Spring 2023 Insurance Outlook: What to Expect
By Michael Giusti
Spring 2023 promises to usher in a time of change for the insurance industry. From health care to homeowner’s insurance, and even automotive insurance, new things are on the horizon, and springtime is a great time to begin evaluating those changes.
This Spring Insurance Guide will evaluate several areas of the insurance industry and discuss some emerging trends and changes that stand to affect consumers and industry professionals alike.
Although fall tends to be where most of the action is at when it comes to the health insurance market, this spring holds several potential changes for the insurance industry. Fall is when most policies hold their open enrollment periods, so by springtime, most policies and premiums are locked in for the year. But 2023 is a little different because of the end of the COVID-19 emergency declaration.
President Joe Biden announced that the emergency declaration is likely going to sunset this spring, and with it will go away several of the protections consumers enjoyed during the pandemic emergency.
One of the key things to change once that declaration sunsets is that during the pandemic, Congress passed the Families First Coronavirus Response Act, which required that Medicaid keep people enrolled in Medicaid, even if their family incomes grew to the point that they no longer technically qualified for the low-income insurance program.
Because of that no-cancelation policy, Medicaid’s rolls have swelled, but with the expiration of the pandemic emergency declaration, states will now begin to wind down those swollen enrollments. People who technically earn too much to qualify for Medicaid, but who were still getting the benefit because of the pandemic rule will now have to be moved off, either to an Affordable Care Act Marketplace plan, or to an employer-sponsored plan, or some other private insurance policy.
Each state is supposed to begin to announce their plans to unwind their lists beginning March 31 — a move that could impact as many as 14 million people nationwide.
Losing a health policy, such as Medicaid is considered a change in life event, so even though now is not open enrollment, someone who is rolled off the federal program would be eligible to join another plan that technically isn’t otherwise accepting new members.
Each state has a federally sponsored insurance policy for low-income children known as the Children’s Health Insurance Program, or CHIP. And there is no open enrollment period for that program — eligible people can join any time of the year.
Regardless of whether someone is enrolled in Medicaid, an ACA Marketplace plan, or a private plan, such as an employer-sponsored plan, springtime is a great time to take advantage of one of the benefits found in the Affordable Care Act — the annual checkup.
Everyone with a qualifying health insurance plan can receive one annual checkup at no out-of-pocket cost, and with so many people skipping the doctor’s office during the pandemic because they didn’t want to go into a health care setting and risk contracting the virus, now is a great time to play catchup and make up for lost checkups and vaccines — which are also covered at no cost to the patient.
If springtime causes the renovation urge to stir in homeowners, insurance should be part of their remodeling plans. As a general rule, any permanent addition to a home will automatically be covered by an existing homeowner’s insurance policy — but that rule isn’t absolute.
If the renovation includes the addition of something like a master suite, that could mean that the home jumps in value — and that may mean that the old homeowner’s policy is now insufficiently low to cover the new replacement cost.
And if the renovation includes the addition of a pool, cool summertime swimming sessions could be in the homeowners’ future, but so could higher insurance rates, because insurers see pools as higher liability risks. If a homeowner added one without telling their insurer, they could be in hot water if an accident were to happen.
Green renovations are all the rage — especially since Congress passed the Inflation Reduction Act. With that bill came generous tax incentives to make environmentally friendly upgrades to a home.
In some cases, those green upgrades may also carry some homeowner’s insurance implications.
If the renovation was an all-in affair, and the homeowner opted for a top-to-bottom retrofit and certification from the Leadership in Energy and Environmental Design — or LEED certification — that would mean some substantial energy savings each year (and a sizable renovation bill.)
Opting for the full certification could also mean a modest discount from a handful of insurers — often 5% off the annual premium — a nice gesture, but nowhere near enough to pay for that all-in renovation.
Other less inclusive renovations also should be on the insurance radar, though.
Solar panels and batteries come to mind. Those get hefty tax credits from the Inflation Reduction Act, and they tend to add value to the home. But some policies specifically exclude covering them.
