Inflation: What does it mean for your insurance?

Perhaps it is time to address the elephant in the room. Inflation. What does inflation have to do with my insurance? I get this question a lot more frequently now. Inflation essentially means that your money has less buying power than it did prior. According to the U.S. Bureau of Labor Statistics, the inflation rate hit a 40 year high reaching 7.5% in January 2022.

I am sure you have noticed the change in price while getting groceries, and filling up your gas tank, but what about your insurance? I have seen pretty significant changes in rating over the past 12-18 months. So...why is this happening?

New and Used Vehicles

Have you noticed the lack of inventory at your local dealership? According to U.S. Bureau of Economic Analysis, new vehicles sales have dropped by just over 50% in 1 year. A national chip shortage has assembly lines screeching to a halt. The huge drop in inventory of new vehicles is created a surge in used vehicle sales which in return has caused used car values to jump 30-35% year over year. Vehicle prices have a direct effect to insurance and the cost of coverage options such as Property Damage of others, Comprehensive and Collision, Underinsured/Uninsured coverage.

Construction Materials and Home Inventory

In a previous career, I use to manage a building materials department in a large national home improvement store. The cost of materials has increased significantly through this entire pandemic. Mills and Material manufactures are back logged on some materials such as windows and garage doors for almost 12 months. These additional costs for materials, labor costs and loss of use coverage can increase your claim by several thousands of dollars. In the Fargo- Moorhead market alone, home listings are under 100 if you take out new construction. Less than 100 homes... in all price points... that is crazy low. In real estate, this is called a sellers market with almost every listing going well above list price.

Injuries

Unfortunately, injuries do happen in car accidents or on your property or business' property. One of the areas hit hardest by labor shortages is the medical field. Hospitals are having to pay top dollar to get candidates in the door.

Help Wanted

For most business that are short staffed ,like I mentioned above, their labor costs have never been higher. The increase labor costs in conjunction with transportation costs to get goods forces a business to raise prices we as consumers pay. Business insurance uses either payroll costs or sales numbers as a major factor in determining a premium.

If you have questions about your insurance and/or you are concerned about increased costs. Give us a call!