Home insurance rate predictions for 2024
Homeowners can expect rates to continue to climb in 2024 due to severe weather conditions pushing many home insurance companies to raise premiums and become more selective in who they insure.
Wildfires out West, hurricanes in the South, and flooding in inland parts of the country have all contributed to home insurance companies pulling out of many states and raising premiums to counteract the outsized risk of homeowners filing claims.
We’ve already seen national insurers including State Farm, Allstate, Nationwide, and Farmers either pull out of states completely or reduce their exposure in high-risk areas.
Ellen Carney, principal analyst at Forrester, predicts this trend to continue. “Expect another dozen insurers to follow the likes of AIG, Allstate, and others and scale back their business in California, Florida, Louisiana, and now North Carolina, pushing those exposures into the laps of state regulators.”
As it becomes increasingly more difficult for homeowners in high-risk areas to find coverage on the traditional market, expect an increase in policies through excess and surplus (E&S) insurers in 2024.
E&S insurers are able to offer coverage to high-risk homeowners since they’re not part of the admitted (AKA traditional) insurance market. This means they don’t have to run policy forms or rate increase requests by their state’s department of insurance. In turn, they can take on more risk — and charge higher insurance premiums to offset that risk.
Why Home Insurance Costs So Much—and How to Pay Less
Blame natural disasters, the pandemic, and your location. These tips will help you whittle down rising premiums.
read the article here: https://www.consumerreports.org/money/homeowners-insurance/why-home-insurance-costs-so-much-and-how-to-pay-less-a6189826846/
Car Insurance Costs Skyrocket in 2024
This year, expect to pay more for your car insurance. Even though inflation has been slowing down, car insurance costs have gone up. Since 2023, car insurance rates have surged 26%, and they’ll likely remain elevated until 2025, according to Bankrate’s True Cost of Auto Insurance Report. The report determined the annual cost for full coverage car insurance in 2024 to be $2,543, compared to $2,014 in 2023 and $1,771 in 2022. For someone earning the median household income of $74,580, that’s 3.41% of their entire income.
Insurers raise costs in response to your risk as a driver, such as where you live and whether you have a teenager on the policy. They also raise rates based on risks beyond your control, like inflation.
“Car insurance is reactionary, meaning the premium increases we’re seeing in 2024 are a result of insurance companies trying to recoup the losses they experienced over the last few years and accurately assess the risk of future loss,” Bankrate analyst Shannon Martin shares with Kiplinger. “Between 2020 and 2024, inflation increased the cost of vehicle parts and labor, car crash fatalities increased by over 10% and we saw a significant rise in extreme weather and vehicle theft claims. All these factors contribute to the high rates we’re seeing today.”
Car Insurance Premiums to Increase 12.6% in 2024 – Highest Rate increase in 6 years
2024 Auto Insurance Rate Predictions:
- Auto insurers will raise premiums by an average of 12.4% in 2024, the highest rate increase over the past six years. The average cost of car insurance has increased 29% overall since 2018.
- Every state is expected to see a rate increase of at least 3% this year. Nevada will experience the country’s largest auto insurance rate hike in 2024 – an astounding 28% increase over 2023. Washington state (18%), Arizona (17%), Connecticut (17%), Louisiana (16%) and Georgia (16%) drivers can also expect substantial increases in their auto insurance premiums in 2024.
- The average cost of full coverage car insurance in 2024 will be $1,984/year, with Michigan, Florida and Nevada residents paying the highest average premiums, and Maine, New Hampshire and Idaho residents paying the lowest average premiums.
- Drivers with traffic violations will see their premiums jump 52% on average, with drivers in North Carolina, California and Hawaii facing the stiffest financial penalties – an increase of over 90% for traffic violations and dangerous driving.
- Insuring electric vehicles is getting cheaper in 2024, but insurance for new EVs will still be 23% higher than new gasoline-powered cars. Tesla’s Model X, Model 3 and Model Y have the highest insurance premiums in 2024 while the Honda CR-V and Ford F-150 are the cheapest cars to insure in 2024.
source: https://finance.yahoo.com/news/car-insurance-premiums-increase-12-164800560.html
Net worth shocks in the insurance industry and the capacity constraint hypothesis on pricing and supply.
