Why home and auto insurance rates are rising in 2022

You may see a bigger change to the cost of your home and auto insurance when it comes time to renew your policies this year.

Why, you ask?

It’s all thanks to an unusual convergence of market trends, ushered in by the pandemic and other disruptive events.

Insurance rates are based on what an insurer thinks it will cost to make you whole in the event of a loss. This could be from roof damage during a windstorm or a vehicle totaled during a traffic accident. As you’ve likely noticed, pretty much everything costs more than it did even a few years ago.

What’s driving higher home insurance costs

If you’ve shopped at Home Depot or Lowe’s lately, you’ve certainly seen the price tags on building materials have risen dramatically. Last year alone, the cost of building materials rose 14.1 percent. Lumber played an outsized role in that trend with costs more than tripling since March 2020.

To make matters worse, the home-building industry is facing a shortfall of at least 200,000 skilled laborers. This in itself is driving up construction-related labor costs. Combined with the high cost of construction materials and historically low housing inventory, home claims have become much more expensive for insurance companies.

Infographic: A perfect storm of market trends has driven up the cost of building homes - and with it the cost of insuring them for repair and replacement.

What’s driving higher auto insurance costs

An ongoing shortage of microchips and other critical parts like wiring harnesses, plastics and glass is making it more costly to repair or replace a vehicle after an accident.

Supply chain issues are rapidly depleting inventories of new and used cars. Inventories have reached a critical low-point, falling 87 percent between 2020 and 2022. As a result, the average price of new cars has risen 14 percent over the same period, while used car prices have skyrocketed 55 percent.

At the same time, accidents have become more frequent and severe, increasing the number and cost of auto claims. In the first six months of 2021, nearly 2.5 million people sustained injuries requiring consultation with a medical professional. Accident fatalities in January 2022 were 14% higher than in January 2020.

Infographic: A confluence of market trends is making auto claims much more expensive, requiring insurance companies to increase what you pay for auto coverage.

Focus on value as you explore ways to save

Keep in mind that savings comes in many forms. The value of the coverage you choose today may save you more in the long run than the lowest possible premium.

Contact us to review your current coverage. We’ll help you explore opportunities for discounts that could offset higher rates when it comes time to renew.

Sources: National Association of Realtors, Federal Reserve Bank of St. Louis, Home Builders Institute, National Association of Home Builders, Nasdaq, U.S. Department of Commerce, Consumer Price Index, National Safety Council, New York Times

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