Summer 2024: Insurance Guide
By Michael Giusti
Summer 2024 brings a sense of anticipation and hope of a continued return to normalcy. The worst of the pandemic seems firmly in the rearview mirror, but a busier than normal hurricane season is being predicted, and the worry of wildfires is always looming. Inflation is showing signs of abating, but insurance markets are straining to the breaking point in many states.
As the temperature warms up, the insurance industry has hopes of a restful season in the sun — but it is keeping a careful eye on the horizon. In this Summer 2024 Insurance Outlook, we will look at some of the trends driving the industry this time of year, as well as some of the risks and highlights summer has to offer.
Lingering Inflation
Inflation has sent many industries reeling over the past three years, but few saw prices jump as much as the auto insurance industry did in the first quarter of 2024.
When the latest Consumer Price Index was reported, it showed auto insurance premiums were up a staggering 23% year over year.
For the doom prognosticators, those numbers were a sign that inflation was entrenched and that prices must continue to be heading up indefinitely.
But looking closer into all the numbers, the near future for the insurance industry isn’t necessarily all doom and gloom.
For one, while that CPI report showed auto rates through the roof, not all insurance markets took the same leap up. For its part, homeowner’s insurance premiums were up 4% year over year according to that same report.
And one industry giant went further to suggest that even the auto insurance jump may be as much about noise in the numbers as it was a true inflationary retrenchment.
In their analysis, reinsurance giant Swiss Re estimates that instead of the headline inflation number reported in the CPI, actual inflation in the auto insurance space should have been more accurately calculated at around 14%. That is still higher than inflation overall, but significantly lower than the CPI headline number. In their analysis they pointed to the less commonly reported Producer Price Index, which reflects the actual costs insurers are facing and was up only 6.6% year over year.
And Swiss Re isn’t standing alone in suggesting signs may not be pointing toward a constant upward march in prices.
In its Q1 2024 Insurance Personal Lines Trends and Perspectives Report, TransUnion pointed out that many insurers are approaching a place where their rate increases are now adequate compared with past underwriting losses.
Of course, this doesn’t mean that rates are necessarily about to fall, but factors like increased consumer shopping and insurers increasing their marketing budgets may begin to put pricing pressure on premiums in the near term.
Protecting Travel
The iconic vision of summer typically includes vacationing in far-off lands. To protect those trips, travelers have long looked to travel insurance to ward off the risks of the unexpected.
This summer, travelers will have another ally when it comes to protecting them from the unexpected. This year the Department of Transportation issued new rules requiring airlines to issue automatic refunds and be transparent about all costs in the case of travel mishaps.
According to the new rules, airlines now have to issue full refunds, including fees, in the case that a flight is canceled or if it faces a significant delay or schedule change. It notably didn’t define what counts as “significant,” and instead said everything would be considered on a case-by-case basis.
The rules also say that if the traveler was moved to a lower class of service, meaning they were involuntarily bumped from first or business class back into economy, the traveler has to be automatically reimbursed for the difference in those fares.
With these rules, it may mean travelers could face fewer instances where they would have to lean on their travel insurance for a refund.
Most hotels already had generous cancelation policies in place. Typically, a hotel will allow travelers to cancel up to 24 hours before the stay for any reason without penalty.
Still, even with these refund rules, there are other places where travelers might need travel insurance.
For one, the new federal airline rules say nothing about instances where a traveler might not be able to make it the flight before it takes off, like if they fell ill, were assigned jury duty, were in an auto accident, or had another instance come up that was out of their control.
When it comes to lodging, travelers are also unprotected if something unexpected happen inside that 24-hour window. For example, even if the flight is canceled and the traveler gets that federally mandated refund for their flight, that doesn’t mean the hotel will automatically also refund them because they didn’t call a day in advance.
Even if the traveler did call in advance, there are other lodging situations that don’t have generous refund options, such as all-expenses-paid resorts, cruises, and many home-sharing apps.
These are instances where travel insurance would typically step in.
Travel insurance pays for unreimbursed costs if a trip doesn’t go as planned.
