| Why Are Auto & Home Premiums Increasing? by: Plymouth Rock AssuranceThough most people see a slight increase in their insurance premium each year for a variety of reasons specific to their driving behavior, the effects of inflation are felt across the whole industry. While it is finally slowing down, inflation is still high by historical standards and continues to drive up costs across our economy – including auto and home insurance premiums.
When premiums go up, it's to offset the ongoing impact of higher costs caused by supply chain delays and labor and parts shortages. Plymouth Rock has created a downloadable guide on the reasons behind inflation, and read on to better understand what's driving higher rates in the insurance industry.
Higher Costs for Parts & Materials
Reduced supply of parts and materials increases the cost to repair your car and home, which drives up insurance premiums. - The average price for a new car is nearly $50,000, up about $10,000 from September 2020. More expensive cars and parts mean more expensive claims.
- Everything from wood to windows is more expensive. The Producer Price Index for construction materials is up over 40% from pre-pandemic levels, which has caused repair costs to surge.
Higher Labor Costs
Demand for skilled workers is outpacing supply four to one. A shortage of laborers means higher wages to recruit and maintain personnel. - The average age of cars on the road has risen to a record 12.6 years, plus more drivers are returning to the roads post-pandemic. Older cars and more accidents increase the number of repairs needed, and the technician shortage drives up costs.
- Construction wages continue to rise as the industry faces a shortage of 274K workers.
Supply Chain Delays
Though both the car and home industries are slowly recovering, the effects of COVID-induced supply chain disruptions are still being felt. - The auto industry is still dealing with the pandemic's effect, with factories still recovering from the semiconductor chip shortage and increased cost of parts.
- Home prices are rising while supply is decreasing, with the median price of a home 2% higher than this time last year but more than 300K fewer homes on the market.
How Can You Help Your Clients Lower Their Premiums?
Knowing that inflation is a heavy factor in rising insurance premiums – and that it is slowing down – can help you prepare your clients for increased premiums. And while the industry waits for inflation to cool down completely, you can share with your clients some ways to lower insurance premiums, including safe driving discounts, group discounts and more. Plymouth Rock even has memberships programs that include coverage savings and exclusive perks with the Red Sox, Yankees, Bruins and Patriots.
At Plymouth Rock, we're committed to providing a higher level of service – and that includes helping our customers and independent agents work through the challenges presented by inflation and offering competitive, reliable insurance premiums.
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