Why Your Auto and Home Insurance Premiums Are Going Up: NPR

Ezra Croft of North Carolina saw his annual homeowners insurance increase to $1,600, an increase of $700. Many people across the country are seeing their auto and home insurance premiums increase.

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Ezra Croft of North Carolina saw his annual homeowners insurance increase to $1,600, an increase of $700. Many people across the country are seeing their auto and home insurance premiums increase.

Courtesy of Ezra Croft

Ezra Croft never filed an insurance claim, and his home in Raleigh, North Carolina, is nowhere near a stormy coast or wildfire-prone forest.

So Kraft saw his annual homeowner's insurance premium jump to $1,600, or $700 more than what he was paying a few years ago.

“I'm a middle-income guy,” Kraft says. “Don't make a ton of extra money. I'm in an unaffordable situation at this point.”

Similar complaints are being heard across the country. On average, insurance companies tried to raise homeowners' premiums by more than 11% last year. S&P Global Market Intelligence.

There are auto insurance premiums Climbs even fasterOutpaces overall inflation.

Take Paul Morrow. His auto insurance bill increased by $600 a year.

“Here's the kicker,” Morrow says. “My wife and I work from home, so we don't have to travel to speak of.”

He's bracing himself for the bill to insure his home in Herndon, VA.

“Everything feels like it's going up at an alarming rate,” Morrow says.

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Why Insurance Costs Are Rising

Insurance companies insist they are playing catch-up after two years of big losses. According to the Insurance Information Institute, for every dollar in home and auto premiums they collected last year, insurance companies paid an average of $1.10 in claims and expenses.

“Nobody wants that high-price bill,” says Sean Keveligan, the company's CEO. But companies “need to price insurance according to the level of risk that's there,” he said.

Inflation partly accounts for those larger payments. The cost of repairing or replacing damaged homes and cars has risen sharply in recent years due to rising labor and material costs.

Even as those prices begin to level off, insurers have to contend with a growing number of natural disasters, not just in the usual places like Florida and California.

A car lies in the rubble after a house and garage collapsed in a sudden landslide as the Atmospheric River storm engulfed the Hollywood Hills area of ​​Los Angeles on February 6, 2024. Country.

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A car lies in the rubble after a house and garage collapsed in a sudden landslide as the Atmospheric River storm engulfed the Hollywood Hills area of ​​Los Angeles on February 6, 2024. Country.

David McNew/AFP via Getty Images

Last year, there were About two dozen severe storms in the United States Lightning, hail and damaging winds spread across many parts of the country, with billion-dollar price tags.

“While these storms don't make many national headlines, they can be very costly at the local level,” said Tim Zawacki, principal research analyst for insurance at S&P Global Market Intelligence. “I think the industry is very concerned about the breadth of where these storms are occurring.”

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As a result, insurance premiums are likely to rise this year even as overall inflation moderates.

Insurers have more pricing power

While state regulators have some power to curb those price increases, insurance companies tend to get their way. Regulators know that if they move too aggressively to control premiums, insurance companies may stop offering coverage altogether.

“Insurance companies have become more aggressive in their bullying,” says Doug Heller, director of insurance for the Consumer Federation of America. “You hear a lot about companies threatening to pull out of the market if they don't get what they want. Usually the bullying worked.”

Douglas Heller, director of insurance for the Consumer Federation of America, speaks during a Senate Banking Committee hearing about the property insurance market on Capitol Hill, September 7, 2023, in Washington, DC.

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Douglas Heller, director of insurance for the Consumer Federation of America, speaks during a Senate Banking Committee hearing about the property insurance market on Capitol Hill, September 7, 2023, in Washington, DC.

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Last week, the Treasury Department held a roundtable with consumer and environmental groups to discuss the ways in which climate change could affect insurance markets. The department also plans to hold a meeting on the topic with insurance industry stakeholders.

Customers can save money by shopping around sometimes. Alicia Pittori switched insurance companies after the cost of her family's auto policy rose by more than a thousand dollars.

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“It is was “Liberty Mutual,” he says with a wry laugh.

Pidori, who lives in Nashville, says that while he's managed to shave a few hundred dollars off his bill, he's still paying a lot more than he did two years ago.

“What can you do?” she asks. “You need insurance. You can't have a vehicle or a home without them. So you have to pay for it. And you figure out where you can cut other things to make sure you can drive.”

Going without insurance

Almost all states require auto insurance. And lenders typically require homeowners who own a mortgage to carry insurance. However, as premiums continue to rise, more and more people are reducing or going without their coverage.

Ezra Croft considered dropping his homeowners coverage, but ultimately decided to pay a higher premium.

“I'm pretty good at home repairs, but if a tree falls on my house or there's a hurricane or a fire, I don't know what I'm going to do,” Kraft says.

A survey by the Insurance Information Institute last year found 12% of homeowners had no insurance, up from 5% four years ago. Going without coverage is dangerous for individuals and communities.

“Insurance is an important product not only for economic stability, but also for community resilience,” says Heller. “These rising premiums will lead to higher rates of uninsured drivers and homeowners, making us all more vulnerable.”

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