Summer 2023: Travel, Home, & Auto Insurance Trends
by Brian O’Connell
The insurance sector has it hands full this summer – but so do consumers.
It’s summertime and the living is easy – except, that is, for U.S. insurance consumers who are seeing increased policy prices rise across the board.
For travel insurance to auto insurance, and home policies, too, costs are up as inflation and a downbeat economy continue to roll through the insurance sector.
“Inflation has impacted every aspect of our lives, including the insurance industry,” says Nick Schrader, insurance agent at Texas General Insurance Second Western Insurance in Los Angeles, Cal. “As a result, consumers have seen significant rate increases on all lines of business, including auto and home insurance. Claims have increased, and replacement cost for assets has increased.”
Consequently, insurance consumers may want to take direct action to counter rising policy prices in al household insurance areas.
“We’re already seeing insurance customers staying home and traveling locally as summer beckons,” Schrader says. “It’s important that individuals also review their auto insurance and apply low mileage discounts if they are driving less. Homeowners should also review their policies to make sure they have sufficient liability coverage for third party lawsuits, and sufficient replacement cost to rebuild after fire or water damage.”
For insurers, the repercussions of higher prices appear to be pushing down the demand for other consumer and business policies.
“High inflation and the economic downturn have led to slow demand for certain insurance packages that may not be considered important,” says Mark Stewart, in-house certified public accountant at Step-by-Step Business, an entrepreneur services company. “For example, since people do not often spend money on ostentatious goods anymore, then the demand for insurance for these products will drop.”
As a result, consumers “are either cutting down spending, increasing their income streams, or doing both to fare in these times financially,” Stewart adds.
Summer Travel Insurance Coverage
The summer travel season also weighs in for a higher overall cost of U.S. travelers.
The average trip, including hotel and flight, costs $3,393.00 according to data from NerdWallet.
Yet skimping on travel insurance to curb travel costs isn’t advisable, given the high risk of lost luggage, cancelled flights, and illnesses and injuries that forced consumers to cancel flights they already covered financially.
According to a recent Bankrate study, “79% of travelers who have taken an overnight trip outside their local area this year experienced at least one travel-related issue” in 2022.
So where does that leave travelers who want to hit the road but are wondering if they should include travel insurance this summer? In a precarious position, apparently.
“The boom in travel insurance purchases across the industry that we, as providers are seeing, supports what will be an incredibly busy season of summer travel,” says Elad Schaffer, chief executive officer at Faye Travel Insurance. “We anticipate continued consumer frustration – from crowded airports to staff shortages – and thus an increase in trip protection purchases and reliance on providers that go the distance to offer both insurance and around-the-clock assistance.”
While the U.S. federal government has been working with the travel industry – especially the airline sector – to improve travel experiences and cut costs – not much has been done on that front so far in 2023.
“The government’s new regulations did not change much for airlines,” says Brandon Frady, a licensed insurance agent with Clearsurance.com. “Most of the regulations demand things that airlines already do and there are loopholes around many of the requirements.”
Passengers should anticipate flight crew shortages leading to delayed and canceled flights. “They should plan layovers accordingly and avoid short layovers that leave no time for delayed landings.,” Frady says.
Trip insurance can help ensure you can stay in a hotel if your flight is canceled and you can’t get on a flight until the next day,” Frady noted. “It can also help you pay for food and necessities if you can’t access your checked bags.”
Expect to pay about $103 per trip for basic travel insurance coverage, Bankrate reports. For more “comprehensive” coverage, expect to about 50% more for luggage loss or for having to cancel a trip for specific reasons, like a major illness.
That’s one reason why “cancel for any reason” travel insurance is becoming more popular. “That will
provide coverage when you cancel your trip, even if it’s for a reason that wouldn’t be covered by other types of travel insurance,” Frady says.
It’s also a good idea to go straight to travel insurance providers rather than buying travel insurance add-ons as you purchase your flight or hotel.
“This type of add-on trip protection, usually suggested to consumers on their way to check out for their flight or hotel bookings, usually does not provide comprehensive coverage and come with many limitations to their terms,” Schaffer says. “Seek out modern insurance providers that offer whole-trip coverage for your health, flights, lodging and all other prepaid expenses and potential travel troubles that can occur when away from home.”
Auto Insurance Outlook
Currently, U.S. auto insurance costs, on average, $136 per-month for solid coverage. That’s $1,638 annually.
