Outlook for home and auto insurance

By Sandra Block

Kiplinger’s Personal Finance

Todd Jackson, the chairman of the Independent Insurance Agents and Brokers of America, discusses likely scenarios for home and auto insurance in 2025.

Q: Consumers have seen premiums for homeowners and auto insurance rise sharply in recent years.What’s behind the increases? A: There are several factors. Prior to 2022, the insurance marketwent through a phase of lower-than-normal hurricane activity. But hurricane activity really spiked in 2022 and 2023, which coincided with inflationary increases in a lot of sectors that affected the homeowners insurance industry. If you look at the consumer price index of all consumer goods, prices increased by about20% overall between 2020 and 2024. But the construction industrywas hitmuch harder— 35% to40% for trade services, lumber, concrete, asphalt and other things that are required to replace and repair homes. In otherwords, the inflationary impact of goods and services affecting the insurance industry has increased at roughly twice the pace relative to other industries. As a result, we have found that these costs have been passed along to customers.

The auto industry also had supplychain issues early in theCOVID-19 pandemic that spilled into 2021 and 2022. The cost of parts and supplies rose dramatically during that period, and the cost of repairing vehicles rose along with it. The time required for vehicle repairs has grownaswell, which increases the need and expense for rental cars, also driving up the overall cost of repair. Those increased costs are still present today and are being passed on to insurance customers.

Q: What’s the outlook for insurance prices in 2025? A: While overall pricing may not be going down, the rate of increase appears to be leveling off— particularly for auto insurance because the supply chain is improving. Insurance carrierswere beginning to see an improving financial picture of their insured properties during the first three quarters of 2024, but the impact of hurricanesHelene and Milton coming back-toback in fall 2024was pretty dramatic and may have some effect on prices for homeowners insurance in the coming year.

Q: Will insurers continue to leave states that have been hit by natural disasters, narrowing access tohomeowners insurance for residents?

A: All indicators in the property market seem to suggest that it will continue to be difficult. People in Florida are used to insurance companies leaving, but now you’re seeing it happen in theMidwest and Plains states, too. Working with an independent agentwhocan offer options frommultiple insurance companies will give homeowners amuchbetter opportunity to find coverage when a carrier has left their area.

Q: Whatsteps can carowners and homeowners take to lower their insurance premiums? A: With regard to auto insurance, practicing safe driving habits and doing all you can to prevent losses will impact your premium the most. Having a good credit score can also help, because in recent decades, credit impacts howcarriers price insurance.

For homeowners, proper maintenance of your home— roof, plumbing, electrical, HVAC— is paramount. You alsowant to review your deductibles and determine howmuchyou can afford to pay before insurance kicks in. If you increase the deductible on your home and auto insurance, the insurer will reward you with lower premiums for taking on a higher portion of the risk.

Bundling your auto and home insurance with the same company can also save you money. As an independent insurance agent, I mightwork with 15 different carriers, and if I look at them in individual silos, insurance companyAmay offer the cheapest homeowners insurance and insurance companyBmay provide the cheapest auto insurance.

But insurance companyCmight offer the lowest overall premium if you buy both policies through it.

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