Everything is rising at a scary rate: Why car, home insurance costs are surging | Hacker News Reader

Everything is rising at a scary rate: Why car, home insurance costs are surging

text.npr.org

46 pointsrntn62 comments

Evolution of a headline...

NPR quotes some ordinary person:

> "It just feels like everything is rising at a scary rate," Morro says.

NPR's headline drops the "It just feels like" of the quote, and also lost is that it's some ordinary person asserting this:

> 'Everything is rising at a scary rate': Why car and home insurance costs are surging

HN's headline drops the quote marks, so it looks like it's a factual determination of NPR:

> Everything is rising at a scary rate: Why car, home insurance costs are surging (npr.org)

I saw this HN headline, with NPR saying "scary", and was expecting that experts had convinced NPR staff that something grave was starting to happen -- such as with inflation, employment, trade, or crime -- and insurance was the bellweather.

NPR headlines are evolving at a scary rate.

I mean it’s true. Borrowing costs are a HUGE input into people’s lives and they’re not included in the standard measures of inflation so there’s a real substantive disconnect that has developed.

New Zealand is going bananas, we had a series of weather events that massively drew down on insurance, 6-18months later everyone's getting whacked with big increases. Furthermore insurance companies are starting to take the position of 'we won't insure x/y/z strips of land - too risky' (where councils really shouldn't have allowed building in the first place)

Times are going to get interesting..

What really ticks me off is there are seemingly no levers to pull to financially convey to an insurance company that I will only ever call them for a large catastrophic loss. Raising deductibles on car or home affects the rates very little. Meanwhile I've seen friends call their insurance companies to handle ice dams, oil burner blowbacks, getting a new roof ("wind damage"), or the inevitable water catastrophe in a finished basement. I suppose their rates go up later to compensate, but it still feels like I myself am not ever going to be contributing to the bulk of claims.

I'm honestly quite close to just saying no thank you to home insurance, but the things stopping me would be the lack of liability protection (even though once again I'm very low on the risk side here), plus the anti competitive scheme they've set up whereby if you go uninsured for a bit, then that's a black mark against you in the future. Perhaps there could be some wiggle room with deeding the house to a trust/LLC and then back (so that during my personal ownership it was never uninsured), but I haven't taken the time to really think that through.

Another thing that needs to happen is a statutory maximum for property damage liability to passenger cars. We've always had expensive vehicles on the road, but they've traditionally been heavy working vehicles and easy to fix. Whereas now, if you've made the choice to drive around an aluminum framed car that is going to require expensive disassembly, inspection, and rework for what would have otherwise been a fender bender, then you yourself should be paying the increased premiums to cover that cost.

Also, (obviously) the health care extortion racket needs to be set straight. It feels like one of the big reasons healthcare providers bill fraudulent prices is because of the big payday when auto insurance gets stuck paying.

A similar thought has led me to a telemetry-enabled car liability insurance. I simply did not want to compensate others for risky driving.

Telemetry-enabled insurances offer you a huge discount when you're driving "safe" - in case of my insurance, that was determined by speeds driven, acceleration and speed in curves.

oof. That's certainly what the reps and suits are pushing, continual surveillance plus unaccountable black box "AI" for a "discount" instead of doing the work to make their models accurately price risk [0]. And I'm sure it'll be inescapable as surveillance culture marches ever on. Eventually the financial pain of opting out of surveillance will be untenable for most. But at this point in time, unequivocally, fuck that noise.

It also suffers from the same misguided metric problem inherent to all surveillance based behavior conditioning. Speed in curves and acceleration are more like evidence of someone driving actively rather than driving poorly - ie paying attention and not texting/phoning/spacing out/etc as if they're in some living room on wheels. But those things are easy to measure and scare the typical middling slushbox SUV driver, so here we are.

