A message from Nate Hatzung on today’s insurance market
It’s no secret that we’re living in unprecedented times. I want to bring you up to speed on the current status of the insurance market in the hopes to educate and provide a sound explanation for the never before seen rate increases, loss settlement(claim) reform and the tightening of underwriting/eligibility guidelines. This affects all personal insurance products including auto, homeowners and commercial property/liability policies. The combined loss ratio for the industry as a whole in Minnesota is running at roughly 173%. This means that for every $100 the insurers receive, they are paying out $173. We have had large national carriers put a “hard-stop” on new business and yet others who have introduced eligibility guidelines that ultimately send the message that their doors are shut as well. We’ve seen smaller regional carriers being purchased by the big national carriers because they cannot operate profitably in this inflationary market. One would think that Minnesota is a profitable state for insurers, but in fact, it is number two only to Florida for being one of the least profitable states. If you have auto or homeowners insurance, your rates have gone up this year. This is not based on a claim you’ve had or a ticket you’ve received. The increases are simply a cost of doing business in a very difficult marketplace.
Below is a list of some of the reasons we are in this situation:
- The cost to rebuild your home has increased dramatically due to the rising cost of materials and labor. Supply chain for materials continues to be an issue.
- Roofing, Siding, and Window Manufacturers and “Storm Chasers” have taken advantage of insurance companies contract language to replace these systems that sustain cosmetic damage rather than significant damage truly effecting the integrity and/or functionality of roofs, siding and windows. This has exponentially and dramatically increased the cost of property claims. The days of waiting for the next hail storm to replace your roof are under heavy scrutiny.
- The cost to repair your car has increased significantly due to rising costs of auto parts and labor to fix your car. A bumper used to cost $1,000 to repair. Now with five or six sensors and a back-up camera they cost three times that amount.
- As it relates to the cost to repair, distracted driving accidents are through the roof! Drive down the road and watch how many people are actively using their phone while driving!!
- The cost of medical care continues to be on the rise and the duty to defend you in the event of a liability claim has immensely increased! There is a reason for all the chiropractors and personal injury attorneys in MN. Chiropractic is paid by insurance companies regardless of fault and Litigation is expensive, and settlements are rising at an unprecedented rate.
- Reinsurance rates(the insurance your insurance carrier buys to transfer risk and cushion them against catastrophic loss) have doubled. This is a major player in explaining the rising costs of insurance products.
On top of all of this, insurance companies are actively and often times ruthlessly examining and underwriting new business accounts like they’ve never done before. This means if you have any claims, violations or marginal credit and not a squeaky clean account, you’ll need to be very careful moving insurance companies. We continue to receive memos in regards to changes in Loss Settlement, specifically as it relates to wind and hail. Most companies are not insuring new clients who have roofs over 15 years old. Many have instituted guidelines that, for any roof over 15 years old will be covered on a depreciated scale based on its age. The days of cosmetic hail damage replacing your roof, siding and windows are going away. Most insurance companies will NOT insure cedar shake roofs moving forward.
It is for all of these reasons above that we are being extra careful with moving accounts from one insurer to another. If you have been with your current carrier for more than a year or two, we are absolutely recommending that you stay the course with them as you are “grandfathered in” with replacement cost on your older roof. Saving $400-500 on insurance may not be a reason to switch insurance companies as you may be foregoing important coverage that could cost you thousands down the line. More importantly, you may see immediate savings only to see the policy renew the following year at more than you were paying before you left your prior carrier.
During the course of my day as I sit in my office and listen to the conversations our staff and agents are having with you, our clients, I’m tickled pink with what I hear. The staff and agents at Hatzung Insurance are real people that have lives outside of here. Who pay the same insurance premiums as you do. I am so proud of what I hear during these conversations. They all do an amazing job and they’re here for you everyday! They’re smart, kind, and value each other as people. They think outside the box and are constantly talking with each other about ways to help you, our clients! In a world full of never-ending challenges, the staff at Hatzung Insurance is beaming with brightness. We appreciate and value your continued support and loyalty to Hatzung Insurance and hope that this letter gives you clarity and an understanding of the changes happening in the insurance industry.
With much thanks and appreciation,