raising deductibles since they have had no claims.
Every time you get an oil change it costs more now than in the past. Same with your trip to hlHome Depot. If insurers never increased the premiums. as their costs are also going up, they would all be out of business and you would have no insurance. Otherwise, our rates would match those of 1980.
What other expense in your budget has not increased in cost? Single digit rate increased should not be difficult to explain as they are pretty much following inflation. Double digit or more may require an explanation. Catastrophes have only increased i number and magnitude and the certainly affects most insurance companies.