A double whammy for consumers: Home and auto insurance rates are set to jump in tandem

It doesn't look like good news is on the horizon for consumer prices. If you get your homeowner and auto insurance renewals now this year, you'll notice the rates have gone up significantly.

Prices vary by location, so it's difficult to pinpoint exactly how much the price will go up. However, analysts typically expect average growth to be between the high single digits for him and the low double digits for him.

It may not sound like much, but analysts say it's just the beginning. Some expect such an increase to occur every year for the next few years.

"U.S. consumers are already feeling the effects of inflation, and an increase in auto or home insurance would be highly undesirable," Bank of America analyst Joshua Shanker said.

Homeowners' insurance premiums rise due to inflation and climate change

Several factors have pushed homeowners' insurance premiums up over the past five years, including an increase in extreme weather events and inflation.

According to the National Center for Environmental Information, in 2021 the United States will record 20 weather/climate disasters for her, each exceeding her $1 billion in damages. This compares with an inflation-adjusted annual average of 7.7 from 1980 to 2021 and an annual average of 17.8 over the past five years (2017 to 2021). These are all losses that must be paid.

Insurers typically pass on some of these risks to reinsurers, but with the increase in catastrophes, reinsurers are saying, ``Enough is enough. said Matthew Carletti, an analyst at the firm JMP Securities.

“So insurers have to pay more for that protection and pass it on to consumers,” he said Carletti.

The higher renewal rate also takes into account inflation, which has risen to a 40-year high.

Not only has the housing market boomed during the pandemic, but there are shortages of everything from wood to oil (used in things like asphalt and roofing materials) to build, repair, or remodel homes. There are even shortages of workers for All of this drives up the cost of rebuilding homes in the event of a disaster, which is a major driver of insurance premiums for homeowners.

“Even if the price of a new mortgage goes up 6%, the cost of home repairs and building materials probably won't change,” says Shanker. “Homeowners underwriting margins, or shortfalls, appear to be at their worst in a decade.”

More inflation and the need for speed are driving up auto insurance rates

Auto insurance rates are also being pushed up by rising costs. Used car prices rose during the pandemic for a variety of reasons, including a limited number of new cars on sale and a strong preference for traveling by car during flight restrictions. Not only did the shortage raise the cost of labor and parts.

Combined with the increase in accidents, vehicle mileage returned to pre-pandemic levels in the spring and the recipe for disaster is set.

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“Suddenly, people were driving more expensive cars, they were driving like crazy, and there were more accidents,” says Shankar. "This has clearly had a negative impact on the (underwriting) margins in the private car market."