Yet vehicle insurance costs are expected to rise by 8.4% through the end of 2023 as auto prices continue to rise and auto repairs grow. more expensive, according to data from Value Penguin,
Those figures, however, depend on personal factors like age, ZIP code, and driving history, among other factors. That’s especially the case in the summer months when more drivers are on the road and accidents and breakdowns are a higher risk.
Couple higher costs and you can’t blame auto consumers for having their head on a swivel this summer.
“We’re still seeing record-high shopping activity and new policy purchasing as auto insurance rates continue to soar,” says Adam Pichon, senior vice president at LexisNexis Risk Solutions.
Pichon says he’s starting to see some stabilization in the market, however, with claim frequencies flattening out the last few quarters and severities rising at a slower clip.
“Until claims severity levels off and vehicle sales begin to rise again nationwide, it’s likely insurers are going to continue to focus on rates, so shopping activity will remain volatile at least into the next quarter as insurers grapple with macroeconomic conditions,” he notes.
Vehicle sales are something to watch very closely for the remainder of 2023.
“If claims severity and frequencies continue to level out and economic conditions improve to the extent that more cars become available for purchase and consumers have the means to do so, we very well may see the shopping growth pendulum begin to tick back to more normal levels,” Pichon says. “We’re at a bit of an inflection point in the market, and the second half of 2023 can provide opportunities for insurers who are leveraging data and analytics to more effectively assess risk and address profitability head on.”
U.S. vehicle sale held steady at around 27% for new vehicles and 36% for used vehicles in the first quarter of 2023.
“The downtick in vehicle sales overall caused a drop in all shopping attributed to vehicle purchases, which can naturally lead to premium increases and more shopping and purchasing in each of the aforementioned age demographics,” Pichon adds.
Home Insurance Outlook
In the insurance sector, the summer means myriads risks expand for home owners, especially regarding barbecues, pool parties, and potential natural disasters like hurricane, floods and home fire issues.
“Home insurance issues are top of mind for homeowners this summer, especially as more people spend time outdoors,” says Linda Chavez, founder and CEO of Seniors Life Insurance Finder. “Summer insurance-proofing a home, such as adding extra coverage for large barbecues or pool parties, is
an important consideration.”
“Additionally, hurricane protection and revisiting fire insurance coverage should also be reviewed to make sure the home is adequately covered in case of any disasters,” Chavez adds.
In all of the above situations, it’s best for the homeowner to mitigate exposure as much as possible against these losses.
“Appropriate tree and brush trimming should be done in advance of weather events,” Pichon says. “Fortifying a home should be considered as appropriate to local risks. Homeowners are also best served with a detailed list of contents within the home.”
Additionally, if you’re in a home remodel scenario this summer, take extra time to examine the correct homeowner’s policy.
“Homeowners should consider revisiting home coverages due to the significant rise in cost of home reconstruction as well as home repairs,” Pichon notes.
The Takeaway On Summer Consumer Insurance Needs
Outside of the main consumer insurance channels, the insurance sector should continue to expand efforts to inject more technology tools into the insurance experience, from a business and consumer vantage point.
“The insurance industry taking a much deeper look at technology that can further automate the claims process to cut down on costs, especially when the claims are disaster-related,” says Joe Tolzmann, CEO of RocketPlan, a SaaS platform for property restoration claims professionals and Board of Advisor member at Goose Insurance Services Inc.
When claims involve property restoration due natural disasters like hurricanes, there’s a staggering amount of paperwork involved, Tolzmann says.
“The industry standard is to use multiple platforms, one for images, one for reports, and so on,” he notes. “Then, field teams end up back at the office re-inputting the same data because the info they’ve captured isn’t automatically shared live. Based on our experience, each employee dealing with claims spends about one hour each day doing extra admin work. For a team of 20, that’s 100 redundant hours a week.”
Not only is this tedious and time-consuming, but it also opens the door for potential claims tampering when data is captured and shared in real time.
“Look at what happened in Florida when adjusters came forward to say insurers altered original claims estimates without adjuster knowledge,” Tolzmann says. ‘Technology to automatically time-stamp and GPS-track all documentation mitigates risks of fraud — regardless of stakeholder issues.”
This summer season, Tolzmann expects to see insurers turn up the volume on technology to reduce costs they can control.
“Software to streamline the claims process will help insurance companies save on excess labor associated with ‘paperwork’, increase transparency, and reduce the overall claims cycle,” he says.
That should be a win this summer, for insurers and consumers alike.