The tumultuous landscape of property and casualty insurance in the United States has witnessed notable upheaval in recent years. In 2022, insurers faced a staggering net underwriting loss of $26.9 billion, the highest since 2011. This financial setback was primarily propelled by a notable surge in incurred losses and loss adjustment expenses, surpassing the growth in earned premiums (Hersch et al., 2023). Consequently, net income plummeted by one-third, leading to a combined ratio tipping into the red at 102.7. The challenges persisted into the first quarter of 2023, with a consolidated net underwriting loss of $7.34 billion, marking the highest in over a decade (Zawacki, 2023).
This period represents a formidable trial for the US property and casualty insurance market, grappling with the imperative to adjust prices to offset soaring expenses. Escalating construction materials and contractor services costs, coupled with a surge in catastrophic events, have driven up property-catastrophe reinsurance costs for primary non-life carriers (Marht-Ganley, 2023). Compounded by insufficient retained earnings among reinsurers to support their cost of capital, reinsurance rates are expected to remain elevated (Pande & Mitchell, 2023).
Insurers are further burdened by escalating expenses in the auto insurance sector, where burgeoning repair costs outpace premium increases. The proliferation of sophisticated assisted driving technologies and the rise in electric vehicle sales contribute to this cost escalation. Additionally, a surge in auto thefts and weather-related losses exacerbates insurers’ financial strain (Henry, 2022).
Understanding these fluctuations in the insurance market requires delving into the nuanced theories surrounding insurance cycles. The capacity constraint hypothesis illuminates how competitive structures, solvency regulations, net worth shocks, and cost disparities between internal and external funds converge to shape short-run supply curves, influencing pricing dynamics, quantities, and overall profitability in insurance markets (Gron, 1994). Notably, capacity constraints emerge when net worth falls short of demand, prompting adjustments in pricing margins to stimulate capacity growth.
Moreover, the underwriting cycle, epitomized by cyclical price patterns, illustrates the intricate interplay between industry profitability and premium fluctuations across distinct stages. The typical cycle description includes four stages in terms of industry accounting profitability. The first stage is marked by several years of low profitability. This is followed by a sudden change to rapidly increasing profitability. The second stage is often called the insurance crisis, owing to the abovementioned characteristics. In the third stage, profitability remains high but is no longer increasing. Profitability declines during the fourth stage as the industry returns to a period of low profitability (Gron, 1994). These stages underscore the correlation between profitability shifts and corresponding alterations in insurance premiums and quantities available.
Recent events underscore the practical relevance of these theoretical frameworks as real-world frictions in the broader economic landscape, environmental factors, consumer preferences, risk mitigation strategies, and regulatory policies coalesce to diminish industry capacity temporarily (Eling et al., 2020). These insights offer invaluable perspectives into navigating the complex dynamics shaping the contemporary insurance market. – written by Darren McGraw
References
Eling, M., Hoyt, R. E., & Schaper, P. (2020). The impact of capacity on price and productivity change in insurance markets. Journal of Insurance Issues, 43(1), 22-58.
Gron, A. (1994). Capacity constraints and cycles in property-casualty insurance markets. The RAND Journal of Economics, 110–127.
Gron, A. (1994). Evidence of capacity constraints in insurance markets. The Journal of Law and Economics, 37(2), 349–377.
Henry, J. (2022, July 25). Repairing an electric vehicle could cost more than gasoline cars: A new kind of sticker shock. https://www.forbes.com/sites/jimhenry/2022/07/25/repairing-an-electric-vehicle-could-cost-more-than-gasoline-cars-a-new-kind-of-sticker-shock/?sh=a6e60245eee5
Hersch, K., Colaco, J., & Canaan, M. (2023, December 15). 2024 global insurance outlook. https://www2.deloitte.com/us/en/insights/industry/financial-services/financial-services-industry-outlooks/insurance-industry-outlook.html
Marht-Ganley, N. (2023, March 27). US P&C insurers facing hardest market in a generation. https://www.apci.org/media/news-releases/release/75202/
Pande, M., & Mitchell, M. (2023, May 16). The state of the reinsurance property-catastrophe market. https://www.swissre.com/risk-knowledge/mitigating-climate-risk/state-of-reinsurance-property-cat-market.html
Zawacki, T. (2023, May 19). US P&C industry posts largest-on-record Q1 statutory underwriting loss. https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/us-p-c-industry-posts-largest-on-record-q1-statutory-underwriting-loss-75828932
Auto insurance premiums set to surge in 2024 https://www.insurancebusinessmag.com/us/news/auto-motor/auto-insurance-premiums-set-to-surge-in-2024-472334.aspx
The new year is poised to deliver another jolt to American drivers, as insurers are expected to raise auto insurance premiums by an average of 12.6%. According to ValuePenguin.com, a subsidiary of LendingTree, this projected hike is the steepest since 2018. It also comes on the heels of an 11.2% increase in 2023, signaling a persistent upward trajectory. Forecasts from ValuePenguin’s State of Auto Insurance report additionally indicate a minimum 3% hike for every state in the US. Nevada leads the pack with a projected 28% surge. Washington, Arizona, Connecticut, Louisiana, and Georgia also face substantial increases, ranging from 16% to 18%. With these hikes, the average annual cost of auto insurance is anticipated to hit $1,984 in 2024, according to the report. Drivers in Michigan, Florida, and Nevada are set to shoulder the highest premiums, while those in Maine, New Hampshire, and Idaho are likely to see the lowest rates.