There's a point to be made for speed (kinetic energy), but I'd still say that someone driving the usual prevailing speed on the highway is being much safer than driving slow and being a moving hazard. In fact now that I'm thinking about it I'm left wondering if part of the reason for so many terrible drivers these days is this surveillance based insurance. Because I doubt the nanny watchers are knocking people for things like camping in the middle lanes of highways while going below the speed limit.

[0] I've got a second car that I had been leaving insured while meaning to get it back on the road some day, but even dropping the miles driven on that to near zero affected its rates very little. I ended up just giving in and dropping the coverage.

> What really ticks me off is there are seemingly no levers to pull to financially convey to an insurance company that I will only ever call them for a large catastrophic loss. Raising deductibles on car or home affects the rates very little.

This doesn't really surprise me. I suspect the vast majority of their payout dollars go to catastrophic loss. It takes a _lot_ of small claims to add up to the same amount as a total loss (value of the house, value of the stuff inside, cost of temporary housing, etc).

I don't think they're cheating you the way you think they are. I used to work for a very large insurance company that had a line of home insurance. We made almost nothing on premiums, we paid out basically every dollar we got in premiums. Our profitable line of business was investing the premiums we collected until we had to pay them out. That seemed a very fair deal to me. The company manages and orchestrates spreading the risk among members in exchange for the profits from investing premiums. Customers are only "losing" what they could have gained by investing the money, which would be a crazy thing to do instead of getting insurance.

> Whereas now, if you've made the choice to drive around an aluminum framed car that is going to require expensive disassembly, inspection, and rework for what would have otherwise been a fender bender, then you yourself should be paying the increased premiums to cover that cost.

I wonder what the impact would be spread across the insurance pool. I bet it's not that much. Honestly, if I were going to guess, I would wager that medical bills are the vast majority of auto insurance payouts. Even expensive cars are cheap relative to an ICU visit.

$100k cars on the road are uncommon, but every single person on or near a road could rack up a few million in medical debt.

There has been a steady increase in car accidents as well since 2001 and that is gradually increasing car insurance in many countries. A smaller effect than inflation but still quite an interesting pattern.

Distracted driving is rampant.

Phone in the hand that normally operates the turn signal = nobody uses their goddamn turn signal anymore = not getting t-boned means either:

absurdly defensive driving (causing, e.g., 10 cars backed up behind someone who can't turn in to cross street traffic because no one signals when they're changing lanes any more, so you have to wait for completely sight-clear passage in all lanes to turn into the nearest one)

or an unasked-for game of chicken multiple times a day, both cases driving up road rage, exacerbating the problem further.

And the only alternative to this for a lot of people seems to be buying the biggest, bulkiest, most Mad Max kill-your-kids-so-mine-survive vehicle that can or can't afford.

I'm not even sure we've realized the "phone in hand" is an even bigger issue than the larger vehicle... People aren't really people anymore, they're just input for the next AGI. Do the kids even matter? long term, what society are we building

Collision repairs are also going up as people buy increasingly complex/expensive vehicles.

They buy increasingly complex and expensive vehicles because there is no option in a significant portion of the world for a simple, functional, economic car.

It effectively hasn’t been legal to sell cars without a moderate degree of computerization, sensor fusion, and telemetry since the 2017 model year

“Inflation is partly to blame for those big payouts. The cost of fixing or replacing damaged homes and cars has jumped sharply in recent years as a result of rising labor and material prices.”

Jeez, it’s almost like the intentionally refuse to understand how inflation fundamentally works…

This is what inflation does, has done, and will continue to do into the future as long as we print money the way we do.

> Customers can sometimes save money by shopping around. Alicia Pitorri switched insurance carriers after the cost of her family's auto policy jumped more than a thousand dollars.

> "It was Liberty Mutual," she says with a rueful laugh. "We've since switched to State Farm since the renewal went up so much."

Meanwhile, in State Farm headquarters, they're attributing the surge of new customer inquiries to the Superbowl ad.

>Ezra Croft has never filed an insurance claim, and his house in Raleigh, North Carolina isn't close to a stormy coastline or a fire-prone forest.

