Rising Insurance Rates in 2022

Why home and auto insurance rates are rising in 2022.

I hate to be the bearer of bad news, folks, but…along with everything else, insurance rates are going up. Our carriers have told us to be prepared to see insurance rate increases anywhere from 20%-30% this year. I know with everything else going up, this is not the greatest news.

Reason #1: Everything is going up

One of the main reasons for insurance rate increases is that everything else is going up. If you’ve shopped at Home Depot or Lowe’s lately, you’ve seen that the price tags on building materials have risen dramatically. Last year alone, the cost of building materials rose 14.1% with lumber playing huge role in that trend, more than tripling since March of 2020. To make matters worse, the home-building industry is facing labor short-fall of 200,000 skilled laborers, this is driving up the construction related labor costs. In regards to auto insurance, since the pandemic there has been an ongoing shortage of microchips and other critical auto parts, such as wiring harnesses, plastics, and glass, this has increased the cost to repair or replace a vehicle significantly. The average price of a new car has increased over 14% and the cost of  used cars have skyrocketed 55% since 2020!

Reason #2: Auto Accidents

Another reason the cost of auto insurance rates are going up is because the severity of accidents has gone up. Before covid, we were seeing an increase in auto accidents that was unparalleled to any increase in auto accidents we’ve seen in history. We have more distracted drivers on the road than we ever have before. When covid happened, everyone stopped driving. This led to an extreme decrease in auto accidents with record lows. Now that most people are going back to their pre-covid ways of driving, we are seeing an increase in the number of accidents and an increase in the severity of accidents. In January of 2022, auto accident fatalities were up 14% from January 2020. When severity goes up, the total cost for auto accident goes up, and that affects everyone’s insurance.

Reason #3: Weather

Weather also comes into play. Now we’re seeing more severe weather than we’ve seen in the past. In 2021, there was a catastrophic claim event in the United States every 18 days!  Here in the Dallas area, we’re building houses at a higher rate. When we have larger subdivisions covering more areas, more people get hit by hail or other bad weather. And the overall number of claims impacts everyone’s insurance.

Summary

The cost of labor, the cost of parts, and severity of damage are all going up. All three of those things have a very negative impact on insurance rates. You can read more about discounts to help with your cost by reading our previous blog article, How Can I Get Discounts on My Homeowner’s Insurance?

USA today article about raising insurance rates

Sources: National Association of Realtors, Federal Reserve Bank of St. Louis, Home Builders Institute, National Association of Home Builders, Nasdaq, U.S. Department of Commerce, Consumer Price Index, National Safety Council, New York Times