2023 is already well underway, and it’s sure to be an interesting year for insurance shoppers. Consumers can expect to see some big changes in the market, from higher prices to new opportunities to help mitigate them. Here are a few of the trends that are already impacting prices and will continue to unfold over the next 10 months.
Economic factors are affecting insurance prices.
So first and foremost are economic factors — such as inflation — that are present in the consumer marketplace today. This is news to no one: things are more expensive. And insurance is no exception.
That’s true for a number of reasons. First, car and home repairs will cost more, so claims will be more expensive to fulfill.
But we can also consider how bigger economic trends in the market affect insurance companies' customer base – i.e. you. The housing market is slowing down as interest rates go up. At the same time, the auto vehicle market is slowing down. Auto prices are decreasing finally, but so is demand. Essentially, an uncertain economy leads to consumers putting off these large expenditures. And it’s these large expenditures that often drive people to review their insurance and potentially change from one insurance company to another.
Why this can be a good thing for you
The flip side of carriers potentially having fewer customers shopping is that they will be focusing on the customers they already have and retaining folks with better service, better technology or better support for claims.
Rates will continue to go up throughout 2023
There has already been a huge jump in insurance prices from 2022. The average American paid $1,759 for insurance, which was a 15% increase over the previous year.
In fact, rates have consistently gone up quarter over quarter and are predicted to continue into 2023. There are two reasons for that.
One is something that many insurance customers don’t think about. Insurance is an industry that’s regulated by state governments, and their involvement impacts the rates insurance companies can change. There's a substantial backlog of rate filings, approvals and reviews with many state insurance departments. As an example, California approved its first personal private auto rate increase in November 2022, which was the first increase since June 2021. Then in January, Progressive was approved for a nearly 20% rate increase in California. When you think of the size of that state and the backlog they have across the top 25 carriers in the country, you've got some pent up costs that will be rolling out through the better part of 2023.
The second reason is simply the need for profitability. Thanks to more expensive parts and repairs, insurance companies need to make sure the money they’re taking in is more than they’re paying out. Already, many insurance companies have been decreasing the amount they spend on marketing or having to cut staff to lower operating costs. The only other way to remain profitable is to increase rates.
How to counter rising rates
Is the amount you pay for insurance increasing? Make sure to take advantage of all potential discounts and also consider shopping around to see if you could get a better price for the coverage you need.
You may have more opportunities to control your insurance
As prices go up, customers are going to start looking for creative ways to keep their costs affordable. And at the same time, as profitability for insurance companies is tighter, they will be looking for ways to retain customers and keep them happy. Taken together, these factors will mean you may be offered new opportunities to help control your insurance costs. Here are some examples.
There's an interesting trend of wanting to decouple and unbundle products to find the best price. These days, customers are totally fine having their insurance with two or three different companies, if the consolidated cost of all of those is lower. Insurance companies may respond to this by offering better incentives for bundling and making sure you’re being offered the best discounts and programs.
Another example is telematics programs. This is a way you can take control of your insurance costs by basing them on how you drive. This presents a major opportunity for consumers to control their costs as safe drivers and benefit from their driving habits.
Connected devices aren’t just a trend in auto insurance, but also home insurance. As claims are more expensive to pay out, insurance companies may offer greater discounts to people who use devices that can help stop damage to their homes before it happens. These include water leak monitors, security cameras, etc.
What you can do to take control of your insurance costs
When you look to renew, seek out insurance companies that offer programs and discounts that can help you save. And even if you aren’t looking to change carriers, you should be asking your agent or carrier what programs and discounts they have on the table. You should consider shopping around for car insurance quotes every six months.
More people may be exposing themselves to risk by being underinsured.
Another effect of rising costs in the industry is that some consumers may choose to not get insurance or to not carry enough insurance.
If you’re in an accident with someone who is uninsured or someone who carries the minimum liability and you don’t have uninsured or underinsured motorist coverage, you're looking at an out-of-pocket cost (or at least a few headaches while your insurance company tries to recoup the losses from the party at fault). And of course, if you’re the one driving uninsured or underinsured, you will be exposing yourself to an even greater risk.
How you can stay protected
Talk to your insurance company about what products make the most sense for you based on where you live and how much you drive. If you drive frequently in high-traffic areas, consider adding uninsured or underinsured motorist protection.
Some geographic areas may have issues accessing coverage
Another issue facing the insurance market is insurance companies leaving certain geographic areas where they no longer see a way forward to profitability. This can be seen in coastal states like Florida and Louisiana, which experience significant weather events like hurricanes that cause substantial insurable losses.
Carriers have been shifting away from growing business in these places and instead just managing their existing customer population. Insurance carriers can choose to suspend writing new business in disaster-prone areas, and in some cases they can choose to leave the state entirely. For customers, it stops being just a pricing implication but also becomes an issue of availability. In 2022, nine insurance companies left the state of Florida, leading to a crisis in home insurance coverage.
What to do if your policy is canceled by a company leaving your area
Talk to your insurance company about the timeline for finding a new policy. Compare rates with companies that are continuing to do business where you live. Contact your state department of insurance for help, if needed.
While 2023 may not look like it will see major drops in insurance prices (and likely quite the opposite), you can take control this year by staying abreast of these industry trends and looking for news opportunities to save with your current carrier or by switching.
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