More Americans forced to make dire decisions amid soaring insurance rates

In the face of escalating home and insurance prices, more Americans are going to new lengths to afford their premiums.

Research from Assurance IQ and J.D. Power found a growing number of Americans plan to either:

1. Use tax returns to pay for premiums
2. Shop around and switch providers
3. Go without coverage

Matt Hagen, director of P&C Operations at Assurance IQ, noted that while insurance bills were an expense most “never really thought about,” they have now become “a hefty bill they must strategize to pay.”

“Most consumers saw their home, renters and auto insurance premiums go up in 2023,” he said. “Most also reported being very to extremely concerned about their ability to handle further increases. More than half said they were reducing how much they spent on non-essentials, and many said they were saving less money because of higher insurance premiums.”

Stephen Crewdson, senior director of insurance business intelligence at J.D. Power, said financial professionals can help American consumers find solutions to manage the costs.

Both experts emphasized the need for financial professionals to work with their clients to address insurance rate increases and provide customized, creative solutions.

A third of Americans eye tax returns for premiums

An Assurance IQ survey of 1,000 Americans found as many as 29% plan to use their tax returns to pay for insurance premiums.

Those most likely to say this were Gen Z respondents (48%), households without children (39%) and minority consumers (38% Hispanic and 35% Black).

“Many Americans rely on their tax refunds to manage large purchases or to pay off debt accumulated during the year,” Hagen noted. “But with inflation continuing to drive up the cost of home and auto insurance, many consumers now struggle to afford their premiums… It comes as no surprise, then, that many consumers are considering using their tax refunds to cover insurance premiums.”

Shopping around, switching providers on the rise

In the face of rising interest rates, more Americans are also shopping around to find better prices and switching to a different insurance provider.

According to J.D. Power’s Quarterly Shopping List Report for Q4 2023, overall shopping rates for auto and home insurance stood at 14.9% and 2% respectively.

“We saw, in the first half of 2023, the shop rate and switch rate going up together. That was fairly unique,” Crewdson said. “People were now intent on switching insurers. They were telling us in our surveys [they are] switching because premiums are too high, rather than just price-checking.”

Both J.D. Power and Assurance IQ expect, and even encouraged, consumers to keep shopping around with rate increases still on the horizon.

“The first half of 2024 is shaping up to be fairly aggressive still for rate hiking, and we have started to see the early signs that households are starting to come back and shop again,” Crewdson said.

A dangerous trend of going uninsured

More Americans have also begun deciding to pay other bills over insurance premiums, leaving them uninsured.

“They felt that they were making a decision between paying the insurance premiums or paying the mortgage or paying the rent,” Crewdson said. “So, we saw an uptick in the share of households that decided to drive uninsured.”

Both Crewdson and Hagen said Americans should speak with an insurance professional rather than opt to go without coverage.

““There's so many risks that a household takes when they do that that could, in the case of a bad event, place them in a much worse financial situation,” Crewdson said.

“Prioritizing premium payments and getting creative with coverage options can protect against these risks,” Hagen added.

Financial professionals can bridge the gap

Both experts said there are many opportunities for financial professionals to offer personalized guidance. For instance, they can discuss usage-based insurance options and other strategies with their clients.

“Financial advisors and insurance agents should work with their clients to ensure that they have enough coverage to meet their unique needs, instead of focusing too much on premiums,” Hagen said.

Crewdson similarly urged insurance professionals to keep the consumer in mind and communicate rate increases in a “more consumer-friendly way than just a renewal notice.”

At the same time, he noted that many consumers don’t even consider just asking their insurer about discounts.

“Discounts are available,” Crewdson said. “Most insurers offer a long list of different discounts to their customers, but if the customer doesn't know that those discounts are available, they might not know to mention to their insurer that they qualify for those discounts.”

J.D. Power is a data analytics, consumer insights and advisory services firm founded in 1968. It uses big data and artificial intelligence to understand consumer behavior in the United States.

Assurance IQ is an insurance company and software solutions provider based in Seattle. Their study was conducted January 26-29, 2024 and weighted to reflect the U.S. population.

Rayne Morgan is a Content Marketing Manager with PolicyAdvisor.com and a freelance journalist and copywriter.

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Rayne Morgan is a journalist, copywriter, and editor with over 10 years' combined experience in digital content and print media. You can reach her at [email protected].