Understanding Today’s *Difficult* Insurance Market

**The following article has been edited for the CA insurance market mostly but most of this content should be credited to Texas insurance broker, Jennifer Klages. Thank you to Jennifer for allowing us to share this important info widely.**

PSA: I hope that you find the below information useful, and I hope that it helps explain what is happening in the insurance world today since it’s definitely impacting almost everyone. It won’t matter what carrier you are with, this is an industry issue.

The insurance marketplace is tightening up and it's happening fast. It’s happening especially fast for home and auto insurance companies. This is regardless of what state you are in, however California, Florida, and Texas are being hit especially hard. New York is in that mix as well. California is in a little worse shape than most though in part because the CA Department of Insurance would not approve rate increases for over 3.5 years which has ultimately led us to what we are seeing now.?

Carriers are pulling a full hard stop on issuing any new policies across the country, and carriers that have NOT put a moratorium are slowing down folks from being able to get coverage with long review periods. They simply can't operate profitably in this inflationary market. *EVERY DAY* we are hearing about a pause on new business, or a carrier putting a full stop on writing new policies.??Some carriers are requiring *full premium payment* up front for new business or requiring a 20 to 30 day hold on new applications.??Carriers may shift underwriting guidelines, so they *only* want preferred business… no claims within 5 years (not 3 anymore), home and auto bundles, etc. Some carriers will NOT reinstate coverage if it lapses, no matter the reason.

The market is disrupted and it WILL affect you. If it hasn’t yet, it will.??

The cost of claims has risen exponentially in the past few years, thus resulting in the carriers having to raise premiums or pull out of some markets.??In some states, carriers have applied for rate increases, but have not been able to get them approved, so they simply shut down for new business.

If you have an auto or home insurance policy, your rates have gone up, and if they haven’t, they will.??This isn't personal, it’s not based on a claim you may or may have not had, it’s simply the cost of doing business.??If you have *not* gotten a rate increase, be prepared for one at your next renewal, if you aren’t non-renewed.

??The cost to rebuild your home is up dramatically due to the rising cost of materials and labor. Supply chain for materials continues to be an issue. We can all agree that everything has gone up in price. Carriers simply can’t survive paying these higher prices without charging more themselves.

??The cost to repair your car is up dramatically due to the rising cost of auto parts and labor to fix your car. In addition, parts in vehicles now include pretty sophisticated technology. Replacing a side mirror or windshield used to be $500 - now it’s more than triple that.

??The cost of medical care continues to skyrocket. Bodily injury on auto accidents is off the charts. There’s a reason every other commercial is for a Personal Injury law firm.?

??Litigation is expensive and settlements are rising at an unprecedented rate.

??Both the frequency and severity of auto accidents are WAY up post COVID along with the rising frequency of auto fatalities (more people traveling after not being able to and folks going back to office result in more chances for accidents to happen).?

??ReInsurance (the insurance your insurance carrier buys to help cushion catastrophic loss) is at or approaching capacity in many markets, and rising rates are unsustainable.?

This is a significant issue affecting the auto & home insurance industry, and pricing correction is anticipated at least through 2024. Unfortunately it may even stretch into 2025.?

There are some things you can do to help get through this current insurance market:

??Consider Higher Deductibles. This will help save some money on your policy.

??Discount Reviews - make sure you're getting every discount you’re entitled to. you're entitled to.

??DO NOT let your policy cancel or lapse *FOR ANY REASON*.??Even if times are tough financially, do what you can to not let that policy lapse. Carriers are not reinstating coverage as easily as they once did. If it does cancel, they may require premium in full before reinstating, if they’ll even take you back at all. This is across the board for every type of policy.

??Bundle your Auto and Home for more discounts and more stable pricing (when possible). This usually makes sense about 65% of the time.?

??Consider tenure (matters more in some states versus others)- jumping companies too often will hurt you in the long run. In addition, some carriers won’t take you as a new client if you have little to no time being insured previously with any carrier. Tenure matters with a carrier. Your prior liability matters too. Try to have NO LOWER than $50K/$100K for bodily injury liability EVEN if you don’t own a home. This can be important if trying to switch carriers too since if you had lower than a certain limit previously, they may not want you now, even if you ask for higher limits.?

??Follow the laws so you don’t get any tickets. Those tickets really add rate to your policy and stay on your record 3-5 years, depending on the carrier.

??Absorb small claims when you're able, and save coverage for catastrophic losses.??Talk with your agent and let them claims counsel you should a loss happen. Stop using your towing or roadside assistance as a maintenance policy. Frequency of claims REALLY matters. A lot, even roadside and comprehensive (I.e. glass) claims.?

Lastly, please remember that we are agents for the carriers. We don’t make the rules, we don’t have control over the rates and we don’t make the decision if your policy is cancelled by the carriers. We are here to help educate, make sure you have the best insurance for your situation, manage your account with the carrier, etc. We are doing our best to manage carrier changes every day with client needs.?

I hope this message explains a little bit of what is going on in the insurance marketplace. I always say it’s critical to help educate my clients in addition to getting them the best coverage at the best rate, so hopefully this is useful in some way.?If my team or I can be of any assistance, please don’t hesitate to reach out.

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Adam Glazer

CA License: 0G90923