I am sure you have noticed the rise in insurance premiums over the last couple years. While one can expect small increases in their premium from year to year, increases have been more frequent and significant of late. Why?
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Until recently, I never really thought about how the economy impacts the insurance industry. I have always paid attention to our financial reports, but the 2022 results really stood out because we did not have a large hurricane or catastrophic event to significantly impact us in North Carolina. Yes, we did have some isolated weather events across the state that added to our losses, but weather was not the driver of our poor financial results. In listening to the annual report given by our general manager, I gained additional understanding of how the residual effects of the pandemic and state of our economy impact the insurance industry.
Economic Impact on Insurance
Inflation has been and continues to be a topic discussed everywhere. We have experienced the highest levels of inflation in 40 years. The insurance industry as a whole, and specifically Farm Bureau, is not immune to the impacts of inflation. Increased building material costs, a lower supply of used and new cars, a shortage of replacement auto parts, and higher labor costs for home and auto repair work have greatly increased claim losses of our insurance operations. Unfortunately, higher insurance premiums are needed to offset the impacts of inflation.
While nobody is excited about paying higher premiums, I think we can all agree we want assurances that our insurance company will be there when we need them. Living in North Carolina, we all know we will have impacts from a hurricane at some point. While the beach and coastal areas are more susceptible to higher storm damage, our entire state is at risk of suffering hurricane losses. No question, 2022 was a challenging year for the insurance company. However, the financial performance of the past 70 years has resulted in a company with excellent financial strength.
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Personally, I am thankful for Farm Bureau, a company that thinks of our policyholders when tough decisions are made to remain competitive in the marketplace while maintaining its financial strength to make sure we are here when you need us.
About the author: Allan Williams is director of training and marketing for the North Carolina Farm Bureau Mutual Insurance Company, Inc.
