The Insurance Industry Went Crazy - 5 Steps to keep from overpaying

Why the insurance industry went crazy:

While I'll focus on home & auto insurance in my examples the crazy is affecting all property & casualty insurance products for individuals & businesses.

The insurance industry doesn't exist in a vacuum and there are some crazy things going on in economy and society right now including:

1. Post Covid supply chain interruptions mean it's taking longer to rebuild, repair and replace buildings, cars & equipment leading to significantly higher 'loss of use' insurance claims.
2. Once those structures or vehicles are repaired or replaced, they're being replaced at a significantly higher cost than before. Inflation has affected every facet of our lives and inflation tends to compound in the insurance industry. Here are just a few examples that have affected insurance claims:
   1. Car inventories are down significantly leading to an unprecedented appreciation in the used car market
   2. Auto parts were up 22.3% at the end of 2022 vs the start of 2020
   3. Severe shortages of skilled labor led to significant increases in construction & repair costs
   4. Building materials costs have skyrocketed since COVID with asphalt shingles up 16.2%, concrete block up 18.5% and drywall up 20.4%
   5. Medical inflation which affects liability rates was up nearly 7% in 2022

How the insurance industry is going crazy:

Insurance rates are based on what insurers think it will cost to make policyholders whole in the event of a loss - whether it's roof damage during a windstorm or a vehicle totaled during a traffic accident. With everything costing significantly more and no relief in sight, rates are increasing much greater than we've seen in decades. Compounding this are two factors the first of which is that investors who were previously investing in the insurance industry can achieve more attractive rates in government backed securities without the perceived risk. Secondly, economic instability has caused the reinsurance market where the insurers insure to collapsed down to a fraction of its previous size meaning that there is now more demand for insurance protection than there is supply or capacity within the insurance industry. Demand for insurance exceeding supply is called a hard market and the difference between supply and demand determines just how hard the market will become. Note that most companies Yennie & Jones represents are 'Mutuals' and owned by you/policyholders which adds increased stability but even mutuals have to buy reinsurance against catastrophic losses from privately or shareholder owned reinsurance companies.

This next list doesn't apply to any single insurer including a number of Yennie & Jones' insurance partners, it's just what we're seeing play out across the industry. Here are some of the ways that insurers are responding to the crisis:

1. Not offering insurance to some or all new applicants.
2. Raising rates at a significantly higher rate than previously.
3. Refusing to offer insurance unless multiple policies are packaged together.
4. Pulling out of States where they don't think they can raise rates enough to break even (mutual companies) or make a profit (stock companies). For example, State Farm, Allstate & others have pull property insurance out of California.
5. Nonrenewing lines of business (property, auto, rental property, etc.) or entire classes of business insurance (usually industry specific like roofers, residential rental property, etc.).
6. Nonrenewing newer business with claim(s). Yennie & Jones picks our insurance partners very carefully and we generally don't see this with our insurers unless there are multiple claims or claim(s) that result of extremely poor decision making.
7. Refusing to reinstate policies that have cancelled for non-payment.
8. Merging with other companies to achieve economies of scale.
9. Re-underwriting current business which may include inspections. Non-renewing those policies that no longer fit the underwriting requirements whic
10. h may be based on driving history for auto policies or failing to show 'pride in ownership' on property.
11. Requiring significant additional verification of information before a policy is issued which may delay receiving pricing for up to 2 weeks.

