In Connecticut, like many other states, rising insurance costs are leaving homeowners feeling uncertain about why their rates are increasing and what they can do to manage it.
As an independent insurance agent, I truly understand how overwhelming this can be, especially when many of us are already juggling other financial pressures. My goal with this article is to shed light on the factors driving these changes and, more importantly, offer practical advice to help you navigate this challenging time.
 
 

Why Are Insurance Premiums Rising?

Several factors, many of which are beyond your control, are driving the increase in insurance premiums. However, understanding these factors can provide you with clarity as you explore your options.
 

Increase in Natural Disasters and Weather Events

In 2023, the U.S. experienced 23 weather and climate disasters, each causing over $1 billion in damages, including hurricanes, wildfires, storms, floods, and droughts, according to the National Oceanic and Atmospheric Administration (NOAA). These events increase pressure on the insurance market as insurers face higher payouts for claims. To offset this risk, insurers raise premiums, a trend further worsened by climate change, which intensifies the frequency and severity of extreme weather events. This contributes to rising insurance costs, particularly in areas prone to extreme weather.
 

Higher Rebuilding and Repair Costs

The cost of construction material and supplies has escalated, particularly post-pandemic. Additionally, the Home Builders Institute as well as the U.S Bureau of Labor Statistics have reported a shortage of skilled labor in the construction industry, further driving up costs. When insurers calculate coverage, they factor in the cost to repair or rebuild your home. As rebuilding costs increase due to inflation, supply chain disruptions and labor shortages, premiums rise to account for these higher potential expenses.
 

Rise in Social Inflation

The insurance industry is experiencing an unprecedented rise in the engagement of our legal system. This causes the need to increase liability rates due to rising litigation expenses and settlement judgements due to exceptionally high jury verdicts.
 

Reinsurance Costs

In the insurance industry, reinsurance is the insurance that insurance companies purchase to protect themselves from large claims. The cost of reinsurance has gone up significantly due to increasing global risks, including natural disasters. When reinsurers raise their rates, insurance companies adjust their own rates, leading to higher costs for customers.
 

National Insurance Market Pressures

National trends, such as California’s insurance struggles due to wildfires, impact insurers nationwide. While Connecticut doesn't face the same wildfire risk, the financial strain on insurers from increased claims in fire-prone areas often leads to higher premiums across the country as insurers adjust their pricing strategies.