The Expert Podcast

So why are your homeowner and automobile insurance rates so high and are they going to go higher? Well, here's a great insight from the insurance industry showing why the rates have gone up and why they're poised to go even much higher than they are now. This is an article that came out today from an insurance publication called Insurance Business, and State Farm Insurance Company, which is one of the largest captive insurance agencies, reported a huge loss for 2023. They have more policies, but they also have a lot more underwriting loss. They lost $4 billion in 2023; they only earned $87 billion in 2023. Now, that loss is not against the $87 billion; they actually paid out more than they took in. This is a record for them in the hundred-year history of their company. Because of that, they have actually halted new policies in some states because they just can't make money, and for the year, they reported an $8 billion loss for total operations.

What does this mean? What it means is that the rates that they currently have are still not high enough to pay off their claims. Most states require that insurance companies only make their rates based on prior years' losses or prior history losses. They can't anticipate what the losses will be for the next year to make up their rates, but now that the losses are real and they actually reported them, they're going to have to increase their rates even more to cover these losses. The rates that they charged in 2023 were already too low to pay the claims that came into their company. So by law, they not only are allowed to raise their rates but they have to raise their rates to make sure that they have financial solvency.

And State Farm isn't the only one; every insurance company has similar underwriting and similar catastrophic loss history. So what you're going to find is whether you have homeowners insurance, automobile insurance, business insurance, any kind of Property and Casualty, you're going to see your rates going up even more. So whatever amount they went up already, expect a similar increase in the coming years because these losses will now start hitting their balance sheets in their books.

How can you avoid your premiums being unaffordable? Well, there's a couple things you can do. You can click the link below; we did some prior videos on how to make your coverages still appropriate but not have the high premiums that you may be used to. One way to do it is to raise your deductible but also raise your upper limit by using either a limit adjustment or to get an umbrella policy. More about that on our website, but be aware that the coming premium increases may actually even be more than what you've seen in the past for your personal lines, homeowners, and auto.