September 27, 2022

A Pulse on Insurance in the Midwest: Insights from Jon Oaks

An image of an oncoming storm

As we head into the fall, I wanted to take another few minutes of your time to talk about the state of the insurance industry — especially as it relates to the Midwest. I know it has not been very long since this topic last came up, but due to some significant developments over the past few months, it is probably worth another review.

How has increased storm activity impacted your insurance?

As the summer comes to a close, storm activity continues to make life difficult for insurance carriers and their customers. The biggest examples of this in our area are the hail storms from June 10th in Oconomowoc and the June 13 storm scattered around Jefferson and Waukesha Counties.

Property claims

The volume of claim activity, combined with the supply chain issues that we have all experienced in different areas, has created unique challenges for carriers and their clients. From the carrier perspective: with hyper demand comes increased costs. For example, roofing materials are up 30 to 40 percent and labor is up 20 to 25 percent, leading to skyrocketing claim costs. In Oconomowoc, the hail storm was especially potent — most claims that we have experienced would include all four elevations of the roof, some siding, gutters, downspouts, vents, decks, etc. What would have been a $30-35K claim six or twelve months prior can now easily approach $50K.

Vehicle claims

As mentioned previously this year, hail claims on vehicles are through the roof as well. Used car values are up 42 percent which means a direct cost increase for the carrier on totaled vehicles. For repairs, supply chain issues and labor increase those claims as well.For the clients, just finding someone to complete the work has been challenging at times. Difficulty in getting materials and a labor shortage are increasing lead time by three to six, even nine months at times. We have seen many vehicles get totaled simply because the carrying costs associated with waiting for the parts and repairs outweigh the cost of the vehicles. The carriers end up totaling the vehicle because it is less expensive; unfortunately, this leaves the client to find a used vehicle in an almost impossible market.

What does all this mean for next year?

Looking ahead, all of these issues are going to lead to a difficult market in 2023. Our carriers all purchase insurance to cover large storms; we believe they will see significant increases to their premiums. It is my personal belief that doubling those premiums may not be unusual. The carriers will also be forced to cover a much higher first dollar limit. For example, they may have coverage in place after storm losses for a particular event that hits $20 million. We believe those numbers will increase to $40 or $50 million per event because of a tightening reinsurance market.

The bottom line for policyholders

All of these item lead to the same result: direct cost increases for the carriers with those increases passed on to the policyholders. There is no way around the inflation and increased storm activity resulting in significant premium increases. Carriers will have to increase the property limits (replacement cost) somewhere between eight to 12 percent and then another 10 to 15 percent to keep up with claim activity and increased costs. On the auto side, probably not as severe, but the increased costs with used car values and repairs with take their toll as well.Our expectations for Q4 2022 and 2023 are that rates will increase 10 to 15 percent across the board. Obviously there will be exceptions to the rules, but this will be the norm. It has been quite some time since we have seen industry wide results that warrant these types of increases, but there is no way around it given what has happened in the Midwest over the past 12-18 months.

Your Lindow agent is here for you.

As always, we will continue to look for the best alternatives to make sure that you as our clients are getting the best possible coverage at the best rate we can offer. We are doing our best to keep up with your renewals and provide solutions where we can. If you have questions or feel that something is unusual about your renewal information, please do not hesitate to reach out to discuss with your agent. We will also continue to monitor the situation from an industry perspective and do our best to keep you informed.Thanks again for allowing us to protect your families.


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