Broker Check

How Inflation Affects Your Insurance

August 12, 2022
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Although the rate of inflation appears to be slowing, it has already disrupted our economy. As with everything else, insurance is affected. A recent article in Risk Management magazine (rmmagazine.com/articles/article/2022/08/01/the-impact-of-inflation-on-the-p-c-insurance-market) discusses the impact on insurers and insureds.

An obvious result is a rise in insurer loss costs - building materials, auto and truck parts - and supply chain challenges leading to delays. Higher costs lead to higher property insurance rates.

Insureds need to respond by increasing building and personal property limits. This will increase their premiums, but the alternative is underinsurance which means incomplete recovery in the event of a loss. (The higher premiums could be mitigated by higher deductibles and/or better loss control.) Having adequate limits in place is a fiduciary responsibility of risk managers.

Auto insurance costs and premiums are also rising due to more costly parts and higher accident rates. Liability insurance premiums are affected by higher medical costs and "social inflation" resulting in higher jury verdicts. Insureds need to consider increased limits for primary and excess liability.

To summarize, be prepared for higher insurance limits and higher costs.