Spring Insurance Guide 2022
By Michael Giusti
Now a full two years after the onset of pandemic-driven lockdowns, Spring 2022 promises to offer an insurance market is moving forward from the pandemic, while still experiencing lingering effects.
Drivers are back on the road, and in-person paramedical exams are back on schedule for life insurance. Travel is even ramping back up toward pre-pandemic levels, sparking a rush for travel insurance policies. But pandemic-induced supply chain backups and inflation are also key factors that will move the needle in the insurance marketplace for the foreseeable future.
Inflation and the supply chain
Perhaps the biggest insurance-related area where inflation and supply chain snarls intersect is with auto insurance.
Overseas factories are still struggling to catch up from pandemic-induced backlogs. Shippers are still working out from under backed-up supply chains. And raw material prices are going up. Combined, that means that prices for replacement parts for automobiles are also going up.
That has a direct impact on the auto insurance industry because when a vehicle costs more to repair after an accident, that means those costs will have to be recovered by higher premiums down the road.
And after the wreck, renting a temporary car is also more expensive. That is because during the early days of the pandemic, many rental car companies sold down vehicles from their fleets in response to a Coronavirus-driven drop in demand.
Once vaccines became available and people hit the road again, there were fewer cars to rent. Supply and demand took over, and prices to rent the fewer available cars went up.
And the cost of buying new cars became expensive because of the critical shortage automakers are facing with semiconductors, making it pricier for rental operators to rebuild their fleets.
So, when someone has to rent a vehicle after an accident, the insurance company has to fork out more to cover those costs.
The semiconductor shortage also hurts auto insurers because if a vehicle is totaled, they are much more expensive to replace.
That shortage of semiconductors has even led to some high-profile assembly line stoppages, meaning that despite today’s higher sticker prices, the automakers are struggling to keep enough inventory on new car lots.
Dealership supply is down to about 31% of its capacity according to the St. Louis Fed, which is the lowest point recorded by far in the three decades of data they reported. As a result, a recent industry report showed that nearly 90% of cars were selling for their sticker price or higher, compared with around 10% of new vehicles in years past.
All that said, despite the price hikes in so many areas for auto insurers, inflation hasn’t yet found its way to higher premiums just yet. So far in 2022, increases filed by insurers with state regulators have mostly been in the single digits.
However, most industry watchers agree that with underlying costs going up, that may bode ill for rates down the road.
And on the topic of inflation, rising prices could also bleed into other markets, like homeowner’s insurance, which would need to pay more for pricier materials and labor costs after disasters and homeowner’s claims.
When it comes to travel insurance, 2020 was basically a bust, according to Stan Sandberg at TravelInsurance.com.
Once the lockdowns started, travel insurers stopped selling policies and instead became customer service relationship managers, helping everyone who suddenly had claims to file.
“Quite a bit has changed since then,” Sandberg said.
After vaccines rolled out in 2021, travel rebounded, only to be beat back down by the delta variant.
“That was a little bit disheartening,” Sandberg said.
Then, when omicron emerged, the industry held its collective breath, only to see that the variant didn’t discourage nearly as many people from traveling.
“More people were vaccinated, and more people were hell bent on traveling and getting out,” Sandberg said.
On top of the urge to travel, the travel insurance industry also saw a bump from countries that began implementing travel insurance requirements to get a visa to enter the country. Many of those requirements centered around health and medical aspects of travel insurance, but others required travelers guarantee that if they fell ill, their lodging would be covered for the duration of their illness.
“A number of coverages were created specifically to meet those requirements,” Sandberg said.
On top of the new requirements, Sandberg said all the talk of travel shutdown also shined a brighter spotlight on the coverage and made people think of travel insurance who may have gone without it in the past.
“At this point, the future kind of looks bright,” Sandberg said, adding that he realizes the industry is just one variant away from going in the other direction.
Travelers buying insurance today will find that COVID-19 is handled like any other illness. If someone falls ill before a trip, it will help cover the un-refundable deposits. If they fall ill during the trip, it will also step in to cover the remainder of the trip, as well as help cover out-of-network health care expenses, and even medical evacuations to get the traveler to the nearest care facility.
That said, if a country shuts down because of a COVID outbreak, those costs won’t be covered by a travel policy because government shutdowns – and fear of travel for that matter – are not covered unless the traveler purchases a more costly “cancel for any reason” upgrade.
One extremely bright side of travel insurance is that the premiums haven’t really moved from pre-pandemic levels, Sandberg said, although some carriers in some cases have added so-called “black box pricing models,” meaning it isn’t always obvious what makes one policy more expensive than another.