Furthermore, motorists with traffic violations are expected to see a 52% average increase in premiums. Drivers in North Carolina, California, and Hawaii will face the most significant financial penalties, according to ValuePenguin, with violations and dangerous driving resulting in premium hikes exceeding 90%. And while electric vehicle insurance is becoming more affordable in 2024, it remains 23% higher than coverage for traditional gasoline-powered cars. Tesla’s Model X, Model 3, and Model Y stand out with the highest insurance premiums, while the Honda CR-V and Ford F-150 emerge as the most economical choices.
As the burden of auto insurance becomes increasingly challenging for Americans, 54% of policyholders told ValuePenguin that they are struggling to afford coverage. Divya Sangameshwar, an insurance expert at ValuePenguin, said the situation is set to worsen in 2024, with the rate hike surpassing that of the previous year. Gen Z drivers will be disproportionately affected by the hikes, as they face a staggering 188% increase in car insurance costs compared to their older counterparts.
The factors behind these escalating premiums include the rising cost of car repairs and replacements, despite a slowdown in inflation. Severe weather incidents in the past year have also led to a surge in insurance claims, prompting insurers to adjust rates to reflect increased weather-related risks. Additionally, there has been a significant uptick in car thefts since 2022, including a 700% rise in catalytic converter thefts since 2019.
Broken Home: The Availability and Affordability Crisis in the Homeowners Market https://www.iamagazine.com/magazine/issues/2024/march/broken-home-the-availability-and-affordability-crisis-in-the-homeowners-market
It is no exaggeration to say the U.S. homeowners market is in crisis. While the hard market has cut deep into nearly every insurance market, the scale and magnitude of its impact on the bread and butter of the personal lines market has turned what was once a simple product that could be sold with ease into a nightmare.
It’s a problem that lays bare the insurance industry and regulators’ challenges in dealing with climate risk. It’s exposing the frailty of the insurance ratemaking and regulatory process. It’s forcing insurers of last resort to accept far more risk than they can afford. And it’s pushing insurers’ obligation to provide a product that is a cornerstone of the economy while also obtaining a reasonable profit to the limit.
The implications of rising construction costs on property insurance
Overarching Market Trends
Personal insurance rates have been on the rise for years due to a number of factors—primarily the increase in natural disaster-related losses, increased costs for auto losses, and “nuclear” liability verdicts, combined with state-specific regulations affecting carriers’ profitability and their ability to adequately price risk. Current loss ratios are nearly 110% for personal lines,1 which means that insurance companies are paying out 10% more in losses than they are collecting in premium.
As a result, policyholders have been experiencing incredible homeowners rate increases ranging from 20% on the low end to as much as 70 – 100+% or more for high-risk properties. Although auto rates had not been on the rise as much as homeowners policies, they are now trending upward for 2024 and policyholders are likely to see rate increases.2
Another critical effect impacting homeowners has been the capacity shortage resulting from many carriers limiting their new policy issuance or pulling out of high-risk states all together. The lack of coverage availability combined with higher rates have put homeowners in a pinch. Many have been taking on more risk in order to reduce their costs. In fact, our 2023 Private Client Insurance Benchmarking Study found that 1 in 4 homeowners moved to a policy with limited coverage and 1 in 5 decided to forgo insurance in some areas due to these unfavorable market factors.
In 2024, the hard market effects are expected to remain with elevated rates in property lines and additional rate increases in auto and in excess liability/casualty coverage. However, some states have recently passed new legislation that will ease pressure on carriers and allow them to reprice risks and hopefully open up capacity. This may set a precedent for other states that may lead to market softening late in the year and into 2025.
