What Impacts Insurance Premium Rates?

If you've purchased a home or car, you understand the feeling of wanting to protect it. Having insurance protection provides peace of mind. It’s important to understand that the cost of claims is growing due to a variety of factors including inflation, increased severe weather events, supply chain issues and more. These issues along with a number of other considerations could impact your rate.

Home and auto factors

Recent claims or violations

Depending on the carrier, underwriters may look at 3 years of claims history for homes and 3 years of accidents and violations for autos. This claims history could have an impact on your insurance, potentially increasing your premium.

Inflation

Inflation can impact insurance rates. Just as the price of goods and services can rise due to inflation, the cost of insurance premiums can also increase. Here’s why: Insurers may raise premiums to attempt to offset the rising costs of claims. The cost of a claim is rising because of a variety of factors such as an increase in materials costs (e.g., lumber or car parts) or a shortage of supplies. These factors can lead to an uptick in claims costs, which can translate into to an increase in insurance rates for the consumer.

Weather events and supply chain

Insurance premium rates can be impacted by a number of factors, including weather and supply chain issues. If you live in an area of the country where natural disasters and severe weather are common, insurance companies may raise your rates whether you file a claim or not. Frequent weather events will probably lead to more insurance claims, and insurance companies will increase your premium to compensate for those costs Supply chain issues can also lead to higher rates for consumers. When products are difficult to source, this affects everyone — from repair shops to auto suppliers to construction companies to lumberyards. These companies then may face delays or increased costs, which impact the speed and affordability of repairs or construction. These combined issues can lead to an increase in policyholders’ rates.

Policy discounts

One of the most common discounts that carriers offer is the multipolicy discount. When you have home and auto insurance with one carrier, you can potentially save. Some carriers also offer discounts for other types of policies. Other discounts vary, but some of the more common ones include those based on the age of the home, a recent renovation, the purchase of a new vehicle, whether your home or car have protective devices, and whether you’ve gone for a certain amount of time without filing a claim. Programs such as telematics and smart home technology may provide discounts for members who implement tech devices to minimize risks. Completing routine maintenance for homes can also help keep your premium low.

Reducing your risk can lower your premium

You can reduce your potential for a loss and often lower your premium by, for example, updating your electrical system, plumbing or roof. The newer your home’s systems are, the less chance of loss, so carriers may reward you with a lower premium or discount. There are many devices available to help protect your home, such as fire and burglar alarms, water and seismic gas shut-off devices, gas leak detection systems, full-house backup power generators and temperature monitoring systems.

Auto-only factors

Technology in vehicles

While most people appreciate new car technology, automobiles are becoming more complex and more expensive to fix, driving insurance premiums up. High-end, modern cars often have advanced features such as backup cameras and intricate sensors. These features are more expensive, are often located in difficult places to reach, and must be coded and calibrated during the repair process. These factors combined means it costs more time and money to fix these vehicles. The added expense and time to repair may cause insurers to declare the car a write-off — when the vehicle becomes uneconomical to repair — earlier in the car’s life cycle. To compensate for these growing costs and write-offs, insurance companies can potentially raise insurance premiums.

Dan Zeiler

dan@zeiler.com

877-597-5900 x134