Don’t you hate it when your insurance rates go up? I do too! Being an independent insurance agent helps, in that I can shop several companies for a better rate, and most of the time find one, but not always due to several factors.
More about that in another blog.
Getting back to rate increases. It makes sense to see your rates increase some, after all, some of the things that make your rates what they are, are increasing in cost (car repairs, medical costs, lumber, materials, labor, etc.). However, what doesn’t make a lot of sense is when you haven’t had any losses, and your rates go up 40% or more.
All insurance companies try to anticipate what their losses will be each year, in 5 years, etc. in order to set their rates. The goal is to collect enough premium dollars to pay for the losses, pay their expenses, set aside money in reserves to take care of unexpected losses, and make a profit. Insurance companies are a business and should make a profit in order to stay in business and motivate growth.
There are some other things that come into play when looking at several different insurance companies rates. One company may be doing business in the whole country, and some are only doing business in one or more States. This can have an impact on that company’s specific rates since some States are more prone to different types of hazards (Wind storms, tornados, hurricanes, fires). For instance, the Mid West has had a higher than the normal amount of wind storms in the last five years, causing rates to increase on most homeowner’s insurance policies (roof damage, etc.). Another factor is underwriting (an insurance company’s rules to accept business). Each company accepts new clients based on rules they feel will keep them profitable. Some of these are based on the client, and some are based on the property to be insured.
Some companies have been surprised by the amount of losses they find themselves paying due to an unexpected number of storms, and other losses. When this happens, they will try to tighten up their underwriting rules, and raise their rates to get back to their comfort zone.
I don’t necessarily hate a rate increase when it is needed, but what I do dislike an awful lot is when a company panics, and jacks their rates up 40% or more or takes other drastic immediate moves that are detrimental to their clients.
If your insurance company has raised your rates in a panic kind of way, or if you would just like to see what I can do for you, please feel free to call (507-226-8121) or email me at firstname.lastname@example.org for a comparison.
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