Consumers are being squeezed by inflationary premiums for essentials like home and auto insurance rates.
National homeowners insurance premiums have jumped to an average of about $2,478 per year, a 37.8% increase since 2019, the year before the pandemic, according to new data released by LendingTree. Compared to the 24% increase in the consumer price index (CPI) over the same period, homeowners insurance premiums have risen 58%.
The spike is attributed to inflationary increases in building materials, which have pushed up home prices and repair costs, as well as more frequent floods and wildfires. “Insurers are raising rates because it’s getting more expensive to rebuild and more homes need to be repaired than before the pandemic, and all policyholders are being affected because of this, even those not directly affected by natural disasters,” said LendingTree home insurance expert Rob Bhatt.
One Korean-American homeowner said, “I’ve never made a claim in 30 years, but my insurer refused to renew my homeowner’s insurance, making it conditional on repairing the roof.”
Auto insurance rates are also rising at an alarming rate. According to the latest April CPI from the Department of Labor, auto insurance rates rose 1.8% for the month, bringing the yearly increase to 22.6%, the steepest annual rate on record. This comes just one month after a 2.6% increase in March, which set a new record of 22.2%.
Compared to a 0.3% increase in the CPI for the same month and a 3.4% year-over-year increase, auto insurance rates have increased 6.7 times as much. Last year, the national average auto insurance premium hit $1,633 per year, up 24% and 29% from 2022 ($1,633) and 2021 ($1,567), respectively, according to insurance comparison website Insurify.
While car insurance rates typically increase due to speeding, traffic violations, accidents, and the addition of drivers, the last two years have been driven by external factors, including continued interest rate hikes, tight supply, soaring new car prices, and rising repair costs. Greg Smolan, vice president of insurance operations at AAA Northeast said, “What’s alarming is that insurance rates have risen more in the last two years than at any other time in history. In the past, cars didn’t have sensors and cameras from the front to the back.”
A Korean-American driver surnamed Lee said, “I recently got in a car accident, and my monthly premiums jumped from $250 to $700. I had to switch from full coverage to minimum liability set by the California government.”
California’s minimum coverage standards are $15,000 for bodily injury or death for one person, $30,000 for two or more people, and $5,000 for property damage.
The premium increases are expected to steeply boost insurers’ profits. Progressive’s revenue is projected to grow 14% and profit 80% this year, while Allstate’s is expected to grow 10% and profit by 13 times. “Premium rates for each company are getting closer to the right line, so we should see some moderation in the increases,” Smolan said.
The Insurance Information Institute recommended that consumers should prioritize understanding the ins and outs of insurance and shop for at least three quotes from different companies before choosing. It added that consumers can save money by increasing deductibles, taking advantage of multi-policy discounts, and completing defensive driving courses offered by insurers.
BY NAKI PARK, HOONSIK WOO [park.naki@koreadaily.com]
