Planning for insurance costs in the new year...

The last few weeks I've had meetings with over a dozen insurance carriers in the Private Risk market to talk about planning for next year. The one thing that remains consistent - a return to profitability is the main focus for 2024.

Insurance carriers focus on something called a "Combined Ratio" which is a really simply equation: it's the total amount of claims paid out + their total expenses to operate the company / premium dollars brought in.

If that Combined Ratio is over 100% it means they are spending more money than they are taking in, which is no way to run a business long term. Carriers can operate at a loss for a short period of time if they have some rainy-day funds set aside or their investments are giving a decent rate of return, but that's not what the market is offering right now.

So what does all that jargon mean?

It means rate increases and tighter underwriting guidelines for new risks.

What does that mean for the consumer?

Higher rates again, bigger change of being non-renewed, and a tougher shopping market.

Anyone who calls to tell you they'll save you 15% in just as many minutes is likely slashing your coverage or possible even lying on the insurance application about the risk - either way that leaves you underinsured. If the agent is lying about your risk profile, saying things like you purchased your car on a different date, you've done upgrades to your home, you don't have dogs on the property, or hiding drivers then you could have your claims denied.

The reality is a good agent will help you maintain proper coverage while shopping the market for the best possible price and tell you the truth about your options. You'll likely pay more in 2024 than 2023, the question is how much more.

A few things you can do as a consumer to prepare for renewal time:

Shop all your policies as a bundle.

Most agencies can give you better discounts if they have your whole risk portfolio, even if they aren't with the same carrier. Even if they don't renew at the same time, print or download copies of all your policies for a complete review. It will take a few extra minutes, but it will provide you the best holistic view of your risk profile.

Increase your deductibles.

A deductible is what you pay before insurance kicks in. If you have to lower your rate, try not to lower important coverages like liability. See if you can take on a little bit more of the risk through increasing deductibles. A $2,500 or $5,000 deducible is a lot better option than dropping tens to hundreds in liability coverage. For example lowering Auto Bodily Injury Liability coverage on your auto insurance from $250,000 per person/ $500,000 per accident to $100,000 per person / $300,000 per accident decreases coverage between $150,000 - $250,000 in a serious accident, I'd much rather pay an extra $2,500 deductible than $250,000 if I am at fault.

Discounts, Discounts, Discounts.

Always ask "are there any other discounts I may be eligible for?" It could be placing a device that captures driving data on your car or phone, safety equipment on your car, adding a water monitoring device to your home, showing good grades for your teen driver, etc. Just make sure you open your mail from your insurance carrier, because now more than ever they are requiring proof of these discounts and re-validating at renewal.

Find an agent with multiple carriers.

Not all agents have access to the same insurance carriers. Some might only have three or four carriers and some may have dozens. Find an agent that can shop multiple carriers for you. Our advisors have access to dozens of carriers and access to just about anyone in the industry. Even if a company was a bad rate last year, they may be a better fit now.

The best thing you can do?

Reach out to one of my advisors when you receive your next renewal policy and prepare to give an hour of your time reviewing your insurance needs. I know it's not the most exciting thing to do, but an hour of your time pre-renewal is way better than days or weeks of your time stressing over a claim that's not covered.