YOUNGSTOWN, Ohio – Heavier damage from more intense weather events and inflation are among the factors that local insurance company owners say are increasing rates for home and business coverage.
There has been a noticeable increase over the past four years in the cost of business insurance, though not as pronounced as in home and auto, according to Ellie Platt, owner of Platt Insurance in Howland. The price of farm insurance also is increasing but not as sharply as other categories.
Any business that deals with real property is seeing increases in rates because of rising labor and building materials costs, she adds.
“A good renewal” for home insurance is in the 20% increase range, “which is just unlike anything we’ve ever seen around here,” Shelley Taylor, president of Paige & Byrnes Insurance in Howland, says. “We’ve got some companies that are in the 40% to 50% range. So we’re spending a lot of time working on options for people.”
Jamie Ciccone, owner of Jamie Ciccone State Farm in Austintown, reports rate activity over the past two years for non-tenant policies – namely, for businesses and homeowners who occupy their properties and aren’t tenants – has seen an overall increase of 6.8%.
“It’s actually quite low in comparison to some of our competitors,” she says, “The highest I’ve seen is 28%. We’ve held pretty steady at a nice, slow increase.”
Rising Rates
Taylor, whose firm represents several carriers, attributes rising rates to factors including the claims histories of the customer and the carrier.
Business insurance is “a bit more stable,” and prices aren’t increasing as significantly, Taylor says. Insurers are taking “a closer look” at the buildings and roofs they’re insuring, sending more people out for inspections and asking more questions about a property.
Structures for homes and businesses are assets that appreciate over time and insurers need to adjust replacement costs “or there won’t be sufficient coverage in the event of a total loss,” Ciccone says.
“That’s basically what we’re here for, to rebuild when you lose everything,” she says.
According to Platt, whose company also represents multiple carriers, inflation is affecting home insurance rates, particularly because of the cost of building materials. Also coming into play are global supply chain issues such as those stemming from the war in Ukraine, which lead to increased shipping costs.
“We’re in an abnormal rating environment due to higher inflation rates, which is driving up the cost of building materials, coupled with our recent property reevaluations in our area. That’s driving up the replacement costs,” Ciccone says. “It’s kind of a perfect storm – no pun intended – on rates.”
Everything is more expensive to fix, Taylor affirms. For individuals, the age of the roof makes “a big difference” in terms of how a claim is paid, because of depreciation.
Platt also points to the increase in the frequency of weather events, including severe ones. Although Ohio generally isn’t experiencing the kinds of severe events such as the recent hurricanes in the South, the rise in the number of events is increasing the number of claims that insurance companies have to pay out.
“As there are increased claims and the [monetary amount] of claims goes up, it’s going to cause everyone’s rates to go up. They’re seeing that each storm is getting more expensive,” Taylor says. Carriers monitor the number of catastrophic events that take place and budget for certain amounts but see them getting bigger.
“Insurance companies are in the business of managing risk, and they estimate the number of claims they’re going to have to pay out every year, and they establish their premiums based on those calculations,” Platt says. “They’re now paying out a lot more in claims than they anticipated the last four or five years.”
Stricter Underwriting
In addition, the “hidden cost” that people don’t see is how those claims elsewhere affect the reinsurance market – the cost for insurance companies to insure themselves. “It’s really the instability of the reinsurance market that’s driving up insurance costs probably more than anything right now,” Platt says.
“Not only are we seeing the rates increasing, but we’re also seeing underwriting of businesses becoming a lot stricter she says.” For example, some insurance carriers aren’t renewing policies for customers such as roofers, contractors or operators of commercial properties such as strip plazas that are showing increased losses or are just more expensive to insure.
“They don’t want to be in businesses that are showing increases in losses,” she continues. “We’re seeing increases of 100% or 200% on businesses that insurance companies don’t want to insure anymore.”
“Some carriers cut off writing new business for a while because they couldn’t handle it. They didn’t have appropriate rates,” Taylor says.
Another category seeing a lot of nonrenewals over the past five years is churches. And carriers are looking more than they did previously at factors such as pools that need to be fenced, breeds of dogs that the policy holder owns and trees on properties, Platt says.
“If you have a tree hanging over your house, they’re going to tell you that you either need to trim it or you need to take the tree down,” Taylor says. Out west the concern is that the tree represents a wildfire risk but here it’s the danger of a tree falling on a house “and it’s something that could have been prevented.”
Managing Rate Increases
Platt advises policy holders against automatically shopping around to find better rates. But if they do, they should shop around with an independent agent and get multiple quotes, and “really understand what you’re getting yourself into.”
She is telling customers that it’s wise to sit tight for the time being.
“What you don’t want to do is switch companies and then have the new company cancel you,” she says.
To reduce rates or increase their deductible, customers can instead bundle their coverage or make improvements to their property.
“If you’ve been with the same company for a long time, you could have a deductible as low as $500 or $250 and you might be willing to take more than that,” Paige & Byrnes’ Taylor says.
“We can’t control the rating environment here on this level. However, I try to educate my policyholders to try to offset their rates with a higher deductible,” Ciccone adds. Many people want the lowest deductible possible but that “really drives up your rate.”
The average policyholder has one claim every 18 years, she says. A homeowner policy with a $1,000 deductible will cost a policy holder several hundred dollars per year.
“You might as well raise that deductible and just save that money,” she says. “You could save that money within one year to offset that, and then moving forward you’re not paying for a deductible that you don’t need.”
In addition, policy holders can check with their carriers to see what kinds of discounts might be available. Examples are discounts for having a backup electrical generator or a water shutoff device to turn water off in the event of a burst pipe, Taylor says.