Steps Yennie & Jones has taken in this Hard Market

As you can imagine, things have become pretty dynamic in the agency as we deal with multiple companies making multiple changes all at once while rates increase at a pace we haven't seen in a couple of decades. Most of what we do hasn't changed and has prepared us and you well for this market including:

1. Commitment to long-term relationships as you rotate through one or more of our insurers as your situation and their risk appetite change. We continue to remarket our current clients as they qualify for more stable insurers.
2. Packaging policies with a single insurer when possible: In all markets conditions this leads to bigger discounts and better claims service. In a hard market it insulates you from some of the craziness.
3. We continue to look at every renewal to identify whose protection program needs additional attention. We have changed the threshold for a second internal review from a 10% increase to a 15% due to the current market conditions and may increase that to 20%. Expect more inflation in your protection program but we can often offset some or all of the increase if you take the time to review your protection with us.
4. Encouraging annual reviews: By keeping your protection up to date and moving your protection only when appropriate, or when you qualify for a more stable insurer we insulate you from more craziness. You should be receiving our annual review request by e-mail and I encourage you to take us up on the offer. If you also get a call from us, then we have a strong suspicion that there's an issue with your current protection or we feel we have a significantly better option for you.

5 Steps To Protect Yourself In A Hard Market

The good news is that there are steps you can take, even in the hardest of insurance markets to keep your protection program affordable:

1. Pick The Right Agent: You want an independent agent like Yennie & Jones that works for you, not an agent who's an employee of a single insurance company. Our agency has access to hundreds of insurance companies so if your current insurer no longer fits your needs, you'll have options and access to professionals who can weigh the available options with you. You also want an agent with hard market experience so they can anticipate changes. Yennie & Jones has been here since 1902 and our staff has decades of experience dealing with all types of insurance markets.
2. Pay your bills on time: Do your best to pay your bills on time. A good credit score leads to a good insurance score which leads not only to better rates at most companies but also leads to more companies competing for your business. Late payments on insurance policies lead to cancellations and non-renewals and while we'll have other options because we're an independent agency, the other option won't be as favorable if your insurer refuses to reinstate due to a poor payment history. Paying insurance premiums in full often yield significant discounts as well.
3. Review your protection with your agent: The first step if you're uncomfortable with your insurance bill is to review your insurance protection and adjust your protection to your current needs as well as the market conditions. Little changes like a change in deductible or removing collision on a 15 year old car can have a big impact. While you're at it, make sure that you haven't missed protecting anything significant you've purchased since your last review or a premium bearing life change like how far you drive your car to work. Once the review is complete your Yennie & Jones agent will recommend sticking with your current insurer or making a change if it's appropriate.
4. Good housekeeping: For property & business protection you want protection from a preferred company that conducts initial and periodic inspections. If your insurer is inspecting your place, they're also inspecting everyone else's. Your rates are largely determined by the pool of other policyholders you are insured with. Inspections are a pain but they're better than the higher cost of being insured with a group of folks who don't think their places could pass inspection.
5. Don't jump insurers frequently: Insurance, like everything else in the economy, is increasing in price. There are reasons to change insurers and if a Yennie & Jones associate is recommending a change, trust their judgement. Here are some of the considerations we weigh:
   1. The rate and underwriting stability of the insurers we are considering. Would a change put you in a position where a claim might lead to a non-renewal or break a package discount and cause a net increase in what you're spending.
   2. The number of companies you've been insured with in the last 3-5 years is now a significant rating factor with many insurers. More insurers can mean higher rates. Insurers are looking for a relationship, not a one night stand.
   3. Would you be switching from a great insurer that's already 'taken rate' to an insurer that's getting ready to 'take rate' or has waited too long and has to take too much rate or other dramatic actions as mentioned above?
6. Bonus Step: In a soft market where we have many insurers competing for your business we rarely recommended 'Accident Forgiveness' endorsements on personal auto policies but in this market, it can potentially save you a significant amount of money should you have a claim. Consider adding the 'Accident Forgiveness' option to your auto policy if it is available to you.

In Closing

Your Yennie & Jones team is working very hard to affordably protect you in the most challenging insurance market of my lifetime. We value your trust and have added additional staffing to meet your needs and are actually turning away some new business so that this flight to quality won't overwhelm our ability to care for you. That said, we never turn away referrals from clients so if you do send a friend or loved one to us, please make sure they use your name when they contact us. Thank you for your business and call us @ 816-540-2114 for any insurance questions or concerns you may have.