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Rising Costs of Construction Affect Property Insurance Rates

Many different variables affect property insurance rates. For property insurance rates, the cost of construction tends to have a significant impact. This makes sense as rebuilding and repairing costs are directly related to lumber, building supplies, and labor costs. As those levers move, so does the cost to insure. The statistics show labor and construction materials costs have increased by almost 50% since 2020, illustrating the scope of the problem.

As an agent, you can help your policyholders understand and plan for these realities. Talk with them about rising costs and how outside factors, like construction costs, affect insurance rates. Sometimes just understanding how insurers price risks can help customers impacted by rising rates.

Here are some points to consider: 

  • Property insurance rates in regions prone to severe weather are likely to be more impacted by changing construction costs.
  • Policyholders located in booming real estate markets may also face higher construction costs, and therefore higher property insurance rates.
  • Rising construction costs can result in higher rebuilding costs, affecting estimates and final payments, as well as rates.

 Agents and brokers working with policyholders who may see increased rates due to higher construction costs can help them manage these expenses. Try focusing on these topics when working with clients facing premium increases: 

Risk Mitigation Strategies

Talk with policyholders about ways they can manage and mitigate their own risks. This should be a part of your discussions already, but it is even more critical to control losses when a policyholder is trying to reduce their rates. Reviewing each exposure and current mitigation measures can help you to identify other proactive ways to reduce risk.

Coverage and Policy Reviews

Add value through in-depth policy reviews to examine coverage, conditions, and limits. Knowing your insured’s needs as they continue to change and evolve means you can offer the right insurance products at the right time. By asking questions at a policy review, you can be sure to keep coverage up to date for the policyholder.

Alternative Risk Management Solutions

Suggest different methods your policyholders could use to manage their risks. This could include different types of coverage or endorsements added to their policy like inflation coverage, or a non-traditional solution like parametric coverage. It could even be a non-insurance solution like an alternative type of funding.

 

Discuss Trending Topics at Industry Events

Trending issues like how the rising costs of construction affect property insurance rates are often discussed at industry events. Plan your 2024 calendar now to take advantage of the best conferences, like the American Agents Alliance 2024 Conference & Expo. Held on September 19-21, 2024, in Palm Desert, CA, the event brings together industry experts, trending ideas, and engaging sessions, some with CE credit.

Mark your calendar now to attend the largest P&C event in the West!

 

External Links:

  1.     https://scharconstruction.com/will-home-construction-costs-go-down-in-2024/
  2.     https://www.mynews13.com/fl/orlando/news/2023/12/28/home-insurance-costs#:~:text=Experts%20say%20as%20we%20head,the%20amount%20of%20overall%20inflation.
  3.     https://www.tampabay.com/news/business/2023/06/07/florida-property-insurance-costs-rising-faster-than-any-other-state/
  4. https://content.naic.org/cipr-topics/parametric-disaster-insurance



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