How the Challenging Property Insurance Market Impacts New York Policyholders

Posted by John Cofini on Thu, Feb 23, 2023 @ 10:00 AM

property insurance market

MarketScout says commercial property rates were up an average of 9.3% in the last quarter of 2022 and personal property rates were up an average of 7% to 7.3%.

The rate hikes did not occur evenly around the country. Catastrophe-prone areas, particularly California and Florida, saw personal property insurance rate hikes of 30% to 40%. Likewise, commercial properties in areas with high catastrophe exposures saw average rate hikes as high as 25% to 30%.

Ballooning Natural Disaster Costs

The National Oceanic and Atmospheric Administration (NOAA) says 18 major natural disasters cost the U.S. $165 billion in losses in 2022. This makes 2022 the third-costliest year for natural disasters on record.

On the West Coast, wildfires have been causing massive property damage and destruction. The National Interagency Fire Center says there were 68,988 wildfires in 2022, up from 58,985 in 2021. More than 7.5 million acres burned in 2022. On the opposite side of the country, hurricanes have caused trouble in Florida. Munich Re says Hurricane Ian caused approximately $100 billion in losses and around $60 billion of this was insured.

These losses are having an impact on property insurance. In a survey from the Council of Insurance Agents and Brokers (CIAB), 56% of respondents reported an increase in commercial property claims in the third quarter of 2022, up from just 39% of respondents who reported an increase in the second quarter. Survey respondents also noticed the impact on insurance. In addition to rising rates, policyholders are also seeing big increases in deductibles as well as reduced capacity.

The Situation Outside California and Florida

Catastrophe-prone areas are seeing some of the highest rate increases, but policyholders in other regions are not immune to natural disasters or rising insurance rates.

Severe storms, including ice storms and tornadoes, have caused major damage in various states. According to Insurance Journal, Winter Storm Elliot dumped more than 40 inches of snow on Buffalo, New York, in December 2022. The insured damage could come to around $5.4 billion, according to Karen Clark & Co.

The Impact of High Inflation

Natural disaster losses aren’t the only factor influencing property insurance costs.

High inflation drove up costs in 2022, and the property insurance market is feeling the impact. The Bureau of Labor Statistics says the Consumer Price Index increased 9.1% in the 12-month period ending June 2022 – the highest increase since 1981.

When costs are higher, claims are more expensive. CIAB says the impact of inflation on insurance was more noticeable in the third quarter of 2022, even though inflation had cooled somewhat. According to CIAB’s figures, commercial property rates were up 11.2% in the third quarter of 2022.

What the Challenging Property Insurance Market Means for You

If you own a house or business, the current property insurance market could have a direct impact on you.

  • Your rates could increase. Since rates are rising for most policyholders, you should expect higher rates at your next renewal. Depending on your situation, the rate hike could be relatively modest or substantial. If you live in an area with a high risk of natural disasters or you have had recent claims, your rates may increase dramatically. MarketScout also notes that homes with values of more than $1 million are seeing slightly higher rate increases than homes with values of less than $1 million – an average of 7.3% compared to 7%.
  • You could receive less favorable terms. In addition to higher rates, you could see larger deductibles, meaning you’ll have to pay more out of pocket if you have a claim. However, selecting a higher deductible can also be a good way of keeping your premiums down. Also watch for more restrictive coverage terms, lower limits, and new exclusions.
  • Your agent may need to shop around. If your rates and terms are no longer attractive, your BNC agent may need to look for a better coverage deal with a different carrier. Some areas are seeing reduced capacity, which can make it harder to secure coverage. Allow extra time for your renewal.

In this challenging property insurance market, you need an experienced broker on your side. Contact BNC.

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