Market prices for property and auto insurance policies have risen dramatically over the past year in response to factors that include higher reconstruction and repair costs, a dramatic rise in insurance claims and the increasing frequency of natural disasters, industry experts say.
Aaron LeBlanc, owner of LeBlanc Insurance Group LLC, doing business as North Town Insurance, says insurance companies must provide reasons for their proposed increases to the Washington State Office of the Insurance Commissioner each year. In general, insurance carriers show how many dollars they took in premiums versus how much they paid out in claims.
“Based on that information, (insurance companies) can ask for a rate increase,” LeBlanc says. “And it was denied very often, year after year during the COVID … a lot of the inflation that happened during that time, coupled with their inability to absorb rate increases. Now some significant (companies) are trying to catch up.”
According to the state Office of the Insurance Commissioner, in 2023 the office approved a weighted average rate increase of 24.7 percent for auto insurance, compared to a 2.8 percent increase in 2022; no increase in 2021; and a 3 percent decline in 2020. The weighted average is among the 20 companies that underwrite private passenger insurance in Washington and make up 77 percent of the market, said Aaron VanTuyl, communications manager for the state insurance office. Before the pandemic, insurance rates saw relatively modest increases: 2.3% in 2019 and 1.5% in 2018.
The sharp increase in the percentage is especially felt by the owners of companies with car fleets. Chelsea Morgan, owner of Spokane-based catering business Chelsea Morgan Inc., operating as A Catered Affair, says car insurance, liability insurance and other rising costs keep her from hiring or giving her staff more hours. As a result, Morgan has taken on many of the tasks for herself.
“Longer term, I hope things change and prices come down,” says Morgan.
Property insurance has also increased dramatically over previous years. In 2023, the Office of the Insurance Commissioner approved a weighted average rate increase of 16.6%, compared to 3.9% in 2022; 1.1% in 2021; and 1.5% in 2020.
In the three years leading up to the pandemic, property insurance rate increases weren’t all that different: In 2019, property insurance increased 1.6%; in 2018 the increase was 3.7%. Before last year, rates had not risen by more than 5% in more than a decade; in 2012, property insurance premiums rose by 5.5%.
Kenton Brain, president of the NW Insurance Council, says policyholders are witnessing a perfect storm of insurance-related problems. While the consumer price index for retail goods and food has risen 9% over the past few years, the increase in construction and labor increased to 40%, he says.
“Labor and materials are dramatically higher than they were before the pandemic, and that’s another factor that’s impacting insurance costs,” Breen says. “But most importantly for insurance consumers, whether they’re homeowners looking for coverage or business owners looking for coverage, it’s a challenging market in the property insurance market in Washington, across the West and across the United States.” ”
The increase in extreme natural disasters, including tornadoes, hurricanes and wildfires, has led to dramatic increases in insurance payouts, Breen says.
“The wildfires have caused significant devastation to communities in Eastern Washington,” he adds.
As a result of changing weather patterns causing devastating losses, people are beginning to understand the impact of climate change, Breen says.
Matt Walsh, president of the Spokane-based Building Owners and Managers Association and Asst commercial property manager for Black Realty Management, says the extreme weather events of the past few years, including wind storms and extreme cold, are incaused excessive damage to many properties.
“It makes sense that these catastrophic weather events cause more insurance payouts,” says Walsh.
Single property owners with one insurance policy have seen significant rate increases compared to multi-property owners who can get a better group rate, Walsh says. He has also heard of insurance carriers waiving premiums due to high risk of damage or to owners who have previously filed claims. Also, parts and labor have risen significantly over the past few years, and costs have further escalated from supply chain delays, Walsh says.
The rise in payouts and risk factors has made insurance carriers selective about the locations and businesses they cover.fer policies. Although no insurance carrier has completely stopped writing policies in Washington state, there have been many reports of carriers decreasing create new business in certain communities or choose not to renew policies for certain customers and areas considered higher risk, Breen says.
“I want to make a distinction between what’s happening in California, where insurers have announced they’re not writing a new business period, from what’s happening in Oregon and Washington, where there are smaller districts,” Breen says. “I have heard of insurers saying they are reassessing their risk exposure in some pockets of the state. You can imagine what these pockets are like: they will be areas that have experienced large losses related to wildfires or have a higher risk of this happening.
Breen adds that he has heard from many consumers, primarily in Eastern Washington, who are having difficulty obtaining homeowner’s insurance, which may be attributed to the greater likelihood of wildfires in the region.
It will likely take some time for the market to self-correct and prices to level out, he says.
LeBlanc says he hasn’t seen carriers leave Washington, but he has seen selective underwriting, including stopping coverage for structures of a certain age or disliking certain types of business. If a policyholder has had a claim, many carriers choose not to renew, LeBlanc says.
Some customers may be affected who have never had a claim.
“The carrier was fine with (for example) a 40-year-old commercial building, and now they’ve made new underwriting guidelines that say the building has to be 30 years old or newer, so then we have to find a new market,” LeBlanc says.
After the Oregon Road and Gray fires in Spokane County last year, many insurers too choose not to do business in those ZIP codes, LeBlanc says. This is being felt by individual homeowners, but it’s starting to happen to business owners as well, he adds.
Just as the cost of rebuilding a structure has gone up, Breen says, so has the cost of repairing vehicles too has increased significantly. Vehicles are now more technologically advanced and equipped with things like sensors and cameras that are expensive to repair or replace.
In addition, the number of serious car accidents too rose, leading to large payouts for medical expenses, Breen says.
According to the Washington Department of Transportation, the number of car crashes in 2023 totaled 78,116 — a 10-year low — and down from a total of 103,315 crashes in 2022. However, even though there were fewer crashes in 2023, the number of serious collisions was higher than in previous years, with 772 people killed in car crashes nationwide in 2023, up from 745 in 2022, the most in three decades, the agency reported.
“The severity of crashes is increasing even as the number of crashes is leveling off,” says Breen. “A vehicle with a fatality means there are likely other injured people … and the cost of treating injuries with medical care is also higher.”
Brine says communities across the country too are experiencing an increase in serious car crashes with fatalities.
“The fatality rate in this country has gone up,” says Breen. “It’s a psychological issue that I’m not sure we’ve gotten to the bottom of yet.”
For businesses looking ahead and wondering how to reduce insurance costs, LeBlanc advises owners to build a focused business plan that communicates how the company operates, avoid mixing multiple businesses under one umbrella, and have a dedicated professional in charge of accounting. For businesses with fleets, he advises shopping around and getting ahead of renewal dates.
More generally, there are also steps communities can take to lower the cost of insurance within their zip codes or avoid carriers refusing to do business with high-risk communities, Breen says.
Having buildings that are resilient to wildfires and an engaged community that takes steps to reduce catastrophic losses can make the difference between paying out claims on a dozen properties versus a thousand properties, Breen says.
“(The wildfires) are not going to go away. In fact, they’re going to get worse, so it’s better to figure out ways to prepare for it, live with it, and minimize the loss from it,” Breen says.
