The State of the Property Insurance Market

April 1, 2022

Surveying the property insurance market will reveal several key trends. It will also offer insight into the general state of the economy and real estate market. As you might expect, there are still some persistent pain points that have caused rates to gradually increase. Of course, this is a natural part of the property insurance market, but it’s worthwhile to understand exactly what’s causing these trends and how insurers can remain competitive in a shifting landscape. If you’re wondering how the property insurance market is doing in 2022, consider the following four factors that have contributed to recent changes.

Low Interest Rates

One of the side effects of COVID-19 that has benefitted consumers the most is the emergence of low interest rates across nearly every industry. Interest rates hold a direct correlation to the insurance market’s profitability, so it’s no surprise that these low rates have negatively impacted many insurers’ bottom line. This is especially true in a market like property insurance that relies on investments to generate profit. Indeed, revenue generated by investments has been substantially reduced due to the low interest rates seen in recent years.

More Natural Disasters

Nobody wants to anticipate more natural disasters, but unfortunately, that’s the forecast. These events affect the insurance industry as much as they impact individual property. Natural disasters were an increasingly common occurrence throughout 2021, and in 2022, there’s no sign the weather will slow down. This poses a challenge to the property insurance market that’s still grappling with losses from COVID-19. There are many potential explanations for this increase in natural disasters, but regardless of the culprit, it’s caused rates to increase substantially.

Higher Risk of Hazards

In addition to the increased incidence of natural disasters, 2021 saw more hazard-related claims, and as a result, higher hazard costs. Some of the hazards affecting the property insurance market include falling objects, catastrophic weather events, and theft. This, combined with increases in liability, may lead to a higher impact on rates than would usually be expected. Luckily, though, your clients can count on their coverage to protect them against these common liabilities.

Economic Inflation

Unsurprisingly, inflation is yet another major cause of rising rates across the property insurance sector. Inflation rates seen in 2020 and 2021 were some of the highest that had been reached in nearly 40 years, and 2022 looks to be headed in the same direction. Inflation has, in turn, increased the cost of auto parts, construction materials, and other essential assets that drive the economy and property industry. Resulting property insurance rate increases affect every sector, but if inflation subsides, there’s a chance that rates will, too. ◼