Personal Insurance Annual Review and Market Trends

JANUARY 3, 2023

Throughout the year, it’s common to implement tax-saving or risk management strategies for your personal insurance program. However, these adjustments often are not reported to insurance providers, and even minor changes may greatly impact a personal risk program. Examples of these changes are highlighted in USI’s Annual Review Checklist.

As 2023 begins, set aside time to review your personal insurance with a trusted advisor; however, keep expectations reasonable. The U.S. insurance market has challenges: inflation, geopolitical risks and supply chain disruptions, to name a few. Premiums are rising and insurance offerings are constricting.

What Happened?

2021 was a challenging year for the insurance industry. Plagued by natural disasters, inflation and supply chain issues, some insurance carriers struggled to remain profitable while others closed their doors. 2022 has proven to be more of the same. Catastrophes generated approximately $29 billion in damage.

Insurers must use technological advancement and better risk management techniques to return underwriting profits. Underwriting guidelines are narrowing, and catastrophe-prone regions have limited capacity for any additional exposures. Options for personal insurance buyers are limited. Now more than ever, the focus for buyers should be on management of risk over premium. State-sponsored insurance programs are flooded with applications, and some individuals are assuming the risk of self-insuring.

Insurance Carriers Pivot

Carriers are expanding non-admitted insurance (surplus lines) offerings in an effort to create more solutions. An admitted company is regulated by the state; however, when admitted markets lack the appetite to offer coverage, carriers place coverage in non-admitted markets.  

A non-admitted insurance company isn’t approved by the state, which means:

• It may not comply with state insurance regulations
• There’s no guarantee claims will be paid if the insurance company becomes insolvent
• Policyholders cannot appeal to the state’s department of insurance for claim mismanagement

Non-admitted insurers therefore have flexibility to design coverage and write hard-to-place risks.

Homeowners Premium Increase

As homeowners policy renewals arrive in 2023, expect to see premiums increase 6% to 12%. Insurance companies are boosting property coverage to meet labor and material shortages. Material goods for residential construction prices increased 18.6% over last year.

Another item contributing to premium increases for homeowners insurance is the rise in cybercrime. Cyber coverage is now afforded in many homeowners policies. As crime increases, so do claims. Eighty percent of personal email accounts are exposed on the dark web, making it easier for cyber criminals to gain access to personal and financial information. Review USI Insurance Services’ cyber checklist to assure good cyber health.

Automobile Premium Increase

Inflation, supply chain issues, claims, a lack of labor and severe weather losses are increasing premium for policyholders. Carriers are filing rate increases to reverse deteriorating loss ratios driven primarily by auto physical damage coverage. Families should expect to spend 12% more in 2023 for auto coverage, according to an analysis from Insurify.

Excess Liability Premium Increase

Social inflation is negatively impacting excess liability insurance. Social inflation describes rising costs of insurance claims resulting from increased litigation costs, expanded liability definitions, plaintiff-friendly legal decisions, and large compensatory jury awards. The Insurance Research Council suggests “very large verdicts have a strong signaling effect on insurance claimants and insurers, resulting in higher settlement costs across a broad class of insurance claims.” Expect to see insurance providers constricting capacity, as well as premium increases of 25% or more.