>So Croft was surprised when his annual homeowner's insurance premium shot up to $1,600, or $700 dollars more than he was paying just a couple of years ago.

Among other things, his insurance premium is paying for the costs of losses in high risk areas.

I doubt it, why would an insurer charge extra to someone without the risks of living on a coast? Wouldn’t another insurer be able to offer lower premiums and take the business.

I would bet it was simply increases in cost of labor for construction and materials, which means the cost of fixing his house has gone up, and so the insured amount has to go up too.

All insurers are raising rates because their reinsurance costs are rising, as well as taking margin and reserves anywhere they can.

https://www.reuters.com/world/us/us-property-catastrophe-rei...

https://www.wsj.com/finance/insurance-companies-profits-stoc... | https://archive.today/2HTH9

> One factor in the run-up in insurance stocks: the recent willingness of regulators to allow large rate increases, even in states traditionally seen as tough on the industry. Last month, Allstate won approval for auto-insurance rate increases of 30% in California, 17% in New Jersey and 15% in New York. The company had threatened to stop renewing policies in those states after suffering losses.

> “Wall Street assumes that insurers will continue to face little regulatory resistance to rate hikes,” said Heller of the Consumer Federation of America.

Greedflation comment reference: https://news.ycombinator.com/item?id=39550382

Zoning restrictions on dense housing, car focussed sub/urban development, ignoring climate change, rampant low interest spending, and here we are. The middle class has no public infrastructure to fall back on. Transit is broken and not suitable for the aging population. Rents are rising faster than wages. Is it any wonder the birth rate is dropping?

> Is it any wonder the birth rate is dropping?

If you’re referring to the USA, and if all these things are as severe and hopeless as you say then how do you explain that the birth rate has been rising slightly for the last few years?

People were stuck inside, didn’t have money and sex is free. US has been below replacement rate since 2008, one blip isn’t going to rescue us.

How much is slightly? And the radioactive question - among which population are births concentrated? Isn't it usually recent immigrants who have the most?

What numbers are you looking at? There was a further decrease in the rate when COVID began, then a slight rebound from those depressed levels. The decline continued this year. Small fluctuations don't contradict a general trend.

> how do you explain that the birth rate has been rising slightly for the last few years?

Let's see. Restricted access to sex education? Restricted access to family planning? Restricted access to abortion clinics?

Preposterous claim. The US is well below replacement fertility. It seems like people have zero problems finding ways to not have kids.

After traveling in Europe with a young child, I concluded that a dearth of places for children to play outside, due to high population density, and the prevalence of public transit that is not well suited for young children, especially if you are trying to wrangle more than one, is a contributing factor to the low birthrates there.

isn't a fair amount of this supposedly due to insurance being an arbitrage/investment shell game with the balances, and the higher interest rates mean it's less profitable to do some of that weird stuff and thus the investment shenanigans can't "subsidize" the actual principal?

Incumbent homeowners get all upset when they aren't totally insulated from inflation caused by housing shortage. The fact is it now costs a fortune to rebuild a house, because the housing market is completely broken nationwide, so insurance rates have to rise.

I thought most house price inflation was about land values? If it was just build costs wouldn’t we see more starter, smaller homes

It can be more than one thing, and no that does not necessarily follow, e.g. a smaller set of larger homes may be most efficient for a development company in terms of cost and potential revenue, regardless of whether or not material cost rises. Especially if costs of hookups, basements, licenses, etc. are non-trivial.

Land values play a major factor in home values, but there are other factors that could lead to the increased cost of building homes, such as the price of raw materials and the price of labor. Higher interest rates are also having an impact, since it costs more to borrow money.

There are of course many factors, but the largest driver of cost increases in recent years have been materials and contractor profits. There aren't enough contractors and they can name their price. Unfortunately labor isn't really part of the cost driver, and basic laborers like carpenters are still under-paid compared to the wages that would attract people to the trade. Basically the American economy is now rigged to direct all earnings to middlemen and "thought workers" so nobody wants to just swing a hammer.

