These rate hikes are attributed to multiple factors, as outlined by Dave Bos.
Dave Bos, the Executive Director of the LARM, has revealed that numerous municipalities are poised to witness spikes in their property insurance premiums this year
Dave Bos emphasized that escalating construction material expenses and a scarcity of proficient contractors for repair work have caused repair costs, which were formerly pegged at $50,000 for fixing hail-damaged roofs, to potentially double. Consequently, insurance rates are being adjusted to accommodate the augmented replacement expenses. Dave Bos referenced a national construction study that indicated a 36% project cancellation rate by contractors in the preceding year due to surging building material costs.
In addition to these concerns, Dave Bos highlighted the impact of inflation on the costs associated with replacing components such as windows and roofing. Inflation rates have surged from 1.4% in 2020 to 7% in 2021, reaching about 5% in April 2023. The construction sector has been hit particularly hard with a 33% cost escalation since 2020, according to Bos.
Dave Bos elaborated that the destructive storms and fires that ravaged extensive properties across the United States in recent years have taken a toll on the insurance sector
Florida and California have experienced significant losses, with Hurricane Ida and Hurricane Ian in 2021 and 2022 leading to insured claims worth $40 billion and $60 billion respectively. Coupled with other losses from wind, snowstorms, and fires, this has prompted insurance companies to raise rates.
Dave Bos proposed measures that municipalities can adopt to mitigate their property insurance premiums. Increasing deductibles, for instance, can lead to rate reductions. Dave Bos also advised regularly reviewing coverage documents, ensuring accuracy in property valuation, and implementing loss control strategies like freeze damage prevention, equipment security, and fire safety installations to minimize losses.
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