The Crisis in Property and Casualty Insurance Premiums
Is the insurance industry going to determine where you live and what you drive?
Most of us are aware of the acceleration in residential and automobile insurance premiums. Now, the industry seems to be not only seeking to protect their profit margins, through special rates for higher risks, but, in some situations, simply refusing to write policies.
Recently released findings of a congressional investigation suggest that the insurance industry has dropped nearly 2.0 million residential insurance policies, a rate that has tripled since 2018. An increase in fire and hurricane risks, together with increasing property values are the leading factors in this trend.
The consequences could be extensive. Without insurance, you can’t get a mortgage; without a mortgage, most Americans can’t buy a home. Communities that are too dangerous to insure, risk falling property values and reduced property tax revenues.
Insurance premiums have also been rising for personal vehicles, as discussed in our blog, “The Rising Cost of Personal Vehicles,” posted on August 2, 2023.
Some individuals have responded to rising insurance premiums by not insuring their homes, and in some cases, their vehicles. To say this is risky behavior, is an understatement. Investors should consider that this kind of outcome begs for government intervention.
All comments and suggestions are welcome.
Walter J. Kirchberger CFA