Cancelations aside, many travel insurance policies also pay for health issues on a trip, such as if the traveler is injured on a hiking trip or while water skiing, or even if they just fall ill. Often this health coverage is secondary to the traveler’s primary health insurance policy, but the travel policy would cover things like out-of-network costs and increased copays.
Travel insurance also pays for medical evacuations if something happens and the local health infrastructure is insufficient to properly offer care — a scenario that often breaks many patents’ banks.
On the Road and the Stage
If the summer calls for a road trip to a concert or sporting event, there are insurance implications there, too.
If someone is renting a car, it pays to take a few minutes to consider all the rental insurance options.
The driver’s primary auto insurance they are already required to carry if they own a car will automatically cover the rental at no additional cost. If the driver only has liability insurance, then they need another layer of protection.
But there are other considerations, too.
Some premium credit cards offer damage loss waivers at no additional cost. Some are secondary to the driver’s primary auto insurance policy. Others are primary, meaning if there is a claim it would not go against their auto insurance at all.
Sometimes purchasing the damage loss waiver from the rental company can be worth the peace of mind and worth avoiding the hassle and risk of relying on a primary auto insurance policy. That is because it is important to realize that auto rental companies can be quick to make a claim against an insurance policy for small things, like a chipped window that drivers would otherwise just pay out of pocket for, resulting in years of higher premiums for the driver.
If the road trip destination is an event, like a concert, festival, or sporting event, insuring that ticket may be worthwhile.
Ticket marketplaces and a handful of specialty and travel insurers offer ticket insurance.
Coverage typically costs about 10% of the ticket price, and it kicks in if the traveler is unable to attend the event for a covered reason beyond their control, and they are unable to otherwise resell the tickets.
These policies typically cover things like illness, traffic accidents, airlines delays, and even termination of employment.
Some critics of ticket insurance have said that the documentation required to make a claim can be highly specific and burdensome. Ticket insurance also generally won’t cover the ticket if the event itself if canceled. In that case it is up to the promoter or venue to issue a refund.
Separately, the venues and the events themselves carry insurance in case something goes wrong on their end.
In the case of smaller events, the organizers will purchase event coverages which would kick in for cancelations and/or for liability.
The cancelation coverage kicks in to protect against non-refundable losses stemming from not being able to hold the event for a covered reason – with some exclusions, including infectious diseases.
The liability portion will cover things like damage to the facility, injuries to spectators, losses due to crime, worker’s compensation, and much more.
Costs for special events polices differ by provider, but one estimate is that policies for smaller events tend to cost around a penny for every dollar of coverage.
When it comes to mega events, like the 2024 Summer Olympics in Paris the insurance sums quickly become astronomical..
No single insurer covers the Olympics. Many different mega insurance companies combine many different policies spread out for billions in protection in all. Taking all the risk on one insurer or one policy would be too much for even the world’s biggest insurers.
Summertime at Home
Homeowner’s insurance covers many of the perils that might be lurking in the back yard or a summertime storm.
The first area homeowner’s insurance or renter’s insurance offers protection is from liability if someone is injured at a barbeque or other event hosted at someone’s home.
A less-commonly considered portion of the homeowner’s insurance that can come in handy during summer get togethers is the medical payments component of homeowners insurance. The medical payments portion of the policy is designed to head off a lawsuit before it begins. If someone is injured on the property, this portion pays a nominal amount, with no fault assigned, to cover the immediate health care costs of guests.
Coverage is often between $1,000 and $5,000, and covers things like ambulance rides, emergency room visits, and doctor’s copays. The idea is that the good will of covering the mishap will go a long way to avoid a suit in the future.
Homeowners worried about higher liabilities should consider an umbrella policy. These additional policies provide an extra $1 million or $2 million in liability coverage for only a couple hundred dollars a year.
Umbrella policies are especially useful if the homeowner feels they are likely to be the target of a lawsuit — say they have a teenage driver in the house, a popular backyard pool or trampoline, or because they have a high net worth.
