Washington Post coverage reveals that rising material costs, supply chain disruptions due to the pandemic and climate change are contributing to homeowners’ insurance premiums increasing by an average 4 percent from 2021 to 2022. Up 11.4 percent since 2017, average rates are rising faster than inflation and are expected to stay high, the Post reports.
Marie Luetmer, an agent with State Farm Insurance in Park Rapids confirmed that these factors are having a real effect on insurance premiums local customers are seeing.
“We saw that spike in building supply prices, especially during the summer, and a shortage of lumber and even contractors to do work,” said Luetmer. “That’s increased some rates, just because when you insure your home, you’re insuring it for the rebuilt value of it. It’s not the taxable value or the current market value; it’s really what it’s gonna cost to rebuild your house as it is today. So, when those lumber prices increase, it costs more to insure your home.”
Meanwhile, the American Property Casualty Insurance Association (APCIA) warned that pandemic-related issues are also driving auto insurance rates higher, due in part to bad “pandemic driving” habits that increased the number of traffic fatalities in 2021.
These habits include driving faster and not wearing seat belts, the APCIA reported. Also rising are the costs of medical care and car repair as well as car theft rates.
Luetmer said supply chain issues are also in play on the auto side.
“Parts are difficult to get,” she said. “They’re becoming more expensive because they’re more difficult to get. Used vehicles’ prices have gone up, as well as new vehicles, because there’s a shortage of those. And so, with those higher prices, again, comes a higher cost to insure those vehicles.
“All insurers have seen rates go up, due to those supply chain issues and the inflation we’re seeing right now.”
Luetmer said insurers are discussing ways to keep rates reasonable for their customers, “but at the end of the day, again, that inflation and the shortage of different things is causing hardships everywhere in the country, even up here in Minnesota.”
Because of these factors, Luetmer said no matter who you’re insured with, now is a good time to meet with your agent to verify that you have the coverage you need.
“You definitely don’t want to be under-insured,” she said. “You know, if there’s a loss right now – making sure your home is insured correctly and that you’ve got good coverages on your vehicle as well. All that is very important, so that you’re not left out in the cold if something were to happen.”