We hope you and are having a wonderful start to 2023.
For the last couple months, insurance companies have been communicating their struggles with us. Some of their issues have to do with inflation. More specifically, they are behind inflation; about a year and a half behind inflation. As prices on everything have increased, insurance has not kept up with the demand. This is partially due to the department of insurance not approving rate increases. The CA Department of Insurance (also known as the DOI) has not approved any real rate increases in the last 2 years. As a result, most insurance companies are running at a loss in California and some are running at a loss nationwide. So what does this mean? Insurance companies cannot run at a loss for very long. If they do, not only will their investors no longer provide them money, they will also go out of business due to spending more than they take in. When there are less insurance companies in the marketplace (and there are plenty leaving CA already), that creates more demand on the remaining companies, which creates capacity issues. It also drives prices up more since there is less competition. You can probably see where I am going with this. I know this all sounds like doom and gloom, but it is really simple economics. I, for one, do not want higher prices or to pay more for insurance and I know that is what's coming though. It is the only way to stabilize the market.
There is no nice way to say: Prices will be going up. It does not feel good to say, well...just go to Starbucks one day less per week and that will help you save more money. I believe, insurance prices will be increasing by about 25% in the near future (if the DOI will approve the insurance company's requests).
A lot of us think, when we see price increases, it is a perfect opportunity to shop your insurance. For now, since all the insurance companies are needing a rate increase along with capacity issues, I have a feeling it may be a good idea to stick with what you have, unless you see a dramatic increase. As an agency, we are very proactive with our clients and re-shop for them, when we see larger increases. If you end up with a 10-20% increase, unfortunately, that may be the norm for the near future.
Let's hope that higher insurance rates do not hit us all at once. Ultimately, it is up to the insurance companies to ask for it and for the DOI to approve it. We will have to wait and see for now.
As always, we have your best interests at heart and want to keep you informed. If you have any questions, we are here for you.
We wish you and your family a wonderful, fun, prosperous and healthy new year.
