Why is my insurance more expensive? Question field

Every week, clients ask us why their insurance keeps getting more expensive, even though they haven’t made any claims. They’re surprised and frustrated when they receive their renewal offer with rate increases from their home or auto insurance company. We’ve previously discussed why Florida home and auto insurance rates are so high (see here and here), but let’s review the situation again.

The short answer to the question of rising insurance rates is: you may not have had a claim, but many other Floridians have. Insurance is a “pool of risk,” meaning that by buying insurance, we share the risk by each paying a relatively small amount (in relation to what it would cost to rebuild our home, for example) with the assurance that our large losses will be covered. When losses go up, the amount which needs to be collected from each of us rises, too. (See below for factors affecting claims payouts.)

There are also several factors that affect the cost of insurance that are a reflection of the current state of the industry in general, and Florida in particular. Read on if you want to better understand why home and auto insurance rates continue to increase.

5 main reasons the price of your insurance keeps going up

  1. Inflation. One of the factors used to determine insurance rates is the cost to repair or rebuild your home or car if they are damaged or destroyed. Those costs have increased sharply—up 45 percent between 2020 and 2023. Supply chain issues and labor shortages have also contributed to rising costs. When it’s more expensive to rebuild a house or fix a car, insurance rates go up accordingly. While costs are leveling out, it will take some time to see if this makes a significant difference.
  2. Fraud and litigation costs. Unfortunately, inflated insurance claims and outright insurance fraud are all too common in Florida. Until recently, the Florida legal system was “litigation friendly,” but legislation that went into effect in January 2023 aims to reduce abuse of the system, as well as stabilize a shaky homeowners insurance market. However, all policies written before Jan. 1, 2023 still fall under the old regulations. The courts and insurance companies will have to sort through the remaining lawsuits before we’ll see results from this legislation.

    Car insurance rates are also affected by fraud and litigation costs. Florida is a no-fault state, so anyone injured in a car accident submits a claim to their own insurance company. Some say this can mean it’s more likely for an attorney to be involved, thus driving up the costs.

    Florida also has a high percentage of uninsured or underinsured drivers, which also drives up the cost of auto insurance. Insurance fraud is not a victimless crime. It has a direct effect of making insurance more expensive. All Florida policyholders pay for it in higher premiums for home and auto insurance.

  3. Reinsurance. How does an insurance company afford to pay out millions of dollars in claims when a disaster hits? In addition to using money they’ve collected from premiums, they draw on something called reinsurance. Reinsurance is “insurance for insurance companies,” and it’s used when needed for claims payouts for all types of disasters: hurricanes, wildfires, and so on. These types of disasters have been more frequent and costly in recent years (see below), so reinsurance rates have skyrocketed, and consumers are paying the price.
  4. Costly catastrophes and crashes. Just three storms, Hurricanes Irma (2017), Michael (2018), and Ian (2022) have caused nearly $200 billion in damage in Florida alone. When hurricanes are bigger and stronger, losses are greater. Insurance companies have to raise premiums in an attempt to cover larger potential claims. And keep in mind, these storm losses are in addition to payouts insurance companies make for other covered perils.Car crash payouts have also skyrocketed. Medical costs and vehicle repair costs have risen at an even higher rate than inflation over the past few years.
  5. Fewer insurance carriers. Several large national insurance carriers have limited the number of policies they write in Florida, or have pulled out of the state altogether. Smaller, local carriers write most of the homeowners insurance business, and some of those have gone bankrupt in the past few years. Fewer insurance carriers = less competition = higher premiums.

L & M Insurance Group—we work for you

We understand your frustration with the continually rising price of home and auto insurance—we live here, too! These days insurance is more expensive than it used to be. While there is much beyond our control, we promise we will work hard to find you the best possible insurance coverage at the best possible rate. L & M Insurance Group is a full service, independent insurance agency, therefore we aren’t tied to any one particular insurance company. If you’re in the market for a new home or auto insurance policy, or it’s time to renew, please call (813) 672-4100, or contact us online.