The market is ‘hardening’. What does this mean to you?

If you read any articles about property-casualty insurance, you may see the above expression used in discussing insurance trends today.   What this means to you is that rates are going up, for both personal and business insurance.  Sometimes, they’re going up a lot.  And, as an industry we expect to see this trend continue for two to three years (or more).

How much are we talking about?  Well, most of the personal auto increases we’ve seen filed so far this year are anywhere from 6 to 10% on a statewide average.  As for homeowners, we’re seeing slightly more; perhaps 10% on average.  Business policies vary more; depending on the type of business some are going up from 20% to 50%.   And some of the individual increases can be much higher than the average.  So, what can you do about this?

First, some increase in pretty much inevitable.  The entire industry has had a number of bad years prior to this, especially the last two years with our natural disasters in the Northeast (the snowy winter, the tornado, the hurricane, and ‘snowmageddon’ on 10/29/11) (I didn’t have to look that date up; anyone in our industry has it memorized).  In addition, the national and worldwide trend in catastrophic losses (i.e. the tsunami in Japan to the wildfires out West) increase the cost of reinsurance the insurance companies must buy, and since insurance is a mechanism to spread risk, we’re all paying for these losses.  So no matter where you are or what you do, over the next few years your insurance costs are going to go up somewhat.   That bit of bad news is beyond yours and my control.

Second, there are things you can do to keep yourself in a desirable class for the insurance company, and over time (and regardless of hard or soft market) these things will lower your bills. 

If you haven’t shopped your insurance in the past three years, for the most part it would be a good idea to do so.  The rating methodology of most policies has changed and its a good idea to see if these new rating programs can lower your premiums.  This is especially true for personal auto policies.

Keep losses to a minimum, ESPECIALLY on homeowners policies.  Almost all companies are finding ways to surcharge for losses (even catastrophic ones) and if you have too many losses you may not be able to find insurance in a standard market.  Even small losses, for example glass losses on your auto policy, can cost you more than the loss in the long run.  Call your agent (before you call your company, and if you don’t have an agent, get one!) before reporting any claim, and weigh the amount of recovery versus any adverse affect the loss may have on your pricing.  Despite what some say, every single loss on your insurance record has the potential to affect your pricing.   For best results, the losses you should file are the ones you truly can’t afford to pay yourself (and this is the basic idea of why insurance was invented).

Along with the above, consider higher deductibles.  However, find out the premium savings for them and be sure they make sense.  For example, I never sell $1000 deductibles on auto policies because the savings between them and $500 deductibles are minimal, and $500 is a lot more money to fork over for a covered loss.  Ask, get complete information, and make an informed decision.

Last, don’t forget that personal (and business credit) is used on a widespread basis to rate personal lines and small business policies.  Having a higher credit score will almost certainly save you money in the long run on insurance.

Don’t think of only price; consider the quality of coverage.  Be sure you have as much liability coverage as you can afford, and enough property coverage to cover large losses.  In other words, don’t be penny-wise and pound- foolish.  Consider your insurance provider the professional he/she should be, ask all the questions you want to ask to provide yourself the level of comfort in knowing that you have made the right decision…for you.  And if you don’t get those answers, call us, and we’ll help find the answers that you want.


About wildbill426

Owner of and Horton Insurance Services. Insurance agent and drag racer.
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