Inflation and Insurance
We are all familiar with the word association game where a word is said like carnival or circus, and immediate thoughts of clowns, cotton candy, and children having a good time come to mind. So, say the word inflation, and instantly thoughts of concern, budgeting, and higher prices flood our thoughts. Unfortunately, inflation seems to be the buzzword these days – you can’t listen to a news program, podcast, or read an online article where the current concerns about inflation don’t crop up. Inflation is spiking to levels unseen in recent history. Many 20 and 30-something year-olds have not seen this in their lifetime. Inflation affects every facet of our lives – from the price of gas and groceries to how we conduct business – opting for virtual gatherings vs. in-person meetings and classes. So, what’s “driving” higher insurance premiums for automobiles? There are three things:
The Price of Cars, Driving Practices, & Car Repair Costs
Why do cars cost more today?
Despite inflation – the demand for automobiles is still high – but supply is on the short side. There is a global shortage of auto parts – especially computer chips and other technological components – slowing down the production of new cars. With new automobiles in short supply, dealers are not negotiating. They are charging premiums and new car fees to the consumer willing to pay more for the chance to own a new car.
In 2021 – we saw travel trends move back to pre-pandemic levels. With that return of activity – car accidents have increased as a natural result. As claims increase – so do auto insurance premiums.
Body shops and repair facilities have 2 major issues: supply chain challenges making parts hard to get and lack of skilled labor. Repairs are taking longer and are costing more.
We are seeing the same trends in pricing for property insurance – up, up, up!
There are two major issues facing any business related to property ownership: building/materials, pricing and lack of skilled labor – ring a bell? Same song, different verse! By now, everyone is sick of hearing the words supply chain – pre-2019 – it’s doubtful many people even really knew what a supply chain was. Now it’s choking us all!
Houses for sale in many parts of the country are in short supply – driving up pricing. Interruptions in consistent and accessible building supply markets have caused new builds and repair/renovation costs to soar. There are not enough skilled laborers to fill all the available jobs to keep the building industry working. 2021 saw historic levels of unfilled jobs in construction-related fields. There is just no end to the challenges builders are facing.
So, what is the consumer to do? Try to have realistic expectations. Everything is different now – we must adjust and find a new normal. Have patience –what goes up must come down. Eventually, things will even out – if you’ve been around as long as I have – you know this is true. Talk to your insurance agent about options to mitigate increasing costs related to your insurance program. It’s easy to get taken in by lower pricing offered by competitors- but what is that pricing really getting you? What are you losing? Talk to your insurance agent first – we are all in this together – saving you money may also mean saving you as our client – a win-win for us all!