Brooks Berry sells insurance for a living, so he knew it would cost more to protect his home when he moved to Mount Pleasant about a year ago from Charlottesville, Va.
Even so, the sticker shock was, in a word, shocking.
"It was definitely a drastic increase," said Berry, a client adviser with Mappus Insurance Agency. "To go from a $1,500 policy to a $4,500 policy — that was a pretty big bump."
Consumers all across South Carolina, especially those along the coast, are experiencing steep increases in the premiums they pay for home and automobile insurance, with inflation being cited as the biggest culprit.
A recent J.D. Power report shows automobile rates soared by an average of nearly 12 percent nationally during the second quarter of this year, with the largest increases seen in the Southeast. The hike in homeowner premiums is even greater — as much as 30 percent, according to S&P Global Market Intelligence.
Berry said he's seen a growing number of consumers at his Mount Pleasant agency dealing with higher costs and trying to find a way to lower their premiums. Many times he can help by shopping around, but prices seem to be rising across the board.
"I think insurance is just going to be more expensive, given the climate we live in close to the water and all the natural disasters that are happening around the country that affect reinsurance," Berry said. "This is probably going to be the new normal."
Inflation baked in
Surging costs for gas, food and other everyday living expenses are easy for consumers to gauge, and business owners see the impact of spiraling labor costs all the time. But price hikes for insurance — which is typically paid just once or twice a year — seem to come out of the blue. It's those everyday costs, however, that are being baked into the premiums.
"Part of what insurance pays for would be the labor and materials that go into rebuilding an insured property, and those costs are up," said Russ Dubisky, executive director of the South Carolina Insurance Association. "Auto parts, lumber for homes, shingles — all of those types of things go into the increased cost of insurance."
A clogged supply chain is also having an effect, delaying the delivery of materials and forcing insurers to shell out more for an extended home or car rental when a customer's property is damaged.
"Some auto insurers have experienced an uptick in both the number of policyholder claims and the cost of vehicle repairs," said Michael Wise, acting director of the state's Department of Insurance. "These trends have resulted in rate increases for those insurers."
For homeowners, the rising price of materials is forcing them to buy more coverage. A home that could be rebuilt for $200,000 a couple years ago, for example, would now cost $250,000 or more, and insurance companies aren't willing to cover a property for less than its replacement value. That 25 percent increase in replacement costs is showing up in premiums, many of them paid through a mortgage company's escrow account, and that's led to higher monthly home loan costs.
"It's not a rate increase, per se, because you're buying more coverage," Dubisky said. "If it's costing more to repair or replace, that's being passed on to the consumer."
The story is similar for automobiles. A study by the U.S. Bureau of Labor Statistics shows the average price for used cars and trucks jumped 40.5 percent between January 2021 and January 2022.
Even drivers with spotless driving records are paying more. The increase has "nothing to do with you personally, or your driving," insurance company Geico said. "It's fairly common and happens when inflation occurs, or when the costs for vehicle repairs and medical bills increase throughout the area you live in."
Inflation isn't the only reason rates are on the rise.
Climate change has increased both the length and severity of the hurricane and wildfire seasons in the U.S., with insurers suffering record losses in 2021, according to a report by the Policygenius website. There were 97 natural disasters nationwide resulting in $92 billion in insured losses in 2021, according to data from the Insurance Information Institute. That's up from 92 events totaling $81 billion in losses the previous year.
Homeowners are also seeing increases because some of South Carolina's largest insurers are leaving the state — and its risky coastal communities — behind.
"There's less competition, and that has caused rates to go up," said Berry, the Mount Pleasant agent.
For example, United Property and Casualty was the state's 11th-largest provider of homeowners' coverage in 2021, according to the Department of Insurance, with about 31,000 policies representing $42.1 million in premiums. Late last year, UPC agreed to sell its business in the Carolinas to a Florida startup called TypTap, which describes itself as "a rapidly growing, technology-driven insurance company" that relies heavily on algorithms and artificial intelligence to set rates.
Those former UPC policies started moving to TypTap in June, and some South Carolina consumers are seeing their premiums double.
Wise, the state's acting insurance commissioner, said the UPC-TypTap deal helped consumers in at least one way, because it provided guaranteed coverage through the transition.
In some instances, insurers have left South Carolina consumers without a ready replacement.
That was the case in June when Florida-based Southern Fidelity Insurance was deemed insolvent, forcing about 25,000 Palmetto State homeowners to line up new insurance within 30 days just a few weeks into hurricane season.
"While some folks are being told their coverage is no longer available with a certain company, we've spoken recently with agents who've been able to find a different insurer to replace that coverage," said Dubiksy with the insurance association. Those new insurers, he said, are often charging higher rates and there is "pressure on buying additional coverage, which is making it somewhat more expensive."
Even in the face of higher rates, consumers can find ways to save.
One of the fastest-growing is the use of telematics that can monitor driving habits, usually by plugging a device into a vehicle's onboard diagnostics port. A Transunion study found the number of customers offered a policy where such a device would help to determine their rates rose from 32 percent to 40 percent between the first quarters of 2021 and 2022. The number of consumers who opted in rose from 49 percent to 65 percent.
"Clearly, consumers are getting over worries about surveillance," the report states.
Bundling different types of policies, such as home and auto, with one insurer can trim between 15 percent and 30 percent from the bill, Policygenius states.
Opting for a higher deductible — for example, $1,500 instead of $500 — can also lower premiums.
"If the replacement cost of your home has gone up by $50,000 but you're still carrying a $500 deductible, you're transferring a lot more risk to the insurance company," Berry said, adding that added risk translates into higher premiums.
Consumers should also ask insurers what discounts they provide. Security systems, smart home devices, a new roof and other protective measures can lead to lower prices.
Wise said the best advice he can give is "to shop around to find the best insurer" for a customer's needs and wallet.
Policygenius said homeowners "should aim to re-shop their home insurance each year to make sure they aren’t missing out on more affordable or better coverage with a different provider."