Record breaking natural disasters continue to cause complications
Since 2017, the U.S. has been experiencing increases in severe weather events and natural disasters. In fact, a record number of 28 billion-dollar disasters impacted the U.S. in 2023 with a large uptick in damaging convective storms across the central states. While the number of events increased, the overall insured cost of damage was $95 billion, less than the $125 billion of 2022.3
Of note, more than $50 billion of this was due to severe convective storms, which bring hail and tornadoes and are becoming more frequent and costly.
Reinsurance rates becoming more balanced
The average personal lines policyholder isn’t likely to be paying attention to reinsurance rates, even though they are a big factor in policy premiums. Reinsurance is basically insurance for insurers, and carriers factor those costs into their policy prices as well. In 2023, reinsurance rates in North America were up 40-60%.
Guy Carpenter, global reinsurer and sister company to Marsh, has indicated that conditions are more balanced for January 1, 2024, renewals with some restored capacity and more consistency in underwriting.4 This notable shift is promising for the insurance market overall.
Insured losses could double within next ten years: Swiss Re sigma
- 26TH MARCH 2024 – AUTHOR: STEVE EVANS
According to global reinsurance firm Swiss Re, the occurrence of medium-severity insured loss events has risen by 7.5% since 1994, at almost double the 3.9% increase in catastrophes generally, and the company warns that insured losses could double within the next ten years.
In the reinsurance companies latest sigma report on natural catastrophe losses, Swiss Re continues to peg the 2023 total for insured catastrophe and man-made disaster losses at US $108 billion, with $100 billion coming from natural catastrophe events.
It is frequency that is the main driver of insured loss accumulation, Swiss Re notes, with severe convective storms (SCS) driving some US $64 billion of the 2023 total, 85% of which were in the United States.
The reinsurer notes that severe convective storms (SCS) losses are actually growing fastest in Europe though, which is something to watch out for in reinsurance capital markets.
Swiss Re has said before that climate change-induced hazard intensification is likely to increas losses in the future, making adaptation critical.
The US $108 billion insured catastrophe loss total for 2023 reaffirms the 5–7% annual growth trend in global insured natural catastrophe losses since 1994, the reinsurer said.
But today, Swiss Re also added that, “Swiss Re Institute estimates that insured losses could double within the next ten years as temperatures rise and extreme weather events become more frequent and intense,” which is a stark warning and a reminder for reinsurance and risk capital providers that loss costs must get priced for.
Insured losses from natural catastrophes is outpacing economic growth, as inflation-adjusted insured losses from natural catastrophes averaged 5.9% over the last 30 years, while GDP grew by 2.7%, Swiss Re explains.
“In other words, over the last 30 years, the relative loss burden compared to GDP has doubled,” the reinsurer said.
Jérôme Jean Haegeli, Swiss Re’s Group Chief Economist, commented, “Even without a historic storm on the scale of Hurricane Ian, which hit Florida the year before, global natural catastrophe losses in 2023 were severe. This reconfirms the 30-year loss trend that’s been driven by the accumulation of assets in regions vulnerable to natural catastrophes. In the future, however, we must consider something more: climate-related hazard intensification. Fiercer storms and bigger floods fuelled by a warming planet are due to contribute more to losses. This demonstrates how urgent the need for action is, especially when taking into account structurally higher inflation that has caused post-disaster costs to soar.”
Moses Ojeisekhoba, Swiss Re’s CEO Global Clients & Solutions, added, “As weather hazards intensify due to climate change, risk assessment and insurance premiums need to keep up with the fast-evolving risk landscape. Looking ahead, we must focus on reducing the loss potential. 2023 was the hottest year on record, and the start to 2024 is following suit. Keeping property insurance sustainable and affordable requires a concerted effort by the private industry, the public sector and broader society – not just to mitigate climate risks, but to adapt to a world of more intense weather.”
2023 was marked by a record 142 events that surpassed the Swiss Re sigma reporting thresholds for insured losses.
The majority were medium-severity, Swiss Re explapined, with losses of between US $1 billion and $5 billion.
“There were at least 30 such events in 2023, many more than the previous ten-year average (17). Of those events, 21 were SCS, a new high. The number of these medium-severity events has grown by 7.5% since 1994, almost double the 3.9% increase in catastrophes generally,” the reinsurance firm said.
The below is a link to a very detailed and thorough examination of some of what is going on in the industry and how it influences the main thing consumers care about: Why are my rates going up?
https://www.northimprovement.com/post/why-did-my-insurance-go-up-a-us-insurance-industry-review