2023 Insurance Industry Outlook

2023 insurance industry outlook

Key Takeaways:

  • In 2023, insurance companies will need to find ways to demonstrate value in their products while combatting rising costs for car and home repairs.
  • Car insurance rates may rise as much as 8.4% in 2023.
  • Contributing factors include increasing prices for cars, homes, and the costs to repair them, changes in habits as people return to work, and an increase in disastrous weather events.

Over the past few years, the insurance business has proven to be incredibly resilient and adaptable. Carriers have tapped into new capacities to promote both operational efficiency and transformation as a result of the maturation of digital technology.

Looking back on this past year, a variety of things stand out. Rising premiums were observed in both the personal and commercial lines of business in 2022. There were difficulties from crises and natural calamities. In the end, it was observed that new market entrants had trouble truly “reimagining” insurance.

In 2023, insurance companies will need to focus their efforts on a variety of issues, including increasing car and home repair costs, rising economic instability, a changing housing market, and an overall increase in climate related events that cause personal and property damage at unprecedented rates.

Insurance companies will need to emphasize the value of their products by promoting ways for consumers to save money even while insurers concurrently raise prices. They must also demonstrate their dedication to clients by giving them appropriate access to services and initiatives that improve their quality of life and make it safer, more convenient, and more inexpensive.

Let’s take a look at the various types of insurance, e.g., auto, home, business, health, and life, and see what 2023 may hold. Then we will explain the best way to get comparative quotes for the best possible prices on coverage.

Car Insurance Rates are Set to Rise

Even with inflation cooling down, car owners may be in for a big surprise. According to ABC News, car insurance ratesare expected to grow by more than 8% around the country. That’s the higher percentage in over six years with no end in sight. And for the most expense state, Michigan, the average cost will be over $4,700 per year.

You may ask why so much and the truth seems to be multi-faceted – a perfect storm of unprecedented changes, including:

  • Weather related events have increased and with them damage done to vehicles. From flooding, wildfires, tornados, and other extreme climate catastrophes, insuring a car has become more expensive.
  • Many workers returning to work following two years of reduced driving while working at home due to the pandemic.
  • Like work, travel has also resumed for families and people choosing to live a mobile or nomadic lifestyle.
  • New car costs have been hit hard by inflation with increases of 8-9% while things like tires have also soared by more than 10%.
  • Repair costs have skyrocketed because of inflation as well as staff shortages and supply chain issues still plaguing many areas of the country.

The Home Insurance Market is Experiencing Similar Headwinds

Similar to car insurance rates, there are several reasons why your home insurance rates may have increased, but in 2023, inflation-driven increases in labor and construction expenses as well as costly natural disasters are most likely to blame.

Your insurer will let you know about any adjustments to your coverage or prices for the upcoming year about a month before homes insurance renewal. Most years, these alterations are either nonexistent or so minor that homeowners don’t even notice them. However, in 2023, homeowners’ insurance costs are projected to increase significantly across the nation.

In fact, a recent review of policy renewals shows that house insurance premiums have increased by an average of 12.1% during the past year. The average price increase for households whose premiums increased was $134. However, your personal prices will vary depending on a number of criteria, including the home’s age, geographic location, and type of construction.

Two big factors in the rising costs for insurance for your home are:

  • The rising cost of new and pre-owned houses which jumped over 11% in 2022 in many parts of the country.
  • Rising home materials cost from inflationary pressure that is impacting commodity pricing for things like steel, lumber, and copper.
  • A severe shortage of skilled labor in the construction field, primarily due to an increase in home renovations for people deciding to improve their current home rather than jump into an already exorbitant housing marketing.

What to Expect with Business Insurance in 2023

For the majority of businesses, small and large, the cost of insurance is a significant expense. Looking ahead to 2023, a lot of variables will probably affect how much an organization will end up paying in premiums.

According to a recent industry report, the combined ratio (losses and expenses divided by premiums) for the insurance sector is anticipated to be 100.7% in 2022. The industry is now paying out $100.70 for every $100 it receives, which is an increase of 1.2 percent from 2021.

Due to investment income, the industry is still profitable, but they are not producing the returns expected from shareholders and stakeholders alike. The majority of insurance companies are asking for rate increases of 5% to 10% or more for some lines due to existing and projected costs.

Let’s take a look at business insurance by type to see where some changes will occur.

General Liability Insurance

We should expect slight increases in general liability insurance. In general, 1% to 5% rate hikes are to be anticipated. Like all lines of business insurance, though, this will change based on your business’s industry and size. Interestingly, while some home building and hotel industries have witnessed double-digit increases, commercial building and health-related fields may actually see decreases.

Professional Liability Insurance

Most attorneys, accountants, engineers, and architects still can expect reasonably affordable professional liability insurance. There are numerous insurers vying for customers, and experience has been passable but not outstanding. Since most accounts are renewing at zero to +5%, despite the fact that several insurers are asking for big increases of 10% or more, competition is helping to temper this trend.

