As a mid sized insurance agency located here in Colorado, we are increasingly being asked to look for better home and auto insurance rates.  I have noticed that with increased tv and online advertisers stating you can save money on your auto insurance, consumers are looking for the best rate and thus making the call.  What are the reasons and hang ups for all of this insurance advertising and rate chasing shifts in our market?Top 6 reasons your auto and home rates are going up in Colorado.

1. Environment:  Our weather patterns have shifted in Colorado.  We are experiencing a greater number of catastrophic events.  It used to be that a hail storm would come along every 7-10 years that would leave a significant impact.  Over the last 3 years, we have seen a tremendous up kick in these sever storms.  Mix is with the hail, we have fire.  Have you ever seen Colorado more of a smoke mess then in recent years?  Over 900 homes have burned in the last 2 years and what is amazing is the size, power and location of the fires.  They are coming through somewhat urban areas like in Colorado springs.   Lastly Flood.  As an agent over 15 years of agency, I can count on two hands the number of flood policies we sold.   And it was because the lender insisted on it for closing.  Now, we get inquiries weekly.  Flood is typically not covered under a  home policy but for your auto it is!  Thus, more claims on auto insurance!
2. Financial Market:  Without boring my reader to much with this segment, I will make it really easy to understand.  Insurance companies take your premium, they invest it in the market.  They are calculating that they will pay your claim and the premium you paid in over a series of years.  Lets say 4.  During that time, they invest your money in the market and that return is where they can make most of their money.  So what happens when the market interest rates are at all time lows, the industry itself is being more regulated and Mother Nature is really reeking havoc?  It is a recipe for increased rates because insurance companies have to go back to underwriting insurance instead of being financial wizards!  Make sense?  Ultimately it leads to increased rates.
3. Marketing:  The distribution process for auto insurance is changing.  Consumers are willing to go online and purchase products at reduced rates but by in large they are reduced coverage's.  Now this does not account for why rates go up necessarily, but I believe that insurance companies can raise renewal premiums and offer lower introductory rates as a means to get consumers believing they are getting a lower rate when in fact if you look long term on that policy, the renewal rate increases can far outweigh what they would have paid if they stayed put.  Thus, rising rates accompanied by billions in advertising ultimately leads to the consumer feeling like they are paying more.
4. Insurance companies change auto and home programs on the fly:  This is a good one.  One that you may not know and one that I am not sure makes a lot of sense.  However, to an actuary it makes a lot of sense.  If a company rolls out an auto insurance program, lets call it Awesome Auto Package, they will often times structure the rate so that it is enticing to agents and consumers to sell their product.  Why do they create a new auto program in the first place?  Simple.  It means the old auto product they have had is not profitable.  Meaning that the combined loss ratio for the old auto product is out of margins.  So they stop selling that product and let it sit till it is profitable.  They then roll  out a new one and with the right information in place (actuary) they in theory will begin to write more auto insurance at a better more profitable rate.  Did I lose you?  Well guess what happens to the old auto book that was not profitable?  The rates go up as a means to get customers to consider alternative auto insurance.  Higher rates means you will shop the rate. they are ok with this because they know based on statistics how many clients they will lose and that book will get profitable.  What it looks like to the consumer is higher rates!  I could go on here but this is the jist.
5. Inflation:  this one is pretty self explanatory.  I saw that milk per gallon is higher then gas!  Enough said.  Rates go up
6. Policy language:  On your home policy, there is language built in that increases your home coverage each year so it keeps up with inflation.  It is nearly impossible to avoid this increase.  Another common one is the new home discount.  It only lasts 7 years on average and it slides.  So looks like higher rates!  It is.

These are just a few of my thoughts on why auto and home insurance rates go up and are increasing so fast.  Are we done?  I don't think so.  My guess is a $250k coverage A home policy will go for as high as $2800 per year in the next 18 mths.The key to success in having a competitive product long term is to do two things.  Get an independent agent that can shop the rates and to stick with a carrier for at least 4 years before switching.  Unless you see a series of increases over 20% 3 consecutive terms.  This is a rule of thumb and each persons triggers are different!  Consult with an independent agent as they have more choices.Rick ClineAgency Owner All Access InsuranceLittleton Colorado303-932-1700