Insurance costs drive up overall inflation
It costs Americans more to protect themselves from disasters, a development that is pushing up official inflation rates.
Different types of insurance – including auto, health and property protection – cost more, at least as measured by official inflation rates. While it is difficult for economic policymakers to do much to eradicate the various drivers of the trend, the pressure is helping to raise overall prices.
“Several types of insurance — home insurance, but also auto insurance and the like — have been a major source of inflation in recent years,” said Jerome H. Powell, chairman of the Federal Reserve. during congressional testimony last week. “And it has to do with a million different factors.”
Vehicle insurance is the one that particularly contributes to overall inflation, says Omair Sharif, founder of research firm Inflation Insights. Part of the increase in car insurance comes from the fact that parts and replacement vehicles have become a lot more expensive in recent years, and that is slowly feeding through to insurance premiums, he says.
Economists at Goldman Sachs expect auto insurance to rise sharply again in February, “due to the strength of online insurance price data,” economists wrote in a note looking ahead to the consumer price release on Tuesday.
Insurance could stop adding as much value to inflation over time, as the delayed effects of higher car costs in particular are more incorporated into insurance premiums. But it’s unclear how long it might take for the full effect to wear off.
And it’s not just car insurance that’s on the rise. Health insurance is also higher, although it is measured in inflation in a crazier way, mainly by looking at an insurance company’s numbers. winnings after they have been paid out advantages. Mr Sharif expects health insurance to remain positive at least until April, when the data will be updated, and probably beyond.
And renters and home contents insurance has been rising rapidly – likely in part because climate-related issues such as wildfires and sea level rise are making homes more expensive to insure in some regions of the country. the policy premiums that contribute to that measure.
“In the longer term, companies are pulling back from underwriting in some coastal areas,” Mr. Powell noted, adding that “it is an important issue.”