via Mike Shedlock
Auto insurance is up more than 20 percent from a year ago. In many places, private home insurance isn’t available at all. Consumers are steaming.
Insurance Chart Notes
- The auto insurance data series is straight from the BLS.
- Home insurance data is from the BLS via Fred, the St. Louis Fed data repository.
- The index level dates are defaults from the BLS. I would prefer the dates to be equal and could do that in Fred, but Fred does not have auto insurance data.
- Today, I asked the St. Louis Fed to add auto insurance to the data metrics they cover.
Car and Home Insurance Percent Change From Previous Month
Car insurance is on an amazing run. For 13 straight months, insurance is up at least 1.0 percent. For 20 straight months car insurance is up at least 0.7 percent.
Home insurance, if you can get it at all from any private insurer, is also rising at a fast clip as the lead chart shows.
Insurance does not really go up monthly as shown. Rather, people see a big jump in prices at annual or semi-annual renewals. The BLS smooths this out.
CPI Car Insurance Percent Change From Year Ago
Car Insurance Notes
- For 11 consecutive months dating to March of 2023, car insurance has been rising at least 15 percent year-over-year.
- For 17 consecutive months dating to September of 2022, car insurance has been rising at least 10 percent year-over-year.
CPI Home Insurance Percent Change From Year Ago
Compared to auto insurance which is rising across the board, the above chart looks relatively benign.
But that is a result of BLS smoothing two ways. As with cars, people see a big jump in prices at annual or semi-annual renewals. The BLS smooths this out.
Second, if you live in a flood zone, hurricane zone, or fire zone, your costs are more likely to be up 100 percent than 4 percent, if you can get insurance at all.
Selling Insurance is One of the Worst Jobs in California
The Wall Street Journal reports How Selling Insurance Became One of the Worst Jobs in California
“It’s soul-crushingly tough,” said Harper, who owns an insurance agency in the mountain town of Coarsegold, near Yosemite National Park. “There are no good days.”
Like Harper, many agents are on the sharp end of a national crisis in home and auto insurance. Things are especially bad in California. Insurers have fled the state, pummeled by losses from drought-spurred wildfires and, this month, storm-triggered flooding.
It never used to be this bad. Harper, an 18-year insurance veteran who sells on behalf of Farmers Insurance, said his job offered the satisfaction of helping people. “A family would walk in needing coverage, you’d write them a policy, and they’d walk out happy,” he said.
“Those days just don’t happen anymore,” he added. “You never get to deliver good news—every rate change is an increase, every coverage change is a restriction. My staff and I, we’ve had to build up some scar tissue.”
The problems stretch beyond California and Florida, said Charles Symington, chief executive of the Independent Insurance Agents and Brokers of America. “What makes this difficult market so unique is its severity and its national scope…our agents are seeing it everywhere,” he said.
Double-digit rate increases for home insurance were approved in 25 states last year, with effective increases of more than 20% in Texas, Arizona and Utah, according to S&P Global Market Intelligence.
Agents find themselves trying to explain the increases. “We daily deal with angry and distraught clients,” said Angelyn Treutel Zeringue, president and owner of the Gulf Coast arm of SouthGroup Insurance Services, a Mississippi-based independent agency. “We completely understand their angst, because we are experiencing the very same issues in our own home and business lives.”
Johnson, a battalion chief, is paying $6,800 annually, more than double his premium six years ago when he bought his home in Bass Lake, a mountain village surrounded by pine trees. He had to get a state plan for wildfire coverage. Johnson is concerned about the impact on the property’s value: “The part no one talks about is the fact you can’t sell your home.”
Florida Insurance Hikes
On February 17, 2024, Wesh 2 News reported Two Insurance Companies Seek Hikes of Over 50% for Florida Homeowners.
Castle Key Indemnity Company, owned by Allstate, covers condo owners. The company has proposed its rate to jump by 53.5% for customers.
A spokesperson for Allstate told WESH 2 the increase was filed with the Florida Office of Insurance Regulation in 2023 and that a majority of their customers have already experienced the increase.
Amica Mutual Insurance, which covers properties like vacation homes, has proposed a 54.1% increase. The Florida Office of Insurance Regulation will hold hearings next week to decide if it’ll approve the rate requests.
“The more storm losses we see, the higher premiums are going to go,” said Mark Friedlander, who is the Florida spokesperson for Insurance Information Institute.
“And it’s not just hurricanes,” Friedlander said. “We’ve had several tornado outbreaks this year during the winter season. Rare.” While other companies may also consider raising their rates, Friedlander said last year, many companies were seeking triple-digit jumps.
True Cost of Auto Insurance
A Bankrate report comments on the True Cost of Auto Insurance
To paint a clear picture of the true cost of car insurance, we analyzed what percentage of household income is spent on an annual full coverage car insurance policy. Nationally, the average cost of full coverage car insurance rose to $2,543 in 2024, an increase of 26 percent over last year. With a national median household income of $74,580 according to the latest data from the U.S. Census Bureau, Americans spend 3.41 percent of their income on car insurance.
The national average cost for full coverage car insurance is $2,543 per year, or $212 per month. Drivers with minimum coverage pay an average of $740 a year, or $62 a month.
Huge Premiums in Hurricane States
Louisiana and Florida, both in hurricane zones, have the highest costs in the nation.
Louisiana has annual premium of $3,618. That is 6.53 percent of income, the highest in the nation on a percentage of income basis.
Florida has an annual premium of $3,945. That is 5.69% of income, the second highest in the nation.
Percent of CPI
Health Insurance Weight: 0.58%
Health Insurance is hugely distorted by Medicare and company paid insurance.
Tell the average person who pays their own health insurance that the percentage is 0.58% and they will think you are from Mars.
Year-over-year supposedly -23.3%!
— Mike "Mish" Shedlock (@MishGEA) February 17, 2024
Why Are Insurance Costs Up?
- The cost of homes are up.
- The cost of cars are up.
- The cost of replacement parts are up.
- Minor accidents can ruin an EV battery, the most expensive component of an EV.
- Wages are up, so the cost of home and auto repairs are up.
- Poor fire prevention policies in California and elsewhere.
People blame “climate change” but the above 6 reasons are what you really need to know.
Lags, the Meme of the Day
Since CPI lags are the meme of the day, please note that both home and auto insurance are understated due to lags.
The BLS reports year-over-year home insurance is up only 4.1 percent from a year ago but rates went up double digits in 25 states last year.
Insurance policy increases have not yet fully filtered into BLS reports. But rent is more important and lags there run the opposite direction.
Is More Inflation On the Way?
Whether or not more inflation is on deck depends on who you ask, who is doing the counting, and the definition of what should or shouldn’t be measured.
For three views on where we are headed, one of them mine, please see Debate Over Lags, OER, and Rent: Is More Inflation On the Way?
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