I'm an Insurance Expert: This Is Exactly Why Your Insurance Rates Are Soaring (and What You Can Do)

If you think your insurance premiums are too high today, I have some bad news for you. They are going to get higher. And not by a little — by a lot.

There is an entirely logical and reasonable reason for this, and after reading this article, you will understand and — dare I say — agree it has to happen.

At their core, insurance policies work because some people have claims, and some people do not. The insurance companies make money on the policies that do not have claims.

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That is an incredible oversimplification, but you see where we start from here. For insurance policies to work, an insurer has to collect more in premiums than it pays out in claims. In general, that's the entire ballgame.

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Without sounding old, in the past we have seen a relatively — and that is Relatively with a capital R — steady pace for weather-related claims. That means that, with some level of accuracy, we used to have the ability to predict claims that were caused by Mother Nature. It was possible to have an idea of what was going to happen.

How things have changed

Prices that insurers charged, in part, had these predictions worked into them so that there was enough money to be there to pay for the expected claims.

But two things have changed:

• The level of predictability has dropped. Weather events are happening a lot more often than predicted.
• Weather events today are costing upwards of 400% of what they used to cost.

Don't take my word for it. Let me show you some numbers:

• In 1992, there was one major event. Hurricane Andrew cost about $60 billion.
• In 2005, there was one major event. Hurricane Katrina cost about $201 billion.

That's two major events spread out over several years. But look at these stats for catastrophic events:

• 2017 (three in one year): Hurricane Irma ($64 billion), Hurricane Harvey ($160 billion), Hurricane Maria ($115 billion)
• 2021: Hurricane Ida ($84 billion)
• 2022: Hurricane Ian ($111 billion)
• 2024: Hurricane Helene ($78 billion)
• 2025: California wildfires ($275 billion)

What you can see is a clear trend — more claims, more often, and larger payouts.

You might be saying, "Wait just a minute. I don't live in a hurricane or wildfire area. Why are my premiums soaring?" Let's address that.

For one thing, wildfires aren't happening just in California anymore. Check this out:

• 2023: Maui wildfire ($5.5 billion)
• 2024: Smokehouse Creek Fire in Texas and Oklahoma ($1 billion)
• 2025: Dragon Bravo Fire in Arizona ($124 million)

This is all unprecedented

Wildfires are everywhere. Even in Colorado, record wildfires have led to the creation of a state-backed Colorado FAIR Plan, which is an insurer of last resort for homes in wildfire-prone areas. Colorado!

And we've had these storms:

• 2021: Winter freeze in Texas ($195 billion)
• 2022: North American storm complex ($2.2 billion)
• 2022 Midwest derecho ($1.3 billion)
• 2025: Tornado and severe storm outbreak ($10 billion)

And severe weather continues to happen.

Let me state for the record again that this is not the way things used to be. This is not what has been considered normal, standard or predictable. This is unprecedented in both the damage caused, lives lost and disrupted and high insurance claim payouts. It's the trifecta of bad, bad, bad.

So you can see clearly, in black and white, that weather events across this entire country are increasing, slamming us all.

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The insurance companies we pay our premiums to are also seeing this. They are, if you can personify an insurance company, scared to the bone.

When insurers have consistent and frequent claims of this magnitude, there is only one significant way to ensure that they have sufficient money to pay their customers' claims, and that is to increase the premiums they charge.

What you can do

What can we as consumers do about it? In a word: prepare.

Prepare by taking as many mitigation actions as you can. Regardless of the type of event, an ounce of prevention can, and will, go a long way.

Prepare by planning for your insurance premiums to increase.

Prepare by educating yourself on different types of insurance coverage — and be sure you have what you need, nothing more and nothing less.

Prepare by shopping for a competitive insurance product that is not cheap — since cheap is cheap — but is competitive and does what you expect it to do.

Remember, if you think having insurance is expensive, see what it costs to have a loss without it.

Want to learn more about insurance? Visit KarlSusman.com.

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