The worry is that the solar panels could present a danger in a windstorm or hailstorm, so they are specifically excluded from some coverages.
Another factor to consider with solar is that if the panels aren’t fixed to the roof — say they were set up as a stand-alone array in the back yard — they would not automatically be covered by the homeowner’s policy because they aren’t permanently attached to the home. And if they were installed on another structure, such as a detached garage, they would only be covered up to the lower limits that protect that other structure — often 10% of the value of the main structure.
If a homeowner is thinking about a sizable investment in a renewable energy system, a conversation with their agent would make sense to ensure that investment would be protected once it was installed.
Some homeowner’s policies may also offer the option to add a green home coverage rider, which would add coverage after a loss so the homeowner can rebuild their home with environmentally friendly building materials and methods after a claim – for an added premium, of course.
One of the biggest automotive trends likely to emerge in the coming spring is a continued move toward returning to the office and away from remote work. Some of that is being driven by tightening labor markets and employers who want to push for office culture.
But with more miles commuting to work will naturally come more automotive accidents, and more claims. The long-term implication is likely going to be higher premiums for auto insurance.
The other emerging trend is the rise of the electric vehicle as a share of the automotive market. With EV sales expected to jump, especially with the renewed tax credits included in the Inflation Reduction Act, as well as price cuts announced by big-name automakers, more EVs will likely be hitting the road.
For the moment, EVs cost more to insure than their internal combustion brethren. Much of that difference is driven by market forces post claim. With fewer repair shops and parts suppliers specializing in EVs, repairing a damaged EV costs comparatively more.
And the outsized cost to replace a damaged battery pack also leads to many low-mileage EVs getting totaled after relatively minor crashes.
The fact that insurers can be quick to total an EV is a good case for a gap insurance policy for people who buy EVs with relatively small down payments. Gap insurance pays for the difference between the depreciated cost of the vehicle and the amount still owed on the car loan.
Auto depreciation is well known. Moments after driving off a lot, vehicles lose thousands of dollars in value. So, if someone buys a $50,000 Tesla and takes out a loan for the full value of the car, but then that vehicle drops in value, there would be a gap that the owner would be on the hook for if there were a crash totaling the vehicle — at least until monthly payments caught up to the vehicle’s value.
After a crash, the insurer would only have to pay out the depreciated value of the vehicle, even if there was thousands more left on the loan. The gap policy fills in the difference.
EVs aren’t the only case for gap policies. Recent reports also showed that used vehicle owners are historically upside down on their car loans right now, many owing tens of thousands more on their loan than the vehicle is worth — putting the drivers at great financial peril if they were to get into an accident.
Another place where drivers can find themselves perilously underinsured is in the medical coverage areas of their policies.
Minimum coverage requirements in most states were set decades ago, and most were not set to rise with inflation. And when it comes to inflation, medical costs tend to have some of the worst inflation around.
For example, the minimum coverage in California for injury is $15,000 — a laughably small amount of coverage given today’s six-figure post-accident liability claims.
While there may not technically be a season dedicated to thinking about life insurance, springtime makes as much sense as any to reexamine life insurance needs.
The rule of thumb driving life insurance is to consider what income would become required after someone dies.
In young adulthood, those discussions are often driven by the needs of a spouse or children who might be left in a lurch if a primary wage-earner were no longer able to provide for the family. In those cases, buying a term life insurance policy for a multiple of that salary — often 10 times the salary — is said to be enough to provide for the young family if disaster were to strike and the main provider were no longer there to provide.
As children grow and become independent, and as families build assets and theoretically become less dependent on wages, those term policies may no longer make as much sense, and then the conversation can turn to estate planning, and then policyholders can shift their sights to permanent policies designed to shield retirement income from taxes and to structure inheritance.
A relatively new conversation has emerged in life insurance, and that is the need some young adults have — protecting their parents who have taken out loans on their behalf.