In states with social host liability laws, the homeowner can get sued if someone drinks too much alcohol at their event and then gets into an accident on the drive home. Homeowner’s and renter’s policies typically cover that liability, too.
When it comes to damage to the home, the homeowner’s insurance property coverage portion would kick in if the fire pit catches the siding on fire, or if the home is damaged in some other way during the celebration.
Storm Coverage
Homeowner’s insurance is key to protecting policyholders from dangerous summer storms.
This could be especially important this summer, with forecasters calling for an especially active hurricane season. The National Weather Service is calling for between 17 and 25 named storms, and other researchers and commercial weather services are singing a similar tune.
If a hurricane comes, homeowner’s insurance will provide the coverage, unless that particular policy has a windstorm exception. These exceptions are increasingly common in storm-prone states with shaky property coverage markets. In cases where windstorms are excluded, the homeowner needs to get another policy specifically for that risk – which often comes from the pricy coverage offered from the state insurer of last resort.
In addition to the damage to the home caused by the storm, homeowner’s and renter’s coverage also kicks in if the storm chases the resident from their home. The loss-of-use portion of the homeowner’s coverage kicks in if a community issues a mandatory evacuation, or if the property is damaged to the point it can’t be lived in while it is being repaired.
Loss of use pays for additional lodging, food, and in some cases clothing costs incurred because the family cannot live at home.
Sometimes homeowner’s coverage kicks in for lost food items in the refrigerator if they spoil because of a storm-caused power outage. And it sometimes offers coverage for things like wine collections damaged by heat when power outages knock out air conditioners, but many policies have exclusions for collectables. Others specifically exclude damage caused by power outages.
Policy holders must realize that homeowner’s policies never cover floods. Water is only covered if it is falling from the sky or flowing from a pipe. Once it touches the ground and enters the house, it is up to a National Flood Insurance policy to protect the homeowner.
In some cases, landscaping can be covered after a disaster, but often it must be blocking the entrance to the property or otherwise causing a hazard.
Residents of many states are struggling to find homeowners insurance. In Florida, the homeowner’s market is teetering on collapse. In the Louisiana homeowner’s market, most major insurers have pulled out of communities near the coast.
In cases where traditional homeowner’s policies are unavailable, the only options left tend to be the surplus market or the state insurers of last resort. Both of these options are considerably more expensive than the “enrolled” or regulated markets. And in the case of the surplus market, homeowners could be left holding the bag if the insurers were to go out of business because of a catastrophic loss.
Inland Risks
While hurricanes tend to get much of the attention, wildfires have been taking an increasingly large portion of the spotlight each summer. That reality is being reflected in insurance markets, too.
California, Colorado, Arizona, and New Mexico are all facing issues of hiked up property coverage, if it can be found at all. In California, major insurers are either pulling out of the state completely, or minimizing how many policies they offer in at-risk counties.
In some cases, homeowners are being offered policies that exclude natural disasters, meaning if a wildfire came through, they would be uncovered.
Again, in these cases, some of the only options left are the costly insurers of last resort or the unregulated surplus market.
If they can get it, homeowner’s insurance will cover fire damage to the house and smoke damage to the property caused by wildfires.
If a property owner has to evacuate, again, homeowner’s policies will kick in money for loss of use of the home.
Insurance risks aren’t just limited to hurricanes and wildfires, either.
In a recent analysis, The New York Times evaluated insurer profitability, which showed places far from hurricanes and wildfires are also facing insurance affordability crisis.
Driven by derechos, hailstorms, tornados, and just plain old thunderstorms, insurance markets in places as far inland as Iowa, Arkansas, and Ohio are also facing huge insurance premiums and markets where insurers are pulling back coverage.
Summer Dreams
Summertime can be filled with pool parties, road trips, vacations, and sunny days. During those days of summer fun and relaxation, insurance risks still simmer in the background.
The good news is that there are signs that the worst of the insurance premium inflation may be coming to an end. But of course, there is always the dread of storms that may be on the horizon.
At least there are the Olympics and a season of sun to look forward to.
Michael Giusti, MBA, is senior writer and analyst for InsuranceQuotes.com
