Farm Insurance 101: Factors Impacting Insurance Rates

Weather and inflation are just two of many factors that may be impacting your insurance rate.

Weather Events

As of June 8, 2023, the United States had already witnessed 9 weather/climate disaster events that resulted in losses surpassing $1 billion each. These events consisted of 1 instance of flooding, 7 severe storm occurrences, and 1 winter storm incident. Comparatively, the annual average from 1980 to 2022, adjusted for inflation (CPI-adjusted), was 8.1 events. However, in the most recent five-year period from 2018 to 2022, the annual average spiked to 18.0 events (CPI-adjusted).

Inflation

Prices worldwide are being impacted by inflation, placing an economic burden on consumers. As the cost of goods rises, insurance policies must also account for the increased expenses associated with reconstruction.

Between January 1, 2021, and December 31, 2022, there was a significant 13.9% increase in the overall Consumer Price Index, marking a sharp contrast to the previous 10-year average of approximately 2% annually. The Federal Reserve indicates that Global Supply Chain Pressure is currently at its highest level since 1998. In conjunction with inflationary factors, building material costs surged by 45% during the initial six months of 2022.

Building Cost Changes: Jan. 2022 to Jan. 2023

Felt Paper 31.2%

Steel Stud 25.9%

Drywall 20.5%

Concrete Block 18.8%

Asphalt Shingles 17.7%

Aluminum Conduit 15.6%

Galvanized Pipe 13.6%

1/2″ Copper Pipe 12.8%

Ready Mix 10.7%

Structural Steel 6.9%

Vehicle Cost Changes: Jan. 2021 to Dec. 2022

Auto Parts: +27.2%

Used Cars and Trucks: +27.1%

Rental Cars: +26.8%

New Vehicles: +18.6%

Transportation Services: +14.6%

Transparency and clarity regarding insurance costs is important. Understanding the changes in the insurance market is an key part of being an educated consumer.

To learn more about the insurance products available for farm risk management, reach out to Chelsea Heatherington at Kingsgate Insurance.

Chelsea Heatherington, Farm & Ag Specialist

Call or Text: 515-302-8400

Email: chelsea@kingsgateins.com

References:

NOAA National Centers for Environmental Information (NCEI) U.S. Billion-Dollar Weather and Climate Disasters (2023). https://www.ncei.noaa.gov/access/billions/, DOI: 10.25921/stkw-7w73

CoreLogic Construction Cost Update January 2022-2023

Consumer Price Index