I often think about it like this - what job would you prefer for your child - work on building a road, or be a lawyer arguing whether or not that road should get built?

>If it was just build costs wouldn’t we see more starter, smaller homes

Sort of. Smaller homes also use less land, so it doesn't really matter which it is; you'd see more smaller homes either way.

But zoning forces lots of land per house (with required house and lawn minimums), which squeezes land supply. So yes, it's land values, but only as a symptom of the core zoning issues.

I thought insurance rates were also rising because of increased rates of natural disasters, but this just adds more pressure to it.

The rate of natural disasters isn’t going up, the cost of natural disasters going up. It is because they are affecting more densely populated areas. And the structures that are damaged cost more to fix/replace.

E.g., https://www.nhc.noaa.gov/pastdec.shtml

I don't get the impression that natural disasters are becoming more frequent, necessarily, or even more severe. But rebuilding is becoming much more expensive, for the same reasons it's become so expensive to build anything in the first place.

Southern coast has seen an excessive amount of hurricane damage over the past five years. Check florida and gulf coast state insurance rates recently.

Again, the point is that you can't just compare $X billion over the past N years with $Y billion during a different N-year period. The numbers have gone up dramatically even if the actual damage didn't.

If i insure my house for 200k, i get 200k whether it costs 200k or 400k to rebuild it.

My home insurance has doubled from 2022 to 2024 for the same level of insurance. And the value of my house crrtainly hasn’t doubled. I expect some increase year to year but that is excessive.

Inflation is expected but a lot of companies are also taking advantage of the rise in prices and using excuses that no longer apply.

Companies aren’t willingly going to go back to reasonable prices if people are still willing to pay higher ones or if customers are locked in.

Check out Pepsis earnings call a few quarters back. Basically “we raised prices bc we can and our margins have increased”. Its just capitalism. Supply chain shock is over.

It's just greed.

it's not greed. it's called inflation.

> For every dollar in home and auto premiums they collected last year, insurance companies paid an average of $1.10 in claims and expense

if you expect a service to loose money because it's more convenient for you, then you are going to have a bad time.

oh, greed exists for sure, but that's not why everybody is getting crushed right now. wages went up a tiny bit and in the last few years everything else has gone up 20-30% or more.

>> For every dollar in home and auto premiums they collected last year, insurance companies paid an average of $1.10 in claims and expense

I've seen this before. What I haven't seen is this compared to their other revenue streams. Insurance companies are quick to total out a vehicle and then insist on getting ownership of it. They must be selling them to someone.

If they were profiting from that, then it would show up as higher profit margins in their audited financials.

So 99% of the time a business’s “greed” gets written about, and there are publicly listed businesses that can be referenced, notice that no one links to the increasing profit margins to prove the greed. Because the claim is usually false.

> So 99% of the time a business’s “greed” gets written about, and there are publicly listed businesses that can be referenced, notice that no one links to the increasing profit margins to prove the greed. Because the claim is usually false.

Hmm:

> Progressive gross profit for the quarter ending December 31, 2023 was $2.665B, a 127.67% increase year-over-year.

> Progressive gross profit for the twelve months ending December 31, 2023 was $5.547B, a 224.14% increase year-over-year.

> Progressive annual gross profit for 2023 was $5.547B, a 224.14% increase from 2022. > Progressive annual gross profit for 2022 was $1.711B, a 63.64% decline from 2021. > Progressive annual gross profit for 2021 was $4.707B, a 38.19% decline from 2020.

Source: https://www.macrotrends.net/stocks/charts/PGR/progressive/gr...

GEICO:

> 2023 pretax underwriting profit of $3.6 billion

> 2023 underwriting profits for the remainder of primary operations coming in three-times higher than 2022 and more than double 2021, with written premiums growing 24.1 percent to $3.5 billion.

