Insurance Costs Soar: Inflation and Supply Chain Issues Drive Up Premiums
BUFFALO, N.Y. — Homeowners and drivers in the Buffalo area are facing sticker shock as they review their latest insurance premium statements. Insurance agents have been navigating a challenging market for the past two years.
Craig Willoughby, an insurance agent with a Buffalo agency, shared his observations with 2 On Your Side. “For the past two years I’ve gotten so many phone calls of so many customers, so many friends, so many neighbors all telling me the same story. Why am I going up? I did nothing wrong,” Willoughby said.
Willoughby explained that property insurance issues have increased an average of 34% nationwide over the past few years. He cited catastrophic events, or “cats” in insurance industry lingo, such as the devastating wildfires in California and numerous hurricanes and tornadoes.
However, Willoughby clarified that in New York, which is less prone to natural disasters and has its own rate guidelines, inflation is the primary driver. He mentioned the homebuilder association indicating a 40% increase in the cost of building materials and labor, alongside persistent supply chain issues that started during the pandemic.
These increases have been implemented across the system for many policyholders. “I’ve had customers going up two years ago. The minute inflation hit, carriers started raising rates immediately,” Willoughby stated. He added, “Not a company out there doesn’t have the proper risk management to handle the catastrophe, but add on inflation and unforeseen where inflation coming in with ‘cat’ … again, a perfect storm, where a lot of the carriers are just pulling out of the state, pulling out of the business altogether. Between the ‘cats’ and the inflation, it’s enough to drive a ton of companies to bankruptcy.”
The Adirondack Insurance Exchange, based in Williamsville, NY, ceased operations last year in New York State.
The auto insurance sector also faces a tight market, influenced by the New York State Department of Financial Services and the escalating costs of vehicle repair, especially bodywork, and increased prices of components like airbags. Extended repair times, due to parts shortages and supply chain challenges, also contribute to higher costs. Even storage fees have increased.
Willoughby noted, “The state will not allow them to raise their rates high enough to cover the costs of inflation on the repair side. So when a loss comes in today, it’s four times higher than it was two years ago, but they can’t raise their rates four times. They’re not taking on new business. They’re just sitting tight until inflation dies, or they can get the rate increases approved.”
New York offers a risk retention pool for last-resort insurance options, although these are very expensive. Experts advise policyholders to maintain a favorable credit rating, make prompt premium payments, and keep a safe driving record. They also suggest avoiding large insurance claims if possible, as multiple claims can lead to policy cancellation.
Consumers are encouraged to shop around for the best rates; however, the current market conditions pose challenges.
