• Increasing Claims Costs: Average vehicle repair costs have risen steadily, with the larges increases happening over the last 2 years.
  • ​Auto Claim costs associated with auto parts and equipment saw double digit increases and are up 23% pre pandemic levels*.
• Frequency and Severity of Natural Disasters: The growing frequency and severity of natural disasters, such as hurricanes, wildfires, floods, and tornadoes, have led to a surge in insurance claims. As insurers face larger payouts due to these catastrophic events, they pass on the costs to policyholders through higher premiums.
  • ​Aon reports the total cost of natural disasters has increased from $41 billion in 2019 to $92 billion in 2021 and was forecasted to exceed $100 billion in 2022.*
•  Rising Repair and Replacement Costs: – The costs of repairing homes and vehicles has increased over the years due to factors like inflation, higher material costs, and advanced technologies in vehicles. Consequently, insurers adjust their premiums to ensure they can cover these increased expenses.
  • Commercial reconstruction costs increased by 6.1%.*
  • Residential reconstruction costs increased by 7.5%.*
  • Used car and truck values are up 47% from pre pandemic levels.*
  • The total 3 year compounding rate of inflation has moved the base +25%* on residential reconstruction costs.
•  Distracted Driving and Accident Rates: The rise of distracted driving, often attributed to smartphone usage, has led to an increase in accidents and, consequently, insurance claims. With more accidents occurring, insurance companies raise premiums to compensate for the elevated risk.
• Uninsured and Underinsured Motorists: The presence of uninsured or underinsured motorists on the roads poses a significant financial risk to insurance companies. In accidents involving these motorists, insured drivers’ policies often have to cover the costs. To mitigate this risk, insurers raise premiums for all policyholders.
•  Technological Advancements: While vehicle technology enhances safety, it can also increase repair costs due to complex systems and expensive components. As a result, insurance companies adjust premiums to account for the higher expenses associated with repairing technologically advanced vehicles.
•  Economic Factors: Economic conditions, such as inflation and interest rates, can impact insurance premiums. Inflation leads to higher costs across the board, including claims costs, and low-interest-rate environments reduce insurers’ investment income, prompting them to increase premiums to maintain profitability.

It’s important to understand that insurance premiums are based on a combination of statistical data, actuarial analysis, and individual risk factors. While the aforementioned factors contribute to premium increases, the actual impact on each policyholder’s premium will vary based on their specific circumstances and risk profiles. Regularly reviewing insurance policies and exploring discounts or alternative coverage options may help mitigate the impact of premium increases.

Source * West Bend Mutual Insurance Company – Contributing factors driving rate, eligibility, and coverage changes for commercial, home and auto insurance