Fed Chair: Insurance Premium Spike Driving Inflation; Coastal Coverage Loss "A Significant Issue"
Troublesomely high inflation rates may have an overlooked metric at their source: soaring insurance costs. But don’t take our word for it, just listen to Federal Reserve Chair Jerome Powell. Several types of insurance, including home and car insurance, have surged over the past few years, and it’s hurting the Fed’s effort to get interest rates down to its 2% target, Powell said in congressional testimony last week. “Insurance of various different kinds—housing insurance, but also automobile insurance, and things like that—that’s been a significant source of inflation over the last few years,” he said.
On Tuesday, data from the Bureau of Labor Statistics showed that its metric for auto insurance, which covers physical damage, liability, and miscellaneous insurance coverage for private passenger vehicles, increased 20.6% over the past year and climbed 0.9% in February compared to the month prior. Meanwhile, a study from S&P Global Market Intelligence found that homeowners’ insurance jumped 11.3% in 2023. Generally, inflation came in slightly higher than expected last month, at 3.2% compared to the same period last year, according to the BLS.
EDIT
nsurers pay reinsurance companies to help them avoid insolvency in the case of catastrophic weather events. But because of the increased likelihood of harsh weather conditions that can damage homes, reinsurance companies are charging insurance companies more for their services, and the insurers are passing on the costs to customers, according to Bankrate.
In some of the highest-risk areas, insurance companies have even stopped providing their services altogether. “In the longer term, companies are withdrawing from writing insurance in some coastal areas,” Powell said, adding, “It’s a significant issue.”
EDIT
https://thinc.blog/2024/03/13/federal-reserve-insurance-prices-driving-inflation-climate-change-driving-insurance-prices/#more-96253
= new reply since forum marked as read