These policies take additional factors into consideration when setting premiums. Where in the past only the cost of the trip and the age of the traveler may have been considered, these policies can now also figure in the destination, how many days there are until departure, how many travelers are going, and things of that sort.
On the whole, though, premiums have been stable.
“People are traveling again, which is exciting,” Sandberg said. “There is a huge pent-up demand for travel, and we are going to see another huge surge when cruise lines start picking up again.”
The statistics support Sandberg’s observations. According to the US Travel Association forecasts, eight in 10 Americans said they are excited to travel in the coming year.
For the most part, spring tends to be a sleepy season for health insurance. The Affordable Care Act open enrolment period has ended, so unless someone has a change in life event, new policies aren’t being written.
For lower-income families who qualify for Medicaid or the Children’s Health Insurance Program, policies are available year-round. And for Medicare, policies are available during a window surrounding the policyholder’s 65th birthday, depending on if they are still working or not.
For private plans, open enrollment depends on when each company’s plan year ends, but often those correspond with the calendar year, so open enrollment tends to be around Halloween and Thanksgiving.
Since new policies aren’t flying off the shelf, spring may be a good time to look into using that coverage.
If someone is about to travel, they should certainly get a COVID vaccine, which is still free, and which is required for entrance to most overseas destinations.
There are also CDC-recommended vaccinations for each country, such as yellow fever or malaria.
It is also a good idea to check the CDC guidance if you are looking to travel for a special purpose, such as adventure tourism.
Cruise ships also have a host of stiff warnings from the CDC, though the outright ban on them expired in January
The CDC has issued color-based rating for participating ships operating in U.S. waters as an attempt to communicate variable risks.
If people are staying home, spring may be a good time to take advantage of the no-cost COVID tests being made available. The federal government has set up a website for each household to request tests be sent to them. Each household is entitled to two sets of four free tests — an expansion from the initial limit set when the program rolled out earlier this year.
And private health insurance providers are covering the cost of up to eight tests per person covered under the policy each year. The details of how to get those vary by plan, so policy holders should check with their insurer, but it typically just involves going to an in-network pharmacy, taking the at-home test to the pharmacy counter, and checking out with their insurance card.
Springtime is a great opportunity to begin renovations. The ground has thawed, and people are ready for a fresh look.
If home improvements are on the horizon, it is important for policyholders to check with their agents. For one, the improvements may increase the value of the home, meaning that previous policy limits may be inadequate.
If the renovations include riskier things, like pools, or even adding a diving board to an existing pool, that can also cause rates to change.
If the renovations are substantial and the homeowner needs to move out during the work, that is another thing to communicate to the agent. That is because most homeowner’s policies require someone be living in the home for coverage to be in effect. If the home is going to be vacant, that requires a specific rider, because insurers see a vacant house as riskier because vandals or thieves may be more inclined to take advantage of the owners’ absence.
There are even policies specifically designed for dwellings under renovation. These cover things like construction materials, and against unexpected disasters, like a construction-induced collapse.
Anyone looking to start a home project needs to ensure that every contractor working on the site is themselves properly insured. Otherwise, if there is an accident at the home, the homeowner may be left holding the bag in terms of liability.
One new trend in the homeowner’s insurance market identified in the 2022 Insurance Trends and Outlook Report from Transunion is home-based telematics. These are internet-connected sensors that can be installed in a home to protect against losses.
The simplest telematics device is a fire alarm that automatically calls 911 in an emergency, but there are also detectors for broken pipes, and much more.
Home-based telematics haven’t taken hold in the market yet – with only 33% of consumers saying they would allow a connected device from their insurer in their home. But if insurers begin offering discounts for these connected devices, homeowners may give them a closer look.
The Spring season offers an ideal time to take a fresh look at many areas of life. Transunion found that 38% of people shopped for life insurance because of the COVID pandemic, so now may be a good time to reevaluate coverages, for example.
But just because it is a good time to shop, doesn’t mean people are jumping at the chance. Transunion also found that many shoppers have been stepping back from comparing insurance policies of late. In its latest quarterly Personal Lines Insurance Shopping Report, Transunion found that auto insurance shopping was down 12.5% at the end of 2021, and property insurance dropped by 3.4%.
Springtime may present an ideal opportunity to renew these insurance shopping resolutions.
Michael Giusti, MBA, is a senior writer and analyst for InsuranceQuotes.com