While we’re all aware of the effects of global inflation on tangible goods such as groceries, clothing, electronics, and more, the issues surrounding inflation on less tangible items such as insurance policies are more nuanced. The truth is that global inflation will touch nearly every service that Americans seek. In the insurance industry, the rise in policy costs is being reflected because of a series of events that are unfolding all across the world.
Nearly all industries are seeing shortages of workers, especially those in the skilled trades. When it comes to homeowners’ insurance, for example, labor shortages in the construction industry – which is down some 200,000 workers compared to years past, are driving up repair and claims costs. This also goes for auto insurance: as repair facilities are short on workers, it costs more to engage in repairs, and the price of new cars has been driven up by these same constraints. Due to labor shortages, the costs of paying workers have escalated by about six percent. In short, it simply costs more to replace the items you have insured.
When it comes to vehicle insurance, many premiums are escalating because it costs more to repair and replace vehicles, in part due to the global shortage of semiconductors, which are widely used in today’s vehicles. Research from Statista found that initial disruption of chip production was seen in China and Taiwan – dominant chip-producing regions – where factories were forced to shut down due to the COVID-19 pandemic. Though there has been some recovery in chip fabrication, new surges in demand such as those brought about by changing consumer habits, together with challenges in chip capacity allocation, have resulted in continued shortages.
Supply Chain Delays
Across the world, delays in the manufacture and shipping of construction materials such as asphalt shingles, lumber, piping, copper wire, drywall, and more have made these commodities more valuable, resulting in significant escalations in costs – as much as 50 percent, according to some studies — as well as delays in getting materials where they need to be. As a result, it takes longer – and therefore costs more – to repair or replace a home. In the vehicle sector, research gathered for the Mitchell Industry Report in September 2022 found that 98 percent of repair shops are experiencing delays due to increased demand for parts, leading to higher repair prices.
Increased Operating Costs
Even in their business offices, companies are facing rising costs in rent, energy, transportation, professional services, storage, and more, which is increasing the cost of doing business. Labor shortages have also resulted in delays in processing claims.
Talk to Your Insurance Agent
If costs are pinching your household excessively, speak to your insurance agent, who may be able to find a way to reduce your premium costs with different policies and coverage, or by bundling your policies. In Connecticut, Petruzelo Insurance offers personal and business policies that fit your needs and protect your home and business. Call us at 866-479-3327 or visit our website for more information.