By Robert Williams

Editor

Most, if not all, area residents have noticed a significant increase in the cost of insurance over the past few years. There are many reasons for those increases: inflation, the pandemic, inclement weather, doubled costs on labor and materials, and other events combined with artificially low rates have created a perfect storm for the current market.

“This is all over the country,” Owner/Broker Brad Solberg said. “I’m part of agent networks and we’re licensed in eight states. The reason everybody’s rates are going up is we had artificially low rates for insurance for a long time. You could get a quote and typically you’ve got companies competing for your business. There were additional discounts that really shouldn’t have been given during COVID. Then we had that big storm that ran all through the midwest in May of 2022. That one storm, and we’re talking companies that write in 2-15 states, so they’re mostly regional carriers, basically, all of them to a tee said that one storm was worse than our next worst year ever in history. That’s how bad it was and that was one storm.”

That event was compounded by more severe weather events and rates lower than they should be coming out of COVID. 

“Then what happened? Inflation took off like a rocket,” said Solberg.

Record losses plus record costs meeting the low premiums created increased costs for consumers, but also for insurance companies, as they are backed up by reinsurance companies so that a major event does not just wipe a company out, according to Solberg.

Many reinsurance companies elected to leave the market to avoid higher costs and risk and left fewer options for insurance companies.

As an example, an insurance company might carry $10,000 of reinsurance, but are now faced with no choice but to accept $100,000 at a charge of three times more.

“That gets past on but then just the cost of everything else is going up with inflation, plus record losses,” Solberg said. “Insurance is the last stop on that. Repairing your car? I don’t see $1,000 car estimates anymore. So many more are totaled. You don’t see anything less than $4,000.”

With 2022 being a total loss for many companies, 2023 became a year of increased costs to try to find a balance. Companies are only allowed so many rate increases and now in 2024 most companies are slowly pulling out of that debt.

“Hopeful for 2025,” said Solberg. “For me, people are hurting too. Often, the underwriting is more stringent and rates are higher. We want to find the best for our customers, but sometimes the news isn’t as good as you’d hope.”

Inflation is a big player in rising costs. An average claim of $2,500 is now $6,500, nearly three times higher. 

“If I would have had a customer walk in three years ago with an increase in home or car insurance like we’re seeing now I would have tipped over in my chair,” Solberg said. “Now, my first response is, ‘that’s actually normal.’”

The market itself has been somewhat of a public relations nightmare with much of the blame centered on insurance companies when the entire cost problem is from events and issues that were completely outside of the control of those companies.”

When Solberg fields calls from his customers about the rise in prices he has an answer that is empathetic.

“I understand and I am not discrediting anything you’re saying. However, these are all outside factors,” he said. “Throw out the losses. Inflation alone has a big impact. The industry has definitely tightened up in every way possible. This isn’t isolated. Every company has been doing the same thing.”

Despite the struggles of the past few years, Solberg says business here in Frazee is good and he plans to stay in Frazee, hoping to potentially add another agent to focus more on the health side of the business.

Solberg Insurance can be found at its new location at 103 Lake Street North in downtown Frazee.

“My whole thing with location is it’s real simple. I want to be in a place where it’s easy for my customers to find me and get to me – that’s it,” Solberg said.

The move was part of bringing Gobbler Grub and Pub to Solberg’s former location. The work needed to revamp that building was more than Solberg wanted to do and the rehab work done by the Perrine’s in the former bank building offered a convenient and modernized space. The move also was done to help the incoming flow of businesses to town.

“If we can get another business in downtown Frazee I’m all for it,” said Solberg. “For me, I went a lot simpler and smaller. Also, it’s really exciting to see all the new businesses coming to town. There is an energy that has gone along with it.”

For more information, including quote requests, from Solberg Insurance visit: solberginsurance.com or call 218-234-2994.