Insurance rates will increase in 2023 for individuals and businesses. Insurance people increasingly expect what they call a “hard market”. Underwriting gets tighter. Insurance rates rise. Appetite for risk shrinks. It’s part of the natural insurance cycle. Here’s why we’re seeing it now.
Insurance Rates Rise in Uncertainty
Insurance companies use history and future expectations to set rates. When they feel confident in their claim predictions, rates are more stable. When confidence is lower, their risk of getting it wrong is higher. That means prudent insurance companies have to charge more “just in case”.
These are uncertain and risky times. Weather and natural disasters are more extreme and difficult to forecast. Moreover, economic signals are mixed. Supply channels are challenged. Even public health is in flux. All that uncertainty prompts insurers to set rates cautiously. They need make sure they’ll be able to pay claims.
Inflation Affects Insurance
We all feel the effects of inflation. Prices are higher for everything from groceries and gas to lumber and plumbers. Insurance companies feel it too. Medical expenses, auto repairs rental, used cars, building materials and costs all increased dramatically during and after COVID.
Some of those costs have settled, but none are where they were before. Meanwhile, insurance companies had to pay 2020 claims with premiums collected using 2019 rates – before anyone knew what was coming.
Insurance Rates Rise After Disasters
Wildfires, tropical storms, temperature extremes, droughts and floods and other disasters are more frequent. Insurance companies have paid billions in property claims. It makes no difference whether they believe these are trends or blips. Insurance companies need to prepare to collect enough premium to pay losses.
The Reinsurance Effect
You buy insurance to protect your family or business from disaster. Insurance companies do the same. They buy reinsurance each year to protect them from going bankrupt due to a catastrophe. Of course, reinsurers set their rates based on losses and projections, too. Now, the property reinsurance rates that insurance companies pay are rising by double-digits. Insurance companies pass that cost on to consumers as part of their rates.
In Maine, we’re fortunate not to have many of these disasters. But we still share in the losses of other regions through reinsurance rates. And, we have harsh weather, too – remember the Ice Storm?
Insurance Rates Vary – Choice is Important
Although insurance costs are higher across the board, each insurer sets their own rates. That’s why it’s important to compare coverage and price to find the best value. As an independent insurance agency in South Portland, Noyes Hall & Allen Insurance offers a choice of several preferred insurance companies. Contact a Noyes Hall & Allen agent. We can help you compare and decide which is the best fit for you. We’re independent and committed to you.