Today's Viewpoint: A MarshBerry Publication

2022 Inflation & CPI Numbers to Worry About: How Insurance Brokerages Should Move to Retain Clients Amidst Rising Rates

While the headline, “highest inflation rate in 40 years” dominates the news, there were even stronger price increases in many of the categories within the 2022 Consumer Price Index (CPI) that paint a more troubling picture for consumers.

U.S. Inflation rose 8.6% in May 2022 from a year ago and represented the highest increase since December 1981. Economists expected an increase of 8.3% in May, but surging food, gas and energy prices all contributed to the higher-than-predicted rise in inflation.

On June 15, 2022, the Federal Reserve (Fed) announced it was raising the federal funds rate ¾ points to a target range of 1.5-1.75% in an effort to combat rising inflation. This is the first time the Fed has raised the target range by ¾ of a percent since 1994 and was higher than the half percentage point increase they previously hinted at.

Is the Fed Understating the Underlying Numbers?

While the headline, “highest inflation rate in 40 years” dominates the news, there were even stronger price increases in many of the categories within the 2022 Consumer Price Index (CPI) that paint a more troubling picture for consumers. Here are some key categories experiencing higher than average, year-over-year increases:

  • Food: 10.1%
  • Gas: 48.7%
  • Fuel oil: 106.7%
  • Electricity: 12.0%
  • New vehicles: 12.6%
  • Airline fare: 37.8%

Analyzing the Impact of Inflation Increases on Rising Insurance Premiums

The rising costs of household goods and commodities aren’t the only pain points for individuals and small businesses. The Council of Insurance Agents & Brokers’ (CIAB) Commercial Property/Casualty’s 1Q2022 market report showed that insurance premiums rose for the 18th consecutive quarter. While 6.6% was the average increase in commercial insurance premiums in 1Q2022 for all account sizes, there were some lines that saw significant increases.1 Here are some notable 1Q2022 increases on specific insurance categories:

  • Commercial cyber: 27.5%
  • Umbrella: 10.5%
  • Commercial property: 8.6%
  • Commercial auto: 5.9%

According to MarketScout data, personal lines insurance premiums rose:

  • Homeowners (home valued over $1M): 7.0%2
  • Homeowners (home valued under $1M): 5.3%2

As Inflation Impacts Costs, Insurance Brokers Can Proactively Offer Solutions to Their Clients

As inflation in 2022 continues to impact costs across the board, brokers may want to get out in front of their clients BEFORE they start to look for their own ways to save money. Small businesses and consumers may feel surprised if they see a larger than expected rate increase when renewing coverage, especially if the firm did not proactively communicate the change.

If a broker is proactive with solutions or in communicating about pricing increases, so clients are not caught off-guard by the level of rate increases, this could help boost the client’s experience, and, in turn, retention. Brokers could suggest modifying coverage to opt for different deductible levels in exchange for lower premiums or they can offer additional services that appeal to clients. Finally, firms can show that they are actively working to aid their clients by letting clients know that they researched multiple carriers in order to find the best rates for them.

Final Thoughts About How Current Inflation & CPI Variables Are Impacting the Insurance Market

Many small businesses and individuals are likely feeling more challenged by rising costs than the inflation headlines would indicate. Many may already be seeking ways to reduce their insurance expenses, so brokerages that are responsive around finding solutions and customer-focused in communications are likely to provide a better client experience and have better retention in the current environment. 

If you have questions about Today’s ViewPoint or would like to learn more about how MarshBerry can help your firm plan for its future, please email or call Gerard Vecchio, Managing Director, at 212.972.4886.

MarshBerry advised more than 95 companies and completed 130 M&A transactions in 2021, closing another record year for the firm. MarshBerry continues to remain the number one sell side advisor for the 23rd year in a row and retains the top spot in the industry for total number of clients advised.

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