How has COVID-19 affected insurance premiums?
Ever since whispers of the novel coronavirus began creeping into our news cycles in early 2020, our world hasn’t been the same. From Zoom dinner dates and spending hours learning how to bake banana bread and sourdough to the very real human cost of the virus, our lives have fundamentally changed. Covid-19 hasn’t just affected us as individuals and as a society: it’s also had a fundamental impact on the financial and business world, with many industries having to rethink the way they’ve always done things.
As such, the insurance industry hasn’t remained untouched. Covid-19 has created a whole set of problems that affect almost every insurance area: More frequent and longer hospital stays due to complications from the virus means that health insurance providers are facing greater costs. Short-staffed businesses and shipping companies face supply-chain issues, causing greater strain on business insurers. Canceled flights and a collapsed tourism industry mean that travel insurance is suddenly facing a crisis. Life insurance providers, too, are seeing greater costs as more claims are being made.
These challenges often translate to higher monthly premiums. Insurers in many sectors are experiencing more claims, which translates to higher costs for them. But it’s not just more claims that have affected insurance providers. The Organization for Economic Co-operation and Development (OECD) released a report in 2020 stating:
“The impact of COVID-19 on the insurance sector will not be limited to the claims incurred as a result of the insurance coverage provided. Like other sectors, insurance companies will also face the impacts of confinement measures and staff absences and will need to implement business continuity arrangements to ensure their ability to maintain core operations. They will also face reduced revenues as the demand for various types of insurance coverage (event cancellation, travel, etc.) declines.”
All of this often translates to higher premiums for insurance seekers.
Higher homeowners insurance premiums due to COVID-19
While we tend to think of life insurance and health insurance as being some of the sectors directly affected by the pandemic, the truth is that your homeowners insurance premium has likely gone up because of the virus as well.
The main reason for that has to do with higher labor and material costs. As mentioned before, a pandemic is pretty disastrous for global supply chains and has created a significant labor shortage to boot. With many workers falling ill or quitting due to unsafe working conditions, the cost of labor has gone up as the supply of workers has gone down. In 2021 alone, labor costs in Canada went up by 4.5%.
Supply chain issues mean that construction materials such as wood and steel are in short supply in many parts of the world, causing their prices to skyrocket while shipping has become more expensive. So what does all of this have to do with your homeowners insurance premiums?
When insurance providers calculate what premium to charge, they’re also factoring in the cost of potential construction and repairs that will need to be done in case something in your home gets damaged. As such, they’re factoring those heightened repair costs right into your premiums.
Another reason COVID-19 has affected homeowners insurance premiums is that many people transitioned to working from home during the pandemic. This means that they may have purchased additional coverage for more expensive electronic items, or may even have created an entirely separate home office that requires additional coverage in their policy. This is because your home office could now be considered a space of business, which requires specific home business coverage that will increase your monthly premiums.
Adapting to a new reality
We’re now in our third year of the pandemic, and businesses have begun adapting, including insurance providers. Many providers now offer additional coverage for cancellations, damages, or losses related to COVID-19 or viruses and bacteria in general. This option to add on additional coverage can increase policyholders’ premiums if they choose to buy this type of coverage.
Insurance companies have also adapted by sometimes introducing more flexible payment options, waiving late fees, or providing incentives for policyholders who are reducing COVID-19 risks, such as business insurances giving out a bonus for businesses that offer robust work-from-home plans.
Some insurance sectors, like auto insurance companies, have not seen significant changes in their premiums since the pandemic started. Depending on the model and make, you may see individual premiums rise because certain replacement parts may currently be in short supply (thanks, supply chain issues). But otherwise, experts in the insurance industry have stated that it’s too early to tell whether COVID-19 will have a significant impact on rates. In fact, because people may be commuting less and therefore using their car less, the chances that some policyholders could negotiate a lower monthly premium is not unlikely.
There’s almost no industry that hasn’t been affected by the pandemic. Coupled with rising inflation, it’s not unusual for policyholders to see an increase in the premiums of some of their insurances. If you’re unhappy with the price of your current policy, the good news is that change is always possible. With YouSet, you can instantly compare all available policies that suit your needs, and rest easy knowing you’re getting the best price out there. That’s our guarantee. Come check us out!
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