Federal student loans die with the student, so if a student with a pile of federally backed student loans were to die young, their loans would be discharged. But the same isn’t true of many private loans that parents can take out on their child’s behalf. Co-signed car notes and co-signed mortgages also don’t go away if the borrower dies.
So, if parents are helping their children launch their financial lives, an inexpensive term policy may be a way to help shield the parents in case those young adults were to die unexpectedly.
Springtime is a great time to begin summer travel planning. And with summer travel comes the risk of trip cancelations.
Travel costs have jumped in 2023, with everything from flights to hotels costing much more than they did before the pandemic.
And there have also been a rash of high-profile travel interruptions that have caught the public’s attention. Ranging from the FAA’s software outage that grounded flights and then snarled flights for hours to catch up, to Southwest Airline’s epic Christmas meltdown, the risks of travel hiccups have become front and center.
For their part, the Federal Government has published a series of rules and resources requiring airlines to compensate travelers if their airline canceled their flight.
But springing in to compensate travelers for interrupted trips is where travel insurance shines.
Travel insurance is designed to reimburse travelers for un-refundable deposits and costs if some unexpected factor messes with their trip.
Weather snarls represent a classic place where travel insurance can make their policyholders whole.
But these policies also step in if someone in the party falls ill or is unable to travel due to a sudden layoff or jury duty.
Travel insurance can also step in if travelers fall ill while on vacation — if the policy included the health insurance portion. That is handy when the trip falls outside the policyholder’s home health insurance network — that can be another country, where most U.S. health insurance policies almost never cover care, or it could be another state, where most policies would require an out-of-network cost structure.
Having the health portion of the travel policy would go a long way to prevent a health emergency from turning into financial ruin for travelers.
When the train derailed in Ohio earlier this year, it caused families to evacuate their homes for days on end. These evacuations triggered a seldom considered portion of many residents’ homeowner’s insurance policies called their loss of use clause.
The loss of use portion of homeowner’s and renter’s policies reimburses policyholders for housing and some living expenses for a limited time when their homes are inaccessible and unavailable due to a civil authority-mandated evacuation.
These clauses often also come into play in advance of hurricane or wildfire evacuations when cities or counties issue mandatory evacuations — though not always during voluntary evacuations.
Homeowners who need to file loss of use claims should keep their receipts for housing costs, meal costs, and even if they had to purchase replacement items, such as clothing, medicines, and toiletries that they couldn’t access during the evacuation.
Each policy sets a time limit and a dollar limit on how much can be claimed, but loss of use claims can be a lifeline when evacuations force people from their homes.
Springtime also brings severe weather events, which are often covered by insurance policies — tornados and hailstorms come to mind. If the damage is to the home, the homeowner’s policy cover’s the damage. If the damage is to an automobile, the comprehensive portion of the automotive policy kicks in.
Comprehensive also kicks in if the natural disaster is a flood or an earthquake, but the same can’t be said of homeowner’s policies. To cover a home from those, separate dedicated plans are required.
And if all the talk of evacuations and severe weather is a bit heavy, one spring insurance policy that might be fun to consider would be festival or concert ticket insurance.
These policies protect concertgoers from things that would unexpectedly prevent them from attending their event.
If the event was canceled and rescheduled, and the attendee is able to attend the new date, the insurance policy would transfer its protection to the new date. But if the new date didn’t work for the attendee, the policy would refund the upfront costs the fan already paid.
They even pay out if the event isn’t canceled, but if an unforeseen and unplanned event – such as an illness or airline delay prevented the fan from attending the concert.
Springtime brings warm breezes and the opportunity to reevaluate whether everything is in order — whether that be through spring cleaning or through an insurance checkup.
We all have occasional risks that needs to be protected with an insurance policy. And whether it is an unplanned evacuation, a summertime getaway, or just a quick concert getaway, proper insurance may be the answer. And protecting the family’s home, income, auto, and health all should be top of mind.
But it is always better to take the time to look over the policies before disaster strikes.
Michael Giusti is senior writer and analyst for InsuranceQuotes.com