FUSA: Why are my rates SO HIGH?

From FUSA Chief Operating Officer, Kyle Bradley, October 5, 2023

I’m sure you’ve noticed that your insurance bill for Home, Auto, Farm, and Business is a lot higher than it used to be.  Other than the frequent, record-setting catastrophic weather events we’ve seen this past year that are impacting the significant change in Property and Casualty rates for homeowners, farm, and auto insurance, there are other reasons.  Low housing inventory and historic demand, a shortage of skilled labor, high materials costs, and a few other issues are other primary drivers behind the historic high insurance premiums.

Home, Farm and Property Insurance

Low Housing Inventory and Historic Demand

The scarcity of available homes has become a concerning issue in the United States, leading to skyrocketing housing prices. As demand continues to surpass supply, homeowners insurance premiums are being adversely affected. With low housing inventory, the cost to rebuild increases exponentially, making insurance coverage more expensive for homeowners.  Additionally, the high demand for housing pushes insurers to adjust their rates, as they must protect against increased potential claims in such a competitive market.

Shortage of Skilled Labor

In recent years, the construction industry has been struggling with a significant shortage of skilled labor. Since the demand for new homes and home renovations has surged, but the pool of qualified workers has not kept pace. This scarcity of skilled labor has resulted in inflated wages and increased construction costs. For homeowners, insurers must account for these elevated expenses when determining coverage and premiums. The shortage of skilled labor, combined with rising demand, leads to increased indemnity payments, which are ultimately reflected in homeowners and farm owners insurance rates.

High Materials Costs

The cost of construction materials has experienced a remarkable ascent, presenting yet another challenge for homeowners and insurance providers alike. Fluctuations in material costs, driven by factors such as trade tariffs, increased production, and global supply chain disruptions, have impacted insurers’ risk assessments. When the cost of materials rises, so too does the expense of rebuilding or repairing a home after a covered event, such as fire or storm damage. To mitigate these risks, insurers must adjust their rates, increasing the overall cost of homeowners insurance.

Auto Insurance

Fewer Cars and Higher Prices

One of the primary reasons for the surge in auto insurance costs is the increased number of cars on the road combined with higher vehicle prices. The ongoing global shortage has severely impacted the automotive industry, leading to a decreased production of vehicles. Consequently, with fewer cars available for purchase, the value of new and used vehicles has skyrocketed. Since insurance policies are based on the value of the insured vehicle, the increasing prices of cars directly impact insurance rates.  As a result, insurance companies are adjusting their rates accordingly to account for the increased cost to replace or repair these valued assets.

Higher Repair Costs

Another significant factor contributing to the rising cost of auto insurance is the continuous increase in repair costs. Advancements in vehicle technology have led to more complex and sophisticated features, such as advanced driver assistance systems, camera, and embedded sensors. While these advancements improve safety and reduce accidents, they also make repairing damaged vehicles significantly more expensive.

Repairing a vehicle equipped with advanced safety features often requires specialized knowledge, tools, and parts, all of which add to the overall repair cost. Consequently, insurance companies must account for these higher repair costs when determining insurance rates.

The Rising Cost of Medical Care

The continuous increase in cost of medical care plays a significant role in driving up auto insurance premiums as well.  Insurance providers must consider the potential for personal injury claims.  Expenses associated with emergency room visits, surgeries, rehabilitation, and ongoing medical treatment have increased dramatically.  Also, the number of Plaintiff attorneys cases coupled with high dollar settlements that are being awarded play into this as well.  To cover these expenses, insurers must adjust their rates to account for the growing medical costs, ultimately impacting the overall cost of auto insurance.

The Good News

FUSA leadership has worked diligently over the past several years to partner with several “A” rated, national and regional insurance carriers, including Farmers Union Insurance, to give our agents the tools and options to provide the best coverage and price available to their customers.  Our agents have the skill set and knowledge to know what insurance carrier would be the best fit for you and your family, farm or business.  The staff at FUSA strive hard to provide our agents with the best sales support and service by partnering along side them through training, service, and market availability.  This is more important than ever in the current market conditions.

The foundation of FUSA, our agents, are positioned better than ever and are ready to serve their communities to best of their ability.  Make sure you find who your closet FUSA agent is, reach out to them to see how they might be able to help you find the coverage at the price that it best for you.