The Expert Podcast

Property and casualty insurance is not always talked about when in the idea of inflation comes up but you're going to start seeing rate hikes all over the country we've seen some crisis of insurance on property in florida but florida is not the end of it it's going to extend into other parts of the country here's a rate hike happening in north carolina they're going to see an increase of newer renewed homeowners rates beginning right now there was a lot of natural disasters in north carolina.

Record-breaking hurricane season and a 24 increase in homeowners insurance rates that's a big jump if your homeowner's insurance is let's say a thousand bucks a year that's going to put it at 1200 if your insurance is 2 000 now it's going to be 2 400. It's a big jump and it's not just because north carolina has hurricanes and nowhere else does every part of the country is having more natural disasters whether it's caused by climate change or global warming or whatever doesn't matter there are more natural disasters happening floods hail storms tornadoes fires every part of the country almost has some type of increased threat that's going to increase insurance.

In addition another factor that's overlooked is general inflation if all materials that go into home construction go up in price or commercial lines you know we write mostly commercial policies in our agency we don't do a lot of personal alliance products but commercials affected the same way if building materials lumber fixtures electrical supplies are all going up in price those are the things that are actually getting paid for with an insurance claim and if all those things are up in price 30 40 percent well premiums have to go up accordingly labor is also up.

One of the biggest factors in insurance rates that's overlooked is the delay in the repair if materials are not available to fix damage to a property and that property remains unrepaired for let's say four months instead of four weeks well guess what kicks in during that extra three month time if the business policy there's bi or business interruption or lost profit insurance coverage so even if the price of the product didn't go up which that would not happen but just assume that the price of let's say one particular breaker box is not available and the price is the same and you have to wait three months for that part to come in to finish fixing that residential or commercial project the insured is getting benefits from the insurance company throughout that time.

They're either getting business interruption coverage or if it's a personal lines they might be getting rental assistance to put them up someplace until their whole house is fixed the insurance companies have to factor that expense into their future premiums by law so if the supply chain is cutting back on availability of certain materials and making those materials cost more that's going to have a ripple effect on the insurance industry some of those effects haven't been realized yet the insurance company can't arbitrarily in most cases just jack up the rate before they have the cost.

Even if you know that cost is coming even if you know that gee all the claims this year are going to have a higher expense basis because of supply chain or inflation they can't proactively raise their rates now they almost have to wait until those expenses hit and then raise them the following year so it's a trailing indicator so the inflation that we've seen over the last 12 to 18 months may not start showing up at insurance policy premiums for another 12 to 18 months until these expenses start to kick in and they have their annual reviews of premiums.

Be prepared for that as a property owner as a business owner that your premiums may go up 20 30 40 percent even if you're not in a high-risk area like south florida that gets hurricanes could be anywhere could go up even more we predict that most property insurance coverage all things being equal will go up 30 percent in the next 24 months on average some will go up more some a little less but on average 30 percent.

So if you look at your policy and look at what your premium amount is and add a third roughly to that that's what you think can expect for your budget a year or two down the road and factor that into your expenses whether it's a personal you know household budget or a business p l use that number for projective costs for property and casualty insurance part of it too is because a replacement cost is so much higher because of the property values have gone up.

Let us know what you think in the comments has this affected you have you seen rate increases we'll see in the next video.