Do you ever feel like your car insurance rates keep on increasing, seemingly for no reason? You’re not alone. Due to recent inflation, a rise in premium costs is increasing insurance shopping among policyholders. Claims costs are also going up with supply chain and inflation pressures. Here's what you need to know:
Insurance and inflation
Inflation is an increase in the general price level of goods and services in an economy. It is measured by calculating the percentage change in the Consumer Price Index (CPI) over time. Inflation can impact insurance in several ways..
Increased Cost of Claims: As the cost of goods and services increase, the cost of claims made against an insurance policy may also rise. For example, if a policyholder makes a claim for damages to their home, the cost to repair or replace the damaged property may be higher due to inflation.
Increased Premiums: Insurance companies may need to increase premiums to keep up with rising costs of claims. As the cost of claims increase, insurance companies may need to increase premiums to maintain their profit margins and ensure they have sufficient funds to pay out claims.
Changes in Coverage Limits: Inflation may also impact the coverage limits of insurance policies. The coverage limit of a policy is designed to cover the cost of a loss, but as the cost of goods and services increase, the coverage limit may no longer be sufficient to cover the full cost of a loss.
Impact on Investment Returns: Insurance companies typically invest the premiums they collect to generate investment income. Inflation can impact investment returns, which can in turn impact the ability of insurance companies to pay out claims.
Changes in Insurance Products: Inflation can also impact the types of insurance products available in the market. As the cost of claims increase, insurance companies may need to develop new products or adjust existing products to ensure they are financially viable.
Inflation can have a significant impact on insurance. It can increase the cost of claims, premiums, and impact the coverage limits of insurance policies. Additionally, inflation can impact the investment returns of insurance companies, which can impact their ability to pay out claims.
It's important for policyholders to regularly review their insurance policies and ensure they have sufficient coverage to protect against inflation during times like these. Reach out to us at Flour City Insurance Agency to talk about your options!