TITLE: Why car insurance rates are so high
https://www.vox.com/2024/2/21/24078362/inflation-car-insurance-distracted-driving-costs
EXCERPT: One reason rates are up is that driving became much more dangerous during the pandemic. People started engaging in risky behaviors like speeding and using their phones while driving more.
“Since Covid, we saw this incredible increase in distracted driving,” says Ryan McMahon, senior vice president of strategy for Cambridge Mobile Telematics. “You could almost track it by the day schools started to shut down.”
He’s not just speculating: CMT has access to driver data for millions of drivers, who download apps via their insurance companies that measure things like speeding, hard braking, and cellphone use while driving. McMahon told me that the huge jump they saw in distracted behaviors during the pandemic hasn’t come down since.
Maybe not surprisingly, the number of fatal accidents spiked; so did the severity of auto insurance claims, meaning cars came in severely damaged and requiring expensive repairs.
While drivers were getting more dangerous, law enforcement in many parts of the country began pulling back on traffic safety enforcement, likely due to Covid-related staff shortages and criticisms over racial biases following the murder of George Floyd.
Traffic enforcement has always been a deeply imperfect mode of safety enforcement, one that leaves Black drivers susceptible to racial biases from law enforcement. But it’s also one of the factors insurance companies use to determine individual rates.
“Ultimately, without traffic violation data, insurers aren’t able to accurately assess and underwrite a driver’s risk. With the compounding cost from accidents, carriers are now increasing rates for everyone, meaning we are all paying for this problem,” Mark McElroy, executive vice president and head of TransUnion’s insurance business, said in a recent report.
Cars have also become more technologically advanced, making car repair more expensive.
Think of a car made in 2004 versus a car made in 2024. If the two crashed, the car from 2024 would probably be more expensive to fix because it’s more likely to have advanced technology like backup cameras and lane sensors.
According to one report by industry analysts CCC, the average estimate for a front-end claim in 2022 was $3,706, up more than 15 percent over the year before. Vehicles more than seven years old, meanwhile, were over $1,000 less to repair.
TITLE: If US Inflation Reflected Rising Home Insurance Costs, It’d Be Even Higher
https://www.insurancejournal.com/news/national/2024/04/09/768610.htm
EXCERPT: Homeowners insurance costs in the US hit roughly $175 billion in 2023, up 21% over the previous year, according to insurance brokerage Policygenius. The increase is in large part due to climate change, which is driving more extreme fires, floods and storms. The US endured a record 28 weather and climate disasters that caused at least $1 billion in damage last year. As insurers incur higher costs, homeowners are facing higher premiums. Inflation itself is also making it more expensive to pay out claims.
The average cost of insuring a US home last year was $1,905 — 50% higher than the average of $1,272 in 2019, according to the National Association of Insurance Commissioners and Policygenius.
Calculated by the US Bureau of Labor Statistics, CPI measures the average change in prices paid by urban consumers for various goods and services, including both food and fuel. (“Core CPI” excludes food and energy.) CPI includes the category “tenants and household insurance,” but this is more colloquially known as renters insurance. Last year, the average renters insurance cost in the US was $180, up 3% from a year earlier.
Stevenson looked at what would happen if the $1,905 average for home insurance were given the same CPI weight as “tenants and household insurance,” which accounted for just 0.01% of the overall increase in CPI last year. He found that the 21% increase in home insurance could have contributed as much as “84 bps to the index vs a 1-bp gain realized by the 3% rise in tenant and homeowner insurance costs.” (A basis point is equal to 0.01 percentage point.)
Just five years ago, homeowners insurance and renters insurance were increasing at similar rates year over year. But while home insurance costs have since surged, renters insurance has largely held steady. The difference “might be meaningful enough” for federal officials to “reconsider” the inclusion of homeowners insurance in the CPI basket, Stevenson writes.
TITLE: US insurers use drone photos to deny home insurance policies
https://www.theregister.com/2024/04/08/us_insurers_drones/
EXCERPT: Nichole Brink, an insurance industry worker, said that her former employer Farmers Insurance used aerial photos to drop claims for almost any reason, from moss on the side of houses to tree branches seemingly hanging above roofs.
Perhaps even more concerning was that some photos were over two years old, leading Farmers to drop policies based on out of date info. Even in up-to-date photos, improper analysis (done by humans or AI) could lead to policies being dropped. In one case, Farmers mistook shadows for tree limbs, it's reported.
In the pursuit of processing insurance applications and renewals on the cheap, insurance companies seem to be going for the worst of both worlds: inaccurate and invasive. While in-person inspections of homes aren't perfect, they're far more likely to result in accurate assessments. Not to mention the fact that they're much more consensual than a drone that doesn't need to ask anyone for permission.
We've asked State Farm and Farmers Insurance for comment about using aerial photography to ascertain insurance policies, though at the time of writing they have not responded.
However, if the goal of insurance companies is to drop as many customers as possible, then this method seems to be pretty good. Many states don't allow insurance companies to deny coverage except for certain reasons, which is supposed to protect consumers. Failing to meet requirements like maintaining a roof is one of those reasons, and shoddy aerial photos can provide the grounds needed to drop customers.
It's bad enough to have to pay a higher premium on an insurance policy, but not being able to get any at all is even worse. Thankfully, there's a simple solution: just move somewhere that never experiences any natural disasters ever.