> P/C reinsurance operations adding another $2.0 billion in pretax underwriting profit.

Source: https://www.carriermanagement.com/news/2024/02/25/259036.htm

All of those figures are irrelevant. Profit margin (sustained) is a clear signal.

https://www.macrotrends.net/stocks/charts/PGR/progressive/pr...

https://www.macrotrends.net/stocks/charts/ALL/allstate/profi...

Nominal amounts are never relevant for this discussion, and it is trivial that nominal profits would keep increasing since the currency is worth less over time. Otherwise, a business would eventually go out of business due to not having sufficient cushion.

Progressive: so, generally averaging about 9% quarterly profits, then? With a dip to 1.7% for three quarters and then steadily increasing by 25% QOQ since then? (1.6% for Q1, 3.1% for Q2, 4.6% for Q3, to 6.1% for Q4).

Progressive's sustained profit margins are doing just fine, other than a relatively brief blip where they only managed ~$2B profit in 3 quarters while inflation and the economy was suffering heavily throughout the country?

Allstate's issues have as much to do with their overly aggressive stock buybacks in the last couple of years. "Allstate's auto insurance profit margins were best in the industry until about 18 months ago". "A report by Crain’s Chicago Business said Allstate spent $2.5 billion on share repurchases in 2022". "“We believe it's prudent for Allstate to pause its buyback, leaving capital in the (insurance subsidiaries) while underwriting results recover, especially as inflationary impacts on severity (replacement costs, medical, legal) are still concerning,” Greenspan said in a report titled “Stop the Buyback” last October."

"Allstate is the insurance industry's most aggressive buyer of its own stock. It has repurchased 789 million shares at a cost of $42.8 billion since 1995, while issuing 154 million shares, according to its SEC filing."

Continuing to push for stock buybacks as costs rise, and continuing dividend payments are failings of its own making.

I have no idea what numbers you are talking about. Progressives’s profit margins are 4% to 8% outside of 2018 to 2021. Currently under 5%.

And dividends/buybacks have nothing to do with profit margin. Those are not expenses, so that money is included in profit (aka net income). From which profit margin is calculated.

Revenue - expenses = profit.

Profit / revenue = profit margin.

Which is the same as net income / revenue = net (profit) margin

>> For every dollar in home and auto premiums they collected last year, insurance companies paid an average of $1.10 in claims and expense

Yet all the major insurers are claiming vastly profitable quarters. Someone is lying and it’s not the insurers in their SEC filings.

> For every dollar in home and auto premiums they collected last year, insurance companies paid an average of $1.10 in claims and expense

I'm sure this is technically true but they've carefully worded this. Most home insurance companies carry reinsurance. This means, they get an insurance policy to cover some of their losses when there is a major storm or something of that nature.

Here in Florida, it's common to see home insurance premiums doubling in the latest billing cycle. That doesn't line up with the rate of inflation.

> > For every dollar in home and auto premiums they collected last year, insurance companies paid an average of $1.10 in claims and expense

Insurers also didn't sit on those home and auto premiums, they invested them. They also worked with re-insurers to mitigate their costs, so some of that $1.10 was "pass-through".

Other years they've paid $0.90 for every $1 in premiums they collected, but I didn't see a rate fall then.

Wage goes up too.

You got a raise this year that kept up with inflation?

Yes. Past 3.

we just need to print some more money and give everyone to afford insurance. /s

Lemme know when you take a pay cut to lower the wage gap.

Greed has existed for all of time. What the greed-hypothesis theory of inflation people can never explain is where the extra dollars come from, absent mass printing of money.

“It’s just corporate greed” has been the state media’s excuse lately to distract from our central bank’s disastrous monetary policy. Left/right/center/whatever: You won’t last long on TV criticizing the fed.

You can probably find online the reports of increased corporate profits during our inflationary years. I believe I read an analysis that said that 25% of inflation was caused by achieving those increased profits.

One of the interesting things about inflation is that it does have something to do with expectations...

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