What’s happening to insurance policy holders in Oklahoma?
We noticed it in 2020 when the prices of homes and home building materials skyrocketed. Then gas and groceries went up and now Oklahomans are witnessing rising costs of insurance. Our economy is changing and insurance carriers are reacting. Carriers are raising their rates, changing their appetites for risk and looking at insurance applications more carefully. Some Oklahomans are going to have a hard time finding coverage for the next two years or so because the insurance industry is entering what’s called a “hard market”.
What is a hard insurance market?
Like many other industries, the insurance market is cyclical. It moves like a pendulum from a soft market to a hard market every so often, maybe as seldom as once every generation. A hard insurance market can be characterized by rising insurance premiums and decreasing appetites for new business.
Several factors can cause a hard market, including falling investment returns for insurers, increases in frequency or severity of losses, and regulatory intervention deemed to be against the interests of insurers.
On the other side of the pendulum is a soft insurance market, which is what we’ve been used to for many years. This side of the market cycle is characterized by low rates, high limits, flexible contracts, and high availability of coverage.
What’s causing this hard insurance market in 2022?
There are several reasons the insurance industry is transitioning to a hard market. One of the largest contributors is economic inflation. Other causes are social inflation and a delayed response from the events in 2020 and 2021.
As of the end of June, 2022, inflation was at 9.1%. Depending on the source, it could even be higher. This was the largest increase over a twelve month period since November, 1981. Inflation affects the cost of products and services. Our recent rising inflation rate has indirectly affected the costs of rental cars, construction materials, home prices and business interruptions.
Social inflation has also increased the size of legal judgements. Social inflation can be caused by an increase in the number of outsized jury awards, legal proceedings that take longer than reasonably expected and rollbacks in tort reform that overturn statutory limits on non-economic damages.
During the beginning of the COVID pandemic of 2020 and the inflation increases in 2021, the insurance industry didn’t react. The carriers thought these developments were going to be short-lived. However, what was assumed to be temporary was actually a trend. The cost of materials and oil was going up, which affected the cost to repair vehicles and homes. And for some reason, drivers adopted riskier driving habits, which increased the frequency of auto accidents. Carriers have been forced to make changes with more frequent and more expensive claims.
How does a hard insurance market affect Oklahomans?
Insurance carriers started to “circle the wagons” in the summer of 2022 to assess their current situations. Many of them are reducing their appetites for risk, which means that their target market is going to shrink. Carriers are increasing scrutiny and applying stricter underwriting when it comes to applications for coverage. Some carriers may even issue a moratorium for a short period on new insurance applications.
This is going to affect a lot of people. Due to changes in carrier appetites, some policy holders may receive notices that their policy is not being renewed at expiration. Most insured homeowners will experience forced replacement cost increases on their homes after the recent increases in home values. A lot of policy holders are probably going to start shopping around for a new insurance policy starting in the second half of 2022.
This hard market is expected to last about two years because the industry didn’t make any significant changes in 2020 or 2021. However, assessments will be made quarterly based on economic conditions.
What can Oklahomans do about this hard insurance market?
Oklahomans need to understand what is happening and why, and that it’s not personal. This is a normal process in the cycle of of the insurance industry.
Make sure your current home value is updated on your property coverage. Your home has most likely increased in value within the past few years, so you need to make sure the full value of your home is covered by your homeowners policy. Think of it this way: either raise your coverage amount or effectively take a huge deductible. It’s up to you.
Aggressively shop for coverage, especially if your current agency only offers one carrier. If your cost of insurance goes up and your agent only has access to one carrier, you may be missing out on the ability to have a competitive rate.
Contact an independent insurance agent that has access to multiple carriers. Independent agents can conveniently shop carriers to help find the coverage you need at a price that fits your budget.
Bundle your home and auto with the same carrier if possible. Bundling multiple policies with the same carrier can help save a lot of money! It may seem like common sense to most of us, but there are a lot of people that have still their home and auto insurance policies with different carriers.
Protect your property and family. Live a stable life and prevent insurance claims as much as possible. Having good credit, no recent accidents and no recent traffic violations can be the best ways to help insurance policy holders receive the lowest rates. I know it may seem boring, but insurance carriers reward stable people with excellent rates!
Why should Oklahomans choose Scherer Insurance?
Scherer Insurance is a client-focused independent insurance agency with Oklahoma roots. Oklahomans should choose Scherer Insurance for personalized service, access to multiple carriers, competitive rates and regularly scheduled policy shopping. Clients benefit by receiving competitive rates from the strategic relationships Scherer Insurance has developed with multiple carriers. During renewal periods, policies are shopped to help find the best coverage and competitive rates.
How can I buy insurance in Oklahoma?
There are two easy ways to get a quote or request more information for insurance in Oklahoma:
- Call/Text (405) 605-9891
- Email jp@schererinsurance.com