Sticker Shock: CT auto, homeowners insurance costs soar. Here’s why ‘people are suffering’

Kenneth R. Gosselin, Hartford CourantHartford Courant

Most years, Eric Ponelli estimates that his Connecticut insurance agency will perform cost comparisons for up to 15% of the customer base whose auto and homeowner insurance are coming up for renewal, if requested by their clients and if the agency suspects a better deal may be out there.

In 2024, every renewal is getting that treatment.

“Most carriers out there took a baseline increase between 30% to 40% within a year’s time, whether it was two smaller ones back-to-back, or 30% all at once.” said Ponelli, an agent at the family-owned Summit Financial Group Inc.

“Some increases have been larger than this. I have seen increases over 100 percent in some cases.”

Connecticut consumers opening their auto and homeowners insurance policy renewal letters should brace for sticker shock, compounding the pressure on household budgets already strained by higher food and fuel prices, experts say.

Higher homeowners insurance costs also are squeezing home affordability in Connecticut. Sale prices have soared since the pandemic.

“People are really suffering under these high prices,” Doug Heller, director of insurance at the Consumer Federation of America, an advocacy group, said. “This is a leading driver of the inflation pain that people are feeling right now. In fact, auto insurance, even more so, than home insurance. But both of them have been much higher than the broader inflation in the economy.”

In May, inflation — the general rise in the cost of goods and services — cooled to a 3.3% annual rate, as measured by the Consumer Price Index.

“In a way, I think the insurance industry is behind the curve on inflation, and they like it there,” Heller said.

‘Crashing to shore,’ with higher costs

A nationwide analysis of the cost of auto ownership by MarketWatch Guides found that the cost of auto insurance rose more than 19% on average between November 2023 and the previous year, making it the largest cost of owning a car. The next largest cost was vehicle maintenance and repair, up 8.5%, according to MarketWatch Guides.

The property casualty insurance industry says rising auto insurance premiums have lagged other soaring costs hitting consumers.

The rise in inflation coupled with high insurer losses coming out of the pandemic; higher repair costs for increasingly sophisticated car technology and rising medical liability claims following crashes are now just showing up in premiums, the industry says.

The increases also have to work their way through state insurance department regulatory approvals, said Bob Passmore, department vice president of personal lines at the American Property Casualty Insurance Association, an industry group, in Washington D.C.

“It’s like a wave out at sea that’s finally crashing to shore,” Passmore said. “And that’s what we’re seeing now.”

But is there a possibility of auto insurance costs dropping for consumers in the coming years?

“I don’t know about that,” Passmore said, “but there are some indications that it’s starting to level off. So as long as something else doesn’t intervene, that could be a positive for the future.”

Rate change filings up 50%

Auto and homeowner policy rates are just one part of the equation when a customer premium is being determined by an insurer.

An individual’s final auto premium also depends on additional factors beyond the larger economic factors of inflation, repair costs and overall severity and frequency of accidents. Those factors include geographic area, vehicle type, driving record and credit history. Changes can affect the premium, according the Connecticut Insurance Department.

For homeowners policies, individual premiums are adjusted for property location, construction type and year, hurricane risk and coverage amount, the insurance department said.

In Connecticut, there were indications of the coming wave, as Passmore puts it, of premium increases, according to the state insurance department’s year-end report on rate change reviews requested by insurance companies doing business in the state.

In 2023, there was an average overall rate increase for auto policies of 11.2%, up from 4.9% in 2022. Rate change filings jumped by more than 50%, rising to 138 in 2023 from 90 in the previous year.

Connecticut homeowners also are likely to see significant increases in their policies.

A recent report by Insurify, an online insurance marketplace, ranked Connecticut as ninth on a list of the top 10 states where rates are expected to increase the most by the end of 2024.

Currently, the average annual home insurance rate is $1,764, but that is projected to increase by 9% to an average of $1,972. According to Insurify, 50% of insurers providing homeowner coverage in Connecticut are expected to boost rates in 2024. Risks in Connecticut include hurricanes, snow and flooding, all heightened by climate change.

Many of the same factors for auto policies have influenced rising homeowners insurance prices, but a big wild card that still remains is the increasing severity and frequency of weather events that intensify insurer risk calculations. In the Northeast, those include thunderstorms, hail and tornados, said Karen Collins, vice president of property and environmental at the property casualty association.

Without a reduction in claim losses, the association doesn’t see homeowners policy rates going down.

“One of the concerns that we have is that one of the most active hurricane seasons ever is forecast for this summer,” Collins said. “So, we as an industry, we kind of holding our breath on whether there is going to be another significant impact from natural catastrophes.”

The Consumer Federation’s Heller acknowledges the insurance industry had a tough year in 2022 with high losses. But leaning heavily into inflation, whether for construction materials in homeowner policies or more complex car repairs in auto policies, as the rationale for raising rates starts feeding on itself.

“They’ve been going to regulators around the country saying, ‘Hey, inflation is high. We need to raise rates to cover costs.” That drives up inflation, which is then used to justify higher rates. It’s this vicious circle for their customers, but for them, it just keeps the rate coming in.”

Two property casualty insurers with major operations in the Hartford were contacted for this story. The Hartford Financial Services Group Inc. declined a request for an interview. Travelers Cos. did not respond with a comment

Tough conversations

At Summit Financial in Milford, Ponelli said each Monday the agency prints out the policies that are coming up for renewal in the next 30 days and goes to work on them.

“The conversations have been tough with the customers,” Ponelli said. “A new plateau for insurance pricing is being set, and we are not likely to see the rates ever go back to where they were only 2 or 3 years ago.”

Ponelli said it is possible to keep a customer at their current rate by moving them to a different company. But the customer must have a “100% clean account,” no claims and good credit. If it is a homeowner’s policy, a new roof is essential, Ponelli said.

Trying to move policies to a new carrier is complicated by the decision by some insurers to limit how many new applications they accept monthly, Ponelli said.

Ponelli advises customers to choose a higher deductible and not to submit small claims.

“Insurance needs to be viewed as a back-up if you have something happen that you absolutely cannot pay out of pocket,” Ponelli said.

He cited the recent example of a client whose home is within two miles of water and they submitted a small, water-related claim, and the premium went from $1,770 a year to $6,500 a year.

“Submitting that small claim could either cause ineligibility” if a new carrier is being sought “or cause the rate to skyrocket,” Ponelli said.

The state insurance department recommends shopping around annually to determine if there are better rates available.

Kenneth R. Gosselin can be reached at [email protected].