Raising Costs

In the past week, we have received this year’s insurance bills, which have all increased dramatically. Nothing has changed on our end, but it appears a lot has changed in the insurance market. This is not your annual few points increase; this is 20-30%. We all know it is happening in the commercial and residential real estate market.

Big profitable companies and landlords have decided to make up for their losses. In some cases, 25% hikes across the board. There is a severe disconnect between the reality of the street and the greed of these companies, who want what they had during the heyday of the past decade. We don’t have enough shelters or homes for people who can’t afford to live in their city, yet large companies that we are unfortunately beholden to are raising prices at insane numbers. It is unclear to me how we have any power over this. What will the government do? 

As our broker put it, the short and not-so-sweet answer is, “Insurance companies are increasing rates to make up for billions of dollars in losses due to worsening climate disasters, and surging inflation means homes require more dwelling coverage to pay for rebuild costs. The combination of these factors has resulted in some fairly drastic rate increases. We are seeing this with every carrier, unfortunately. We are hoping the market starts to level out soon”. It isn’t like they are not paying any dividends to their shareholders.

What does leveling out mean? Have we ever seen an insurance company or a landlord decide to lower their price? There is a severe housing shortage, commercial offices are not filled, and commercial real estate charges ridiculous prices for their spaces at the street level. More than before Covid and things were already over-priced. Urban cities are having an exodus as people can not afford to live in their own towns.

Right now, there are roughly a few prominent companies in different genres, from banks to insurance companies, leaving little room for competition. Competition is what keeps this idiocy in check. Someone told me there were peaks and valleys the other day, and we are in a valley right now. I wonder how long it is until we hit the bottom of this valley, what does that look like, and when will we get there?