What has happened to the homeowners’ insurances last year?
Last year, we saw an increase in premiums throughout the whole of the United States. Massive rising costs have let many homeowners to drop their insurances, because they were unaffordable.
A lot of these rises were due to the natural disasters happening in the areas, such as Florida and Georgia and Minnesota. In general terms, if risks increase in an area, premiums that are not set can rise to cover the potential damages paid out.
Insurance companies have often claimed that these price increases were necessary due to the increase in damage payouts or potential risks that could increase in the coming years.
However, a research done by Triple-I (Insurance Information Institute) has shown that it was not comppletely the case in many cases.
They showed that increased cost in raw materials, have lead to increased cost for repairs and damages. A roof repair in 2021, cost not nearly as little as it did in 2015.
Due to this, the money paid out for damages and repairs had been way higher than in previous years and that was outside the scope of whether there were more or less claims.
Why have homeowners’ insurance premiums been lagging behind inflation?
There are a lot of regulations regarding insurances for insurance companies. Homeowners’ insurance premiums can not simply be heightened at any point for no reason.
Of course, this is done so that the consumer is protected from unnecessary rises and to keep them in the insurance policies. Insurance companies also do not want to lose customers, so they are very careful in their pricings.
The cost increase of everything is hard to measure for insurance companies and in order to maintain a steady influx of customers, they have not been ready to increase prices with inflation, due to fear of losing customers.
However, the story of natural disasters and high-risk areas might have been a better one to sell to premium holders, which is why the prices have skyrocketed in a lot of areas last year.
What does this mean for the cost of homeowners’ insurances in the future?
Every company needs to make money to keep existing and this is no different for insurance companies. It is therefore expected that the prices will keep rising in the near future.
If there are less natural disasters and risk-prone areas are not having to claim as much as they have been doing these last couple of years, it is possible for those increases to be less than currently.
Insurances in the United States are plentiful and insurers are not out to rob people of their money, this would be a bad business strategy. We can therefore expect that they will do everything they can to keep premiums affordable.
Regulations however are not set to change any time soon, so homeowners’ insurances will stay limited in changing and this means that continuous slight changes are needed to adapt for the losses of insurance companies.