We are seeing the effects of high inflation in every aspect of our lives. Certainly, we are impacted by higher prices in food, energy, and consumer goods. Combined with the problems we are still feeling from supply chain issues that developed during the pandemic, it is no wonder that inflation is a major national issue.

Let’s review a few key areas where we will see how inflation will affect your insurance rates.

Higher Inflation Rates and Insurance

Higher inflation changes your insurance program as well. The most obvious effect is that we are seeing carriers start to increase their rates after a few years of flat pricing.  

While the rate of increase in insurance premiums will not be quite as high as you see in other areas of the economy, we think it is reasonable to expect increases of 5-8% in most of your insurance products, so it is more important than ever for us to work together to make sure that you are doing everything possible to get the best value from your insurance program.

Limits of Liability Insurance

The industry has noted an alarming rate of increase in judgment and settlement amounts over the last several years, even before we started to see consumer prices affected by the rate of inflation. Interestingly, some in the insurance industry were calling this, “Social Inflation” because there was no other fact or set of circumstances to account for these dramatic increases. 

You should review your limits of insurance to make sure that they are keeping up with the times. For example, if you have carried an Umbrella policy with a $1,000,000 limit for several years, it is probably time to increase that limit to $2,000,000. 

Higher Court Settlements

The insurance industry has noted a disturbing trend of much higher court judgments and settlements over the last several years. While this may not be related to economic inflation, the industry has been calling this trend a form of social inflation. 

We strongly urge our clients to consider their liability limits for both automobile and personal liability. A remarkably high percentage of our clients have Umbrella Liability policies that extend your liability limits above those on your home and auto policies. It may be time to purchase an Umbrella if you don’t already have one, or if you do, it may be time to increase your limits.

Increased Construction Costs

Another significant effect of high inflation is the skyrocketing costs of construction. This is critical for you because your property insurance for the home you live in or rent to others is based on the replacement cost rather than the market value. 

While we have seen some modulation in market values, we have seen little backtracking in construction costs. Most insurance companies try to keep pace with inflation by increasing the amount of your property insurance limits each year as the policy renews, but we have serious reservations that these increases have been enough to keep pace with the rate of inflation. The result of this is that you may find yourself a bit underinsured on your property coverage.

Your building, equipment, contents, and supplies are more expensive to rebuild or replace today than they were a year ago. Your insurance policy may have accelerators for some of those values, but that may not be adequate for the actual rate of inflation.  

We strongly recommend that you review your limits of property insurance and reach out to us to discuss increasing them to make sure that they are adequate.    

How Can We Help You?

At G. S. Newborn, we are committed to doing our best work to help you minimize your insurance premiums. Each year before your renewal, we search our markets to see if we can generate a better value for you. We do this proactively. For everyone. Every year. 

If we find a compelling differential – either in coverage or price, we contact you. Of course, we are happy to speak with you anytime to review your insurance program.

Talent Acquisition

Business pundits are saying that finding good employees is the number one problem facing business owners today. One way that you may be able to make your business more attractive to new employees is to spruce up your Employee Benefits offerings. We offer a full range of employee benefits – everything from health insurance to pension programs.  

Estimating Costs

We have some tools to help you estimate the replacement cost of your residential buildings.  Many of our carriers also have endorsements that pay you more than the amount shown on your policy. The bottom line is to contact us if you have concerns about your limits insurance.

Contact Us Today!

We want to be your trusted insurance advisor! Please feel free to call on us anytime – you do not have to wait until your policies are about to renew. 

Let’s make sure that your coverage is keeping pace, we are adjusting your program to your ever-changing business needs, and that we are up to date on any changes in your operations. Together we can get through this difficult cycle.