With 2018 just around the corner it’s time to peer into our crystal ball and forecast what we see ahead for the insurance industry.
Homeowners Insurance: Home owners can expect modest price increases thanks to hurricanes Harvey, Irma, and Maria, with support from other catastrophes around the world such as the Mexico earthquake. Why do events that occur outside Florida matter? Because all of them affect the reinsurance market that Florida homeowners insurance companies rely on so heavily. So when reinsurance rates go up, homeowners insurance premiums usually follow. Some industry pundits are predicting reinsurance rates to raise as much is 20% by January 1, 2018.
Adding to the reinsurance burden are ever increasing water claims such as broken pipes, overflowing toilets and leaking roofs. In Florida the cost of these claims can be inflated through the Assignment Of Benefits (AOB) process that allows a homeowner to assign their rights under their insurance policy to a third-party such as a water extraction company, roofer or any other contractor performing repairs. On average these claims have a much higher severity then claims without an AOB, and this contributes to higher homeowners insurance premiums.
In spite of mother nature and the AOB water claims, we expect market forces to keep premium increases in check. Barring significant weather related events in 2018 we think any increases will likely be in the single digits.
Automobile Insurance: Auto premiums are also facing headwinds as claims costs are increasing due to three factors:
- People are driving more miles because gasoline is relatively cheap. More miles driven means more accidents.
- Automobiles are more expensive than ever to repair because they are loaded with technology. A bumper is no longer a bumper and the windshield is no longer a windshield. Both have camera sensors and other technology that make them expensive to repair or replace.
- More distractions, particularly due to our electronic devices. Whether it’s due to texting or checking the in-dash screen found in newer cars, drivers are taking their eyes off the road.
Because of these factors, underwriters are talking about increasing rates. The good news is that as with Homeowners insurance, early indications are that the increases will be in the single digits.
Here’s to wishing you and your family safe, prosperous and claims free 2018!