Home Insurance Forecast Heading into 2023

The home insurance market is currently being challenged by significant market conditions. The companies that respond the best to inflation and the challenges of natural disasters will provide the biggest benefits to consumers going forward.

How inflation affects home insurance

Inflation wreaks havoc on all types of consumer goods and services and insurance is not immune to its damage. The cost of insurance goes up during periods of inflation in response to the cost of things that impact claims and premiums.

The cost of repairing a home has increased this year. Materials and labor costs have skyrocketed due to inflation and a shortage of skilled labor. As the cost to cover a claim spikes, insurance providers raise their premiums, a costly double-hit for the consumer.

Customization of insurance coverage is key during times of high inflation. It is important for consumers to compare rates from as many companies as possible to make sure they aren’t paying more than they need to, or paying for things on their policy they don’t need.

Companies that can leverage bundles while lowering overhead by keeping staffing and internal costs down are able to pass more savings on to the buyer. Times of higher inflation put a strain on everyone, but they can also reveal the insurance companies that are really working with the consumer’s best interest in mind.

Natural disasters are increasing

Tracking data on natural disasters reveals a dramatic increase in catastrophic events. In the last ten years, natural disasters have cost the U.S. $200 billion per year. Similar to the inflation model, as costs of repairs increase with the frequency of natural disasters, the cost of insurance premiums will follow.

In addition to homeowners’ insurance premiums going up across the country, many property owners are not properly insured against catastrophic events like floods. According to FEMA, floods are the most common and costly natural disasters in the United States. Still, many homeowners are misinformed about flood insurance. There are several misconceptions about what flood insurance covers, how to buy it and what it should cost. It’s important to consult an agent who can offer guidance on insuring a home against natural disasters, like floods. Too many homeowners discover after a flood that their policy does not include flood insurance.

With climate change causing an increase in catastrophic weather events across the country, the environmental impact to the insurance industry will only become more severe. It is important for consumers to understand what their policies do and do not cover when it comes to natural disasters.

This type of coverage is also a big differentiator when comparing insurance companies.

A rise in remote work opportunities encouraged many Americans to move, during the height of the pandemic and continuing into 2022. The Southeast saw the biggest increase in population, as people left places like California, New York and Chicago for warmer and less congested southeastern states like Texas, Florida and South Carolina.

According to a Consumer Pulse Survey conducted by Transunion in Q2 of 2022, topping the concerns of most Americans are inflation, the possibility of a recession and increased housing costs. As people reduce their spending in response to anxiety, they also take a closer look at their current expenses, including what they pay for home insurance. More consumers are likely to visit digital insurance aggregators in times of uncertainty. The ability to personally compare rates from over 50 insurance providers at once, without having to speak to a sales person, gives people a sense of control that they want–especially when facing an uncertain future.

The homeowner’s insurance market is very complex and still fragmented despite recent consolidations. Many insurance companies have failed to modernize their systems to the levels of customization and speed that consumers expect from service providers. That puts offline insurance companies at a huge disadvantage at the very same moment when more people are shopping around.

The type of insurance company that will be seen as the remedy to all of the insurance anxiety people are feeling will be one that has the best access to the data needed to deliver quotes from the most providers, offer a seamless online shopping experience and ensure people are getting the coverage they need at the best price.

For more ways to save on home insurance, contact INSURICA today.