Many insurance companies have managed to keep their rates steady for many years. However, some have been slowly increasing their renewal bills.

But starting in 2023, the insurance industry in California and a few other states really took an unexpected turn or came to an almost complete halt. You might have been one of thousands of Californians who have received a non-renewal notice stating your insurance company is no longer offering services in this state.

If you are the lucky one who actually received a renewal offer, you most likely, too, had a surprising twist in your Home, Auto, Landlord, and Business insurance costs this year. Thanks to a unique mix of market shifts influenced by the pandemic and other shake-ups, you might notice a more significant change in your insurance premiums this time around.

Let’s break it down: Insurance rates reflect what an insurance company expects to pay out if you experience a loss, like roof damage from a storm or a totaled car in an accident. And guess what? Prices for almost everything have gone up recently.
So, buckle up for a potentially higher bill, all because of these whirlwind changes in the world around us.

With major players leaving the state altogether, many others are sitting on the sidelines, watching how the insurance market in California will play out. There are only a handful of insurance companies left to pick up all the people who are suddenly either non-renewed or are in search of insurance for their first car or a house, or even renters insurance.

So, of course, one of their defense options is to raise the rates (when and if approved by the Department of Insurance) to offset a massive flood of new risk.

Are you noticing your home insurance costs creeping up? Let’s dive into what’s behind these higher prices and why they might continue to rise.

Climate change is causing more frequent and severe weather events, such as hurricanes, wildfires, and floods. Property owners in areas prone to earthquakes, landslides, or other geological risks see higher premiums due to the increased potential for property damage.

Building materials skyrocketed during the pandemic and have not returned to pre-pandemic levels. According to recent surveys, there is a significant shortage of skilled trade workers, which in turn affects the growing labor costs. Consequently, projects take longer and cost more.

Due to growing demand, property values are also on the rise in many areas. Since insurance coverage is often based on the replacement cost of your home, higher property values can lead to higher insurance premiums.

As homes become more connected with smart devices and security systems, insurance companies need to factor in the cost of replacing or repairing these technologies in case of a loss.

If claims increase within a specific area or for certain types of damages (like water damage or theft), insurers may adjust premiums to reflect the higher risk associated with those claims.

Insurance rates are based upon various risk factors and operating expenses, and if those risks grow or expenses go up, the cost of Auto insurance will rise with them. 

Car insurance rates have been on the rise recently due to several key reasons:

Rising inflation affects the cost of parts, labor, and other resources needed for repairs and replacements after the accidents. The COVID-19 pandemic caused manufacturing shortages and shipping delays. The Russian invasion of Ukraine drove up oil and commodity prices upward. This perfect storm of events fueled inflation, making everyday things like Car insurance more expensive.

The cost of repairing vehicles has increased significantly, mainly due to advanced technology and features in modern cars. From sophisticated sensors to complex computer systems, repairing cars has become more expensive.

Severe weather conditions, such as storms, floods, and hail, can damage vehicles and result in insurance claims. As these weather events become more frequent and intense, insurers pay out more for expensive car repairs and total losses.

Rising medical costs are another key factor. Healthcare costs have not stopped growing for years. Since insurance companies have to pay more for medical treatments and rehabilitation during bodily injury claims, it is no surprise that this leads to higher premiums for policyholders.

There is also a shortage of rental cars because rental companies sold off significant parts of their fleet during the pandemic to generate revenue. Low rental car inventory has spiked transportation expenses you acquire. Meanwhile, your vehicle is stuck in the body shop, awaiting the replacement of an ordered car part following an accident.

In summary, a combination of reasons, from climate-related risks to economic trends and technological advancements, is contributing to higher insurance costs. The bottom line is that you can stay informed about these factors to better understand why the premiums are increasing.

However, it is more beneficial to learn what you can do to lower your premium and how. Keep in mind that savings come in many forms. The value of the coverage you choose today may save you more in the long run than the lowest possible premium.

Contact us to review your current insurance policies. We will be happy to help you explore opportunities for discounts that could offset higher rates during the renewal.