Insurance Companies Quietly Making Record Profits While Doubling Premiums or Cutting Coverage
No one expects to be caught in a natural disaster like tornadoes, hurricanes, or devastating flooding. But if you find yourself in a dangerous situation, at least you can count on your home insurance policy to recover.
Except insurance companies are up to their old tricks again.
Just when disaster-weary consumers need insurance protection the most, the insurers are jacking up rates by 50% or more, or dropping homeowner’s coverage altogether.
“Instead of doing what they are supposed to do, which is serve their customers, they are cutting loose by the droves,” said one independent insurance agent in a recent report for the New York Times.
The insurance companies say they’re losing money because climate change produces more extreme weather, even in states with low hurricane and wildfire danger.
The truth? Insurance companies are quietly making record profits while consumer rates continue to skyrocket.
Rate Hikes Are Linked to Record-Setting Profits
On the one hand, you have executives from the major property and casualty insurance companies telling devastated families they have no choice but to drastically increase rates or curtail coverage as losses from claims exceed earnings from premiums.
But here’s the catch: While many of these companies might be losing money on homeowners insurance in disaster-prone states, they are earning record-breaking profits from policies in other states, other lines of business, and investments.
The Wall Street Journal links rate hikes to record-setting profits, saying, “The pain for home- and auto-insurance customers is quickly becoming investors’ gain. Insurance giants’ shares and profits are hitting records, thanks partly to steep rate hikes.”
According to the National Association of Insurance Commissioners, the property casualty insurance industry—which covers losses due to property damage, personal injury, and financial loss—earned $88 billion in profits in 2023, its most profitable year of all time.
Here are more statistics that paint a damning picture:
- The $88 billion profit was more than double the profits of the previous year and marked the industry’s most profitable year in history.
- In Q1 2024, profitability continued to surge, reaching $39 billion in one quarter, putting the industry on pace to shatter 2023’s record profits.
- Despite this, insurance executives continue complaining that they’re not making enough money because of lawsuit abuse and the need to limit Americans’ access to the courts.
Homeowners Insurance Rates Skyrocket in Arizona
If that’s not bad enough, homeowners insurance rates have risen dramatically in specific states, with Arizona being one of the states hit the hardest. Arizona’s average premium in February 2024 was $148.17, representing a 40% increase from January 2023.
Plus, the record profits were made in a year in which insurers raised auto insurance rates by an average of 26%, with some states seeing increases of more than 40%.
So, which is it: a financial crisis and excuses to Arizona homeowners or record profits and what looks like a cynical business decision designed to boost profits even further?
Do You Suspect Your Rates Have Gone Up Unfairly?
Insurers claim that rate increases in recent years are due to pandemic-related losses, delays in parts, rising labor costs, and increased used car values. Consumer advocacy groups criticize these hikes, arguing that insurers are exaggerating their needs and placing undue financial strain on consumers.
Next time, we’ll look at auto insurance and how insurance companies are finding more ways to cover less while raking in added profits from rate increases.