Insurance Price Hike (homeowners, freeze, property, blue)

[Mathguy]

Originally Posted by don6170

Insurance companies are notorious for using things like Loyalty Scores, where they rate how likely you are to shop around/switch. They keep raising premiums until you hit the the pain point. Shop around.

Never heard of that and given the highly regulated nature of the product, I'm doubting very much this claim.

Can you provide a source to this?

[Mathguy]

Originally Posted by WRM20

You misunderstood the article. State Farm had a $4.7 billion underwriting loss. That means that paid claims exceeded premiums by $4.7 billion, ie they paid out $74.6 billion in claims. The company is profitable due to earnings on invested premiums

They weren't profitable on that business, not by a long shot.

For home and auto the claims are generally all paid within a year and they're required to hold safe investments like govt. bonds that get maybe 2% interest in 2021.

So at best they made maybe 1 bil in interest there.

[don6170]

Originally Posted by Mathguy

Can you provide a source to this?

I just did a quick search. Here's one from a few years ago.
https://www.npr.org/2015/05/08/40359...r-can-cost-you
"A sophisticated algorithm crunches that data and spits out an index showing how sensitive a customer is to price increases"

[Hollytree]

Originally Posted by ss20ts

Insurance is a pool. It's not about 1 individual. A fire department nearby doesn't keep a house from burning down to the ground. When there's a house fire quite often it's the water and smoke that destroys the house and not the fire. Those who don't make claims are paying for those who do. That's how insurance works. Insurance already is heavily regulated by the government. When the insurance company deems an area to no longer be profitable they leave. Look at Florida and how many insurance companies have left due to hurricanes. Insurance companies are businesses and their purpose is to make a profit for their investors. They're not a charity.

State Farm also had expenses which offset that 66.9 billion in premiums. The 4.7 billion wasn't paid out. That was losses that they took. This article doesn't say what their actual profit was at the end of the year.

Of course insurance is not a charity nor about one individual- I thought I was clear it was all about business. I also know insurance companies are leaving Florida in droves.

Perhaps you can find what State Farm's profits were at the end of the year and post it. It is entirely possible I misinterpreted the "losses" and therefore misunderstood the article.

[Hollytree]

OK, I think I've found the answer to my own question:

https://newsroom.statefarm.com/2021-by-the-numbers/

[Mathguy]

Originally Posted by don6170

I just did a quick search. Here's one from a few years ago.
https://www.npr.org/2015/05/08/40359...r-can-cost-you
"A sophisticated algorithm crunches that data and spits out an index showing how sensitive a customer is to price increases"

Errrr, the guy you just quoted doesn't have a great reputation for fair and accurate studies. I'm not going to comment further on them.

The fact that the Louisiana dept of Insurance refutes him immediately afterwards should be a huge red flag.

Regardless one thing we can ALL agree upon is to shop around.

It's an extremely competitive marketplace with many options to choose from so just like when buying a TV, compare and save.

[Mathguy]

Originally Posted by Hollytree

OK, I think I've found the answer to my own question:

https://newsroom.statefarm.com/2021-by-the-numbers/

Generally speaking the profit margins on home and auto are a few percent.

The rates of return are higher because of the investment relative to the premium.

For example,

Bob puts 40k down on a house that cost 100k.
A year later he sells the house for 104k.

The house went up 4% in value.
Bobs investment went from 40k to 44k a 10% return.

So, the profit margins on these types of insurance can be small and they can still make a higher return on their investment.

They're HIGHLY regulated, there's tons of competition and the product profit margins are thin. But, just like gas prices, they impact a lot of people and that leads to a lot of political blame games and dishonest narratives that create these rumors that they make 80% profit margins etc. and gouge everyone at every turn and aren't regulated.

[don6170]

Originally Posted by Mathguy

Errrr, the guy you just quoted doesn't have a great reputation for fair and accurate studies. I'm not going to comment further on them.

I just did a quick search. The source was NPR. Now you can't trust them?

I did a little further looking. It seems the term is Price Optimization or Rate Optimization. Here is another quick source. If you don't believe this, just stay with your current company and don't shop around.

https://www.nerdwallet.com/article/i...e-optimization
"Price optimization is the practice of charging higher rates based on the likelihood that a person will not shop around for a lower price. Insurers create algorithms based on all kinds of personal data, including loyalty to other service providers and shopping behavior, but not your driving habits."

[johngolf]

I shop around for car insurance every year when mine comes do. I call 3 to 4 Independent Insurance Agents and I have them shop for me. It will take more then $100 to $150 to make me change otherwise not worth the effort.

[dr.strangelove]

Originally Posted by otterhere

My homeowners' insurance has increased every year by $30-60 dollars or so, but this year, it has jumped by nearly $180 or more than double the usual rate. I'm sure when I call them to complain of my sticker shock, they'll say "inflation, blah blah" and inform me that "everything has gone up," which of course I can't argue with. So two questions: does EVERYONE'S go up every year? Frankly, I didn't even notice until I just now went back and researched it. And has anyone's gone up THAT much THIS year? I've been with this agent for decades, but am thinking it's time to shop around.

Yes, my homeowners went up more this year than usual.