NuStar Insurance Agency Blog

All You Ever Wanted to Know About Insurance

Why do increasing insurance rates piss us off?

Mainly because we don't know why or how it works.
I am going to tell you how it works and chances are, you still won't be happy but at least you will have an understanding of why. Insurance companies sell a promise to protect us when something bad happens. In good financial times the companies invest money in secure investments that make 6-8%. In the time we are in those investment dollars don't exist or only pay 1-1.5%. A company bases their rates off breaking even and making some investment revenue as their profit so they have roughly 35% expenses to run their business and assume they will pay out 65% in claims. With all the catastrophies throughout the country they are paying out far more than 65% even thou they buy reinsurance policies to help cover their large losses. With no investment revenue and higher than anticipated claims paid out, the companies are losing money and NEED to increase rate to stay solvent. For your home and auto rates they also need to prove thru an outside actuarial firm that they are losing money and get permission from the State to raise prices. The State is here to protect us as consumers so their main goal is to make sure the Insurance company is rating the policies responsibly and not gouging the consumers but will always be profitable enough to pay claims when we need it.

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