Umbrella Insurance

Umbrella coverage, that extra insurance that covers all manner of things beyond what’s covered by other business insurance, often has a price that corresponds to general liability insurance. Unfortunately, inflation has severely impacted society as a whole, which, not surprisingly, leads to rising jury awards.

Underwriters may restrict the number of umbrella policies they issue in 2023 while also raising prices by 25% or more. Again, it’s hard to have a precise or exact idea where prices may increase, but it’s a good bet that housing and construction, hospitality, and major retail industries will face significant surges in pricing for umbrella coverage.

Property Insurance

In general, the cost of property insurance has been zero to 10% increase. However, there are noticeable increases in some situations.

Expect massive rate increases for any property even slightly at risk from wildfire. Also, it can be challenging to find insurance for properties with wind or hurricane exposure. CNBC reports that Hurricane Ian, a Category 4 hurricane that hit Florida in late 2022, cost the industry more than $50 billion, with some experts estimating as high as $65 billion.

Wind and flood damages were significant in 2022. Expect a 25% or greater increase in flood insurance premiums. Remember that due to inflation, most properties’ replacement prices have climbed dramatically, so don’t be surprised if your insurer demands on higher replacement cost estimates.

Note:  Both personal and business lines of insurance are impacted by these issues. According to CNBC, “Insurance losses from catastrophes were at a record high in 2022, with estimated damages of $115 billion, higher than the 10-year average of $81 billion.”

Cyber Insurance

The good news — loss experience in cyber insurance has declined probably due to more advanced technology being put into place in recent years. This type of coverage was relatively inexpensive for years, but rates are gradually rising, and underwriting standards are getting more strict.

A general indication of what insurance customers can anticipate at renewal is difficult given the illiquid nature of cyber insurance and the sheer volume of new participants entering the market. It is advisable to receive an early read on your cyber program from your broker because, based on recent experience, the cost of cyber insurance may increase by up to 25% or more.

Health Insurance

What will your likely healthcare premium increase be in 2023?

The average healthcare insurance premium for a 40-year-old on an average silver plan — the most popular tier — purchased through the Insurance Marketplace will be $560 per month, a 4% rise from last year, according to the Average Cost of Health Insurance 2023 Report.

The report goes on to say that there will be five states that see the biggest increases in healthcare premiums from 14% to over 20% — Georgia (20.3%), Colorado (19.56%), Wyoming (15.45%), Alaska (14.97%), and New Mexico (14.79%).

As a refresher, these are they types of plans typically offered by insurance companies:

  • Bronze plans offer the highest co-pays and deductibles but the lowest premiums. They are a fantastic choice for healthy people who just need coverage for unexpected emergencies or who expect only small medical costs.
  • The most complete coverage is provided by platinum plans. They are suitable for people who anticipate paying a lot of out-of-pocket medical costs because they have the lowest co-pays and deductibles.
  • For people who do not anticipate major medical treatment but do not want the burden of large out-of-pocket payments in the case of unforeseen medical bills — silver and gold plans offer that mid-range solution.

Term Life Insurance

The life insurance sector has seen rising instability during the last ten years and costs have accelerated as expected.

According to the latest McKinsey insurance report for 2023, three key forces will shape the business even more in the coming decade:

  • The increasing knowledge that individuals will be personally responsible for their future health and retirement expenses with little or no help from Social Security.
  • In the near term, interest rates will stay high as central banks try to manage inflation. This stands in stark contrast to the preceding two decades, which have generally been characterized by quantitative easing and extremely low rates.
  • Many insurance businesses are altering their business models to enhance the adoption of disruptive technologies like cloud computing and applied AI, as well as to deploying more agile working practices and new techniques for recruiting top talent.

Expect to see changes in term life insurance premiums to keep up with these new realities.

Finding the Best Insurance Quotes for All Types of Insurance

One of the best ways to find good insurance pricing on all the types of insurance we have discussed so far is to shop online using an insurance marketplace website like einsurance.com. This type of site gives you access to different types of insurance quotes and allows you to enter your personal information to get customized details from a selection of insurance companies.

In addition, einsurance.com has a rich library of resources including an insurance journal filled with articles like this one, state guides for auto, health, home, and business insurance, as well as a helpful glossary.

It also saves you valuable time instead of researching each type of insurance and visiting each company’s website to fill out more of the same information and then having to compile it all for comparison.

Compare Car Insurance Rates

Simply enter your zipcode to compare car insurance rates and find the best coverage.

Why is this Type of Quoting System Helpful?

An insurance quote is a projection of your premium cost. Even if you give the same information to Geico, Progressive, or any other carrier, no two quotations will be the same because insurers each employ a different algorithm to determine your insurance pricing quote. You will have a greater chance of locating the most affordable car insurance provider the more auto insurance quotes you obtain.

About Kathryn Morstad

Kathryn has a background as a small business owner and currency trader. Kathryn also enjoyed a career as a Regional Director and COO in healthcare, specializing in operations, third-party insurance reimbursement, and revenue cycle management.