Economy Forces Rate Increases On Auto & Homeowners Policies

Saturday’s Post 1/14/12 – Extreme weather and natural disasters have been hard on the profitability of both Auto Insurance and Homeowners Insurance Companies the last few years.  Although many of these Car and Homeowner Insurance Companies are needing to increase rates this year, insurance analysts warn these premium payment increases may backfire if  their customers are unable to pay the new increased rates.  With the current state of the U.S. economy, a large portion of these policyholders will be unable to pay any higher insurance premium payments should these increases be required by the same discount insurance carriers.  Once the increases are felt, policyholders would likely start reassessing the coverage on their Homeowners Insurance Policies. In order to avoid the unaffordable cost of these policy increases,  reductions to their coverage levels and increasing deductibles would be their only alternative. Of course shopping for a lower rate is always recommended.  Although the reduction of coverage would stabilize the price of coverage, sadly it will expose the policy holder to an even greater risk in case he or she needs to file a claim for their auto insurance or homeowners insurance policy. Unfortunately, these insurance carriers will still be forced to increase rates regardless of the warnings from insurance industry analysts. Agents and Brokers like InsureDirect have an important role to play as the market transitions from the prolonged soft market to a hard market. The insurance market which we are experiencing now, has been soft for approximately 10 years. This means rates have been low and it’s always an important a carriers pursue an increased rate model when profitability problems become a serious issue. Few outside the insurance industry realize this has been the longest soft insurance market in 25 years. There is normally a market turn every 5 to 7 years.


Michael E. Dortch
President &  Managing Agent
Corporate Home Office
618 South Broad Street
Lansdale, Pennsylvania  19446
(800) 807-0762  ext. 602