Some homeowners and drivers are finding their insurance rates are going up significantly without any obvious explanation.
You need to know that there are global changes happening that may affect you.
Soft Market vs. Hard Market
The property/casualty insurance market is cyclical. That is, there are periods when the number of claims paid, and the amounts paid, are lower and, as a result competitively priced insurance is relatively easy to come by. We’ve been in this period—called a soft market—for about 10 years now.
Then, there are periods of time when insurance companies are trying to recover from claims paid as a result of catastrophes anywhere in the world. This is called a hard market. In a hard market, rates go up, underwriting requirements tighten and other insurance policies are increasingly hard to come by.
The earth was besieged by $40 billion weather disasters in 2019, according to insurance broker Aon. The U.S. experienced 14 separate billion-dollar disasters last year and, the decade of 2010-2019 was a landmark 10-year span of billion-dollar weather and climate disasters.
As a result of these weather disasters, the industry is entering a hard market. This means Homeowners rates may go up across the board due to things like:
- Where the insured property is located. If your property is coastal, in an area that has been affected by a catastrophe or otherwise in an area insurance companies determine to be more risky, you will be best off paying the increase in premium because another, better option may not be available
- Your claims history. If you’ve made even a single claim or have had multiple claims with your Homeowners insurance company, your rates may be going up
- Characteristics of the insured property. There may be characteristics of your insured property that are causing the premium to go up. This can include older construction, an older roof, etc.
What to do in a hard market
In this hard market, Brightway continues to provide customers with information to make informed decisions. We strongly urge you to:
- Stay with the insurance company you’re with now; other options may not be available
- Do not change/remove coverages or lower your limits of coverage as a means to lower your premium. Oftentimes, the savings do not offset the future out-of-pocket of a potential loss
- You can consider increasing your deductibles to help lower your premium but be sure that whatever amount you’re considering you can afford out of pocket. Remember that the deductible amount is the amount you pay in the event of a claim before the insurance company starts to pay the remainder of the claim amount up to the selected limit of coverage
- Review the discounts you have on your policy—if there are others you believe you are eligible for, call your agency. Depending upon the insurance company that your policy(ies) is with, you may qualify for multi-car or multi-policy discounts, as well as discounts for having a newer home, an impact-resistant roof, a security system, etc.
- Remember that there are benefits of staying with your current insurance company that could include a loyalty discount. If you’re a long-time customer, you may get surcharged less following a covered claim
- If you haven’t already, consider taking advantage of other money- and time-saving options that may be available from your insurance company including electronic means of paying your bill, electronic funds transfer or electronic check (ACH), recurring credit card payments, paid in full and other payment options that could save you money