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Help customers understand the forces behind higher insurance costs
Insurance customers everywhere have questions about increased costs and limited options. These talking points can help you address your customers’ concerns and keep them informed.
Affordability and availability are on everyone’s mind
- 82% of agents are concerned about consumer price sensitivity.
- 1 in 3 car insurance customers had a rate increase in 2023.
- The net written premium grew 12% for homeowners—the highest rise in 10 years.
What’s happening?
Premium increases have largely been driven by substantial losses from convective storms (severe thunderstorms, hail, tornadoes) and higher than average inflation. Pricing needs to adjust to realistically cover long-term losses.
Historic weather
In 2023 alone:
- #1 claims driver is a record level of severe thunderstorms—not hurricanes
- $66B in damage ($50B insured) in North America
- 28 weather events each caused $1B+ in damage
Widespread inflation
Over the last 20 years, the cost of claims per insured home has outpaced inflation. Building and construction costs, including repairs, supplies, materials and especially labor, have all snowballed.
- 33% rise in building prices since the pandemic started.
- Car maintenance and repair costs up 12.7% (June’22-June’23)
- Cost of collision claims has risen 40% since 2019.
Shifting from “repair and replace” to “predict and prevent”
We can’t avoid extreme weather or control economic forces, but we can take proactive steps to reduce impact and costs.
What you, as an agent, can do
- Understand the underlying reasons behind premium increases and market disruptions.
- Be aware of all the ways customers can save as much money on their premium as possible.
- Promote preventive care and loss mitigation. Seasonal care tips can help keep homes and vehicles from developing small problems that may grow into claim events. There are also specific ways to diminish potential damage caused by hurricanes or wildfires. American Modern is working hard to make sure every policyholder is aware of these tips.
- Make sure to match the coverage with the need, so customers aren’t paying for features that aren’t relevant or won’t cover unique situations. This is exactly what specialty insurance is for. This also helps customers see the value of their coverage rather than the cost.
What American Modern is doing
- Introducing loss mitigation initiatives, like our water sensor program, part of Connected Home. By buying an approved smart water sensor, policyholders in certain states can receive a premium discount (plus in some states, a product purchasing discount). These smart sensors can detect moisture, alert homeowners, and help prevent severe water damage in case of a leak or burst pipe.
- Providing support and resources, including loss prevention tips and proactive communication before or even during catastrophic weather events.
- Streamlining the claims process with digital claims and introducing self-service solutions such as virtual property inspections. A more efficient claims process is a less expensive claims process.
- Using data for enhanced modeling and smarter underwriting. By improving the ability to predict and evaluate risk, we’ll be better able to accurately attach an appropriate premium to that risk.
- Working with lawmakers and regulators to update building codes and construction methods to improve the resiliency of homes.
Click here to download and share this infographic with your customers to help them understand the forces behind higher insurance costs:
Sources:
- Agent Perspectives Report; American Modern ; Sept 2023
- Auto Insurance Customer Satisfaction Plummets as Rates Continue to Surge; J.D. Power; Jun 2023
- Commercial Lines Continue to Perform Better Than Personal; Insurance Information Institute; Jan 2024
- When Higher Pricing <> Underwriting Profit or Double-Digit Returns; Carrier Management; Jan 2024
- Record thunderstorm losses and deadly earthquakes: The natural disasters of 2023; Feb 2024
- Homeowners Insurance Affordability: Countrywide Trends and State Comparisons; Insurance Research Council; Nov 2023
- The cost of insurance is rising. Here’s why; Frankenmuth Insurance; Jan 2024
For informational use only. Not applicable to all situations.
American Modern
American Modern is a widely recognized specialty insurance leader that delivers products and services for residential property--like manufactured homes and specialty dwellings--and for consumers in the recreational market, including owners of boats, personal watercraft, classic cars, motorcycles, ATVs and snowmobiles. For more information, visit amig.com.
