‘Really Big Hits’ Industry Responds, Adapts to Severe Weather, Inflation

It is a fact of life that accidents happen

In 2023 alone, there were an estimated 13.1 million motor vehicle crashes, according to the National Safety Council.

Because of those unplanned events, it is also a fact of life that people have to think about insurance. Recently, another fact of life has been rising insurance rates.

“Economic shifts are creating a complex landscape for the insurance industry, and individuals and businesses should be aware of the potential impacts on their insurance coverage and costs,” said Randy Allison, senior producer at Sunstar Insurance of Arkansas in Little Rock.

Due to the inflation, the price of replacement costs for homes and cars has jumped, which has caused insurance rates to increase, said Brooke Brolo owner of Brolo Insurance Group in North Little Rock.

G&G Independent Insurance CEO Jordan Greer added that the country has been dealing with inflation causing building materials costs to rise and thus house prices to rise. He estimates a house that cost $200,000 just a few years ago could easily cost $400,000 now.

The same phenomenon has happened with vehicles and auto insurance.

Then there is the increased and heightened severity of storms. There were 27 confirmed weather/climate disasters in the United States last year, each resulting in losses exceeding $1 billion, according to the National Centers for Environmental Information.

“Insurance companies have taken really big hits, really big losses, catastrophically, due to all the storms we’ve had, especially in our area,” Brolo said.

This has caused insurance rates to rise even more to keep up.

“Catastrophic weather events are leading to increased premiums and are influencing risk assessment and insurance products, pushing the industry to innovate and address new challenges,” Allison said.

While tornadoes have wrecked havoc across Arkansas, hail is often a larger issue for insurance.

“Hailstorms, from a dollar standpoint, cause even more damage than tornadoes, generally, because they usually affect a wider area,” Greer said.

Wind/hail deductibles started a few years ago to help make insurance more accessible and affordable, Allison said.

“Unlike standard fixed-dollar deductibles, wind/hail deductibles are often percentages based, meaning they are   calculated as a percentage of your property’s insured value and not a flat fee,” Allison said.

Even as inflation slows, Greer said customers are still a few years away from seeing insurance rates stabilize. That is because insurance companies can only take a limited increase based on what insurance departments approve. That also means not every company is taking the same rate increases in the same years.

Other major changes in the field come in the way of technological advances, one of those being artificial intelligence.

AI has changed the game in the insurance industry by advancing underwriting, being able to do predictive risk assessment and personalizing product recommendations for clients, Allison said. AI has also worked to streamline the claims process.

“The days when claims processing took weeks or months will eventually be a thing of the past,” Allison said. “AI-driven chatbots will be able to provide 24/7 customer support, improving response times and customer satisfaction.”

Another high-tech advancement is the use of drones. Greer said that some companies have started using drones instead of onsight ground inspectors.

Brolo pointed to the use of apps that track how safely a person drives and changes their rates accordingly.

Allison said mobile devices have made it easier for customers to interact with insurance providers and do routine transactions that way. It also means consumers are more aware of their insurance rates, which has contributed to a phenomenon of people shopping around for different rates.

All three agents said they have seen customers looking for a new company more often due to the rising rates.

“These trends reflect a shift in customer behavior towards more proactive and personalized insurance shopping driven by the need for better value and convenience,” Allison said.

Greer said independent companies such as G&G can find the best rates for their customers by mixing and matching policies from different companies.

“We’re loyal to our customers, not necessarily the insurance companies that we represent,” he said.

However, while customers may be looking to cut back or change policies in order to save money, they also need to know they are getting the correct coverage for their unique situations.

“With inflation and with rate increases across the board in the industry, people are very price conscious,” Brolo said. “I understand saving money, but look at what you’re buying.”

Exactly what coverage does a person need?

A home is usually a person’s biggest item to insure. The coverage on a home should equate to at least the home loan and replacement cost for everything in the home.

“The most important coverage is personal property,” Greer said.

Greer said homeowners should imagine walking through their home and thinking of everything they see and how much it would cost to replace each item. A replacement cost is not just the cost of the item itself, but what it would cost to buy a new version of that item.

Allison said flood insurance, is not included in homeowners insurance and earthquake coverage must be added, as well.

Renters insurance is similar to homeowners insurance, but, usually, rental companies also require renters to have liability insurance, Brolo said.

Liability insurance on a home or rental covers a customer if a person gets hurt on the property.

Then there is auto insurance. With auto insurance, rather than paying out replacement costs, insurance companies are going to pay out the cost to fix what is broken or to replace the cost of the car at the time it is totaled, not the cost of a brand new car, Brolo said.

There are a lot of other types of insurance too. Brolo recommended thinking about other items in a garage and making sure those are insured, as well, including golf carts, recreational vehicles, four-wheelers and boats.

She added that life insurance is also important.

“People insure things all the time, but if you have 10 people in a room, maybe only three of them have life insurance,” she said. “We want to make sure we educate people about the importance of life insurance because all of that can be replaced, but you can’t.”

Another insurance policy to consider is called an umbrella policy. It is typically excess liability coverage beyond someone’s home, renters or auto liability insurance policy.

Greer said umbrella policies are essentially lawsuit protection and protect customers if they somehow injure someone and are sued for it beyond the amount of their liability insurance. That is where the umbrella policy kicks in.

Brolo recommended about $1 million in an umbrella policy.

There is so much that goes into choosing what coverages people need, and that is what insurance agents are there to help their clients do.

“I would say the most important thing is working with someone that’s knowledgeable that can customize it,” Greer said.

Brolo said people should revisit their policies, especially when they experience a major life event such as a marriage, birth, move or buying a new car.

Allison said customers should contact their agents and conduct comprehensive reviews of all policies.

“It stands to reason that insurance coverage should not be taken for granted,” Allison said.

Brolo also stressed that working with an agent who gets to know their customers in order to customize coverage to an individual’s risk and needs.

“Make sure that you make protection a priority, just as much a priority as you would price,” she said. “You want to make sure you’re saving the most amount of money that you can with the coverage you need.”

READ ALSO: Hubbard Confirmed as Little Rock’s New City Manager