Your money has less buying power than it did. Here is how that shows up on a policy you did not change.
Perhaps it is time to address the elephant in the room. Inflation. What does inflation have to do with my insurance? I get this question a lot more frequently now. Inflation essentially means that your money has less buying power than it did prior. According to the U.S. Bureau of Labor Statistics, the inflation rate hit a 40 year high reaching 7.5% in January 2022.
I am sure you have noticed the change in price while getting groceries and filling up your gas tank, but what about your insurance? I have seen pretty significant changes in rating over the past 12–18 months. So why is this happening?
New and used vehicles
Have you noticed the lack of inventory at your local dealership? According to the U.S. Bureau of Economic Analysis, new vehicle sales dropped by just over 50% in one year. A national chip shortage brought assembly lines to a halt. The drop in new vehicle inventory created a surge in used vehicle sales, which pushed used car values up 30–35% year over year. Vehicle prices have a direct effect on the cost of property damage, comprehensive, collision, and underinsured/uninsured coverage.
Construction materials and home inventory
In a previous career I managed a building materials department in a large national home improvement store. The cost of materials increased significantly through the entire pandemic. Mills and manufacturers were backlogged on some materials, such as windows and garage doors, for almost 12 months. Those additional material costs, labor costs, and loss of use coverage can increase a claim by several thousand dollars. In the Fargo–Moorhead market alone, home listings were under 100 if you take out new construction. Less than 100 homes, in all price points. In real estate that is called a seller's market, with almost every listing going well above list price.
Injuries
Unfortunately injuries do happen in car accidents, or on your property, or on a business' property. One of the areas hit hardest by labor shortages is the medical field. Hospitals are having to pay top dollar to get candidates in the door.
Help wanted
For most businesses that are short staffed, labor costs have never been higher. Increased labor costs in conjunction with transportation costs to get goods forces a business to raise the prices we as consumers pay. Business insurance uses either payroll costs or sales numbers as a major factor in determining a premium.
If you have questions about your insurance, or you are concerned about increased costs, give us a call.
Written by Bryan McClean, Principal Agent & Founder of Insure Logic.