Price shock – Insurance news

Insurance costs – both auto and home insurance – have risen significantly across the country, adding to the financial stress faced by Americans since the pandemic and the wave of inflation that followed.

The average premium for home insurance is currently $2,270 annually, according to the financial company BankRate LLC.

In Floridathe average premium costs 5,531 USD per year. This is the most expensive in the country.

In 2019 (before COVID and the post-pandemic inflation wave), the average cost of home insurance was 1,272 USD nationwide, according to management consultancy Capco.

That’s a 78% increase nationwide since the pandemic.

Car insurance premiums have also increased across the country since the post-pandemic price increase.

In 2019, annual car insurance premiums averaged $1,470according to a market analysis by the insurance portal TheZebra.com. Now they are on average $2,329 nationwide – an increase of 58%.

The cost of car insurance has risen even more since before the coronavirus pandemic – even in New York, North Carolina, Florida And Maryland.

Last month, U.S. Bureau of Labor Statistics Car insurance prices rose by 19.5% compared to July 2023BLS reports that auto insurance inflation has been 47% since the end of 2019.

This is almost double the burdensome inflation rate of 22% in the US since the end of 2019, according to BLS.

So what is the reason for the increase in insurance premiums?

RE Hawleya writer with Bank rates The research team said broader inflation trends and higher costs for repairing homes and cars led to higher premiums.

The average price of a new car is 48,644 USD – an increase of 32% since 2019, according to Cox Car and the insurance information group TheZebra.com.

According to the two groups, used car prices have increased by 27% since 2019, with the average price for used cars at more than $25,200.

More expensive cars have higher parts, repair and mechanic costs, which impacts both consumers and insurance companies that pay out accident and other claims.

“Rates are rising in all states. And they have been for several years,” Hawley said.

Hawley also pointed out that more extreme weather events resulted in greater financial losses and greater property damage, which in turn led to higher insurance claims and costs, and therefore higher premiums.

“We’re seeing an increase in wildfires in certain areas. We’re seeing a lot of severe weather in areas that aren’t normally high risk,” said Hawley, who also pointed to an increase in major hurricanes and tropical storms.

Since 2019, the US has 121 natural and weather disasters with damages amounting to 1 billion US dollars or more, costing an estimated 667 billion, according to the US National Centers for Environmental Information.

The warmer water in the Gulf of Mexico not only lead to larger and more intense hurricanes, they are also part of the climate dynamics that favor more tornadoes and other storms in the Midwest and the Prairie States,

According to Hawley, some states have seen an increase in insurance fraud and there has been an increase in inattentive and dangerous drivers during and after the pandemic, leading to higher insurance premiums.

“There is an increase in risky driving,” she said.

Mark FriedlanderDirector of Corporate Communications at Insurance Information Institutesaid the higher costs of natural disasters, along with inflation – including higher repair and replacement parts costs – are driving up costs for insurers and therefore premiums.

He said the shortage of workers in the construction and repair industry had led to higher labor costs, putting upward pressure on insurers.

He also said that “abuse of the legal system” through lawsuits and litigation helps drive up insurance costs.

According to Friedlander, the cost of replacements – such as materials and parts – rose by 55% during the post-COVID inflation wave – four times the rate of inflation.

He also said that more and more people are living in areas prone to extreme weather events and natural disasters, citing population growth in hurricane-prone areas. Florida, Texas and the Carolinas, as well as weather factors that have led to more tornadoes and storms in the Midwest.

There are also more people living near wildfire-prone areas in the Mountain West, Pacific Northwest and area of California.

“We are seeing more and more storms that cause major damage,” Friedlander said, pointing to the high costs of hurricanes and tropical storms and the rising financial costs of tornadoes and hailstorms.

An increase in the number of uninsured drivers on US Roads can also lead to higher premiums.

According to the latest figures from Insurance Research Council14% of US Drivers are uninsured, up from 11.1% in 2019.

Car theft and insurance fraud also affect the amount of car insurance premiums.

According to the National Insurance Crime Bureau. This is an increase of 29% from 794,000 in 2019. Car thefts increased by 63% in Maryland and 64% in Washington, DC between 2022 and 2023, according to NICB.

The insurance industry also blames some of the premium increases on a familiar enemy: plaintiffs’ attorneys who specialize in accident claims and litigation. Floridaand other states, the insurance industry is pushing for legal reforms to stem the tide of litigation.