Why your auto and home insurance premiums are rising: NPR

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

Courtesy of Ezra Croft

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Courtesy of Ezra Croft

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

Courtesy of Ezra Croft

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

So Croft was surprised when his annual homeowner's insurance premium rose to $1,600, or $700 more than he was paying just two years ago.

“I'm a middle-income guy,” Croft says. “Don't make a lot of extra money. At this point I'm teetering on the point of not being able to afford it.”

Similar complaints can be heard across the country. On average, insurers sought to raise homeowners' insurance premiums by more than 11% last year, according to a report Standard & Poor's Global Market Intelligence.

Car insurance premiums are Climb fasterwhich far exceeds overall inflation.

Take Paul Moreau. His auto insurance bill jumped by $600 a year.

“That's the kicker,” Morrow says. “My wife and I work from home. So we don't have any transportation to speak of.”

He's preparing to pay the insurance bill on his home, in Herndon, Virginia.

“It's like everything is going up at a scary rate,” Morrow says.

Why are insurance costs rising?

Insurers insist they are playing catch-up, after two years of huge losses. For every dollar collected in home and auto premiums last year, insurers paid an average of $1.10 in claims and expenses, according to the Insurance Information Institute.

“Nobody wants to get an expensive bill,” says Sean Kivlighan, the institute's chief executive. But he added that companies “need to price insurance according to the level of risk that is out there.”

Inflation bears part of the responsibility for these large payments. The costs of repairing or replacing damaged homes and cars have jumped sharply in recent years as a result of rising labor and material prices.

Even as these rates begin to stabilize, insurers will have to deal with a growing toll of natural disasters, and not just in the usual places like Florida and California.

A car remains among the wreckage after a landslide suddenly destroyed a home and garage when an atmospheric river storm flooded the Hollywood Hills area of ​​Los Angeles on February 6, 2024. A wave of natural disasters is helping to drive up insurance premiums around the world. Country.

David McNew/AFP via Getty Images

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A car remains among the wreckage after a landslide suddenly destroyed a home and garage when an atmospheric river storm flooded the Hollywood Hills area of ​​Los Angeles on February 6, 2024. A wave of natural disasters is helping to drive up insurance premiums around the world. Country.

David McNew/AFP via Getty Images

Last year, there was About twenty severe storms in the United States At a cost of one billion dollars, it led to the spread of lightning, hail and damaging winds in many parts of the country.

“Even though many of these storms don't make national headlines, they tend to be very costly locally,” says Tim Zawacki, principal research analyst for insurance at S&P Global Market Intelligence. “The scale over which these storms occur is something I think the industry is concerned about.”

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

Insurance companies have a lot of pricing power

While state regulators have some authority to limit rate hikes, insurers tend to achieve their goal. Regulators realize that if they move aggressively to cap premiums, insurers may stop offering coverage altogether.

“Insurers have gotten really aggressive in their bullying,” says Doug Heller, director of insurance at the Consumer Federation of America. “I've heard a lot about companies threatening to pull out of the market if they don't get what they want. In general, the bullying has worked.”

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

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

Anna Moneymaker/Getty Images

Last week, the Treasury Department hosted a roundtable with consumer and environmental groups to discuss the ways in which climate change is impacting insurance markets. The department also plans to host a meeting on this topic with insurance industry stakeholders.

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

“He. She He was Liberty Mutual,” she says with a rueful laugh. “We've since switched to State Farm since replenishment went up so much.”

Bettori, who lives in Nashville, says she was able to shave a few hundred dollars off the bill, but she still pays much more than she did two years ago.

“What can you do?” she asks. “You need insurance. You can't have a car or a house without it. 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

Auto insurance is required in almost all states. Lenders usually require homeowners with a mortgage to carry insurance as well. However, as insurance premiums continue to rise, more people are reducing or even doing away with their coverage.

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

“I'm pretty good at home repairs, but if something like a tree fell on my house or a tornado or a fire, I don't know what I'd do,” Croft says.

An Insurance Information Institute study last year found that 12% of homeowners did not have insurance, compared to 5% four years ago. However, not being covered is risky for individuals and communities alike.

“Insurance is an important product, not only for economic stability but also for community resilience,” Heller says. “We are very concerned that these escalating premiums will lead to escalating rates for uninsured drivers and homeowners, leaving us all completely vulnerable.”