Insurance rates go up from fires, COVID, inflation, unemployment

Decreasing prices, less workers, the effects of the growing COVID pandemic and devastating wildfires are driving up the cost of home, auto and business insurance.

“Everything,” said Sunnyvale insurance agent Steve Nelson, “has gone up.”

The pandemic and the rising cost of living, especially in the Bay Area, have exacerbated the shortage of construction workers, and combined with the rising cost of building materials, inflation is at risk of rising costs in areas where homes and commercial buildings have been damaged or destroyed. Therefore, the salary of the owner of the house has increased by 20% to 25% in the last three years, Nelson said, adding that the business policies vary so much that it is impossible to explain the increase accurately. Auto insurance rates also depend on a number of factors, including zip code, but Nelson estimates that they have risen about 15% in the past few years, even as drivers relax during the worst of the pandemic.

The high cost of home insurance and insurance after the wildfires sent some evacuees to dangerous areas of California, leaving a few companies in the Bay Area and the state, with greater risk in their fields, causing them to charge higher rates, said Nelson, who agreed. with them. -owns Nelson/Nelson Insurance Services with his cousin Jason Nelson.

The two Nelsons represent the third generation to run the business, with Nelson’s grandfather Buford starting it shortly after World War II. The news organization spoke with him about the state of insurance at a time when prices have risen sharply for the benefit of consumers. His comments have been edited for length and clarity.

Steve Nelson partner at Nelson/Nelson Insurance Services is pictured Monday, Aug. 1, 2022, in Sunnyvale, Calif. The pandemic, wildfires, and rising property prices have increased the cost of replacing homes and businesses, driving up insurance costs. (Aric Crabb/Bay Area News Group)

Q: How has the COVID pandemic affected the insurance industry, including home, auto and business?

A: All insurance companies just made more. These machines have given people (in the insurance business) the ability to work from home, but I think the efficiency has gone down a bit. In some ways it has sped up the process, in other ways it has slowed down our ability to come up with new ideas and be successful – it’s a kind of Catch-22. Insurance is less for digital products, services, things of that nature. We do a lot on the computer but there are a lot of parts and pieces where we still take information and write it down…in PDF form by hand. Most of it has changed. They do it automatically, where they pull the information from other sources.

Q: How has the COVID pandemic affected car insurance, as many people have moved home?

A: Many companies go the extra mile and limit people’s annual mileage – everything is based on the number of miles driven and your rates. Some companies offer discounts, some companies… only cover everyone at 3,500 miles per year.

Q: What happened to that discount as more people started driving again?

A: That has been removed now that things are back in the open. Everyone is being blamed based on their behavior. Some people who work remotely, we keep them – they just have to provide proof, like calculating the distance.

Q: What is home owner insurance?

A: What’s been hitting people in California is the long-term effects of years of wildfires – there’s also a drop in insurance coverage. Even if you are not in a fire prone area, in insurance we all share the risk. That fire has driven companies from the areas where they used to live. A lot of companies have just decided, “We don’t do insurance in these areas anymore.” Because there are fewer insurance companies, (the rest) are taking on more risk, and this has caused premiums to rise. Where we did not have many issues to write insurance in areas like Saratoga or Los Altos, or the mountains of Redwood City and other areas of Fremont and Milpitas, now there are times, even Morgan Hill, where we submit something. that any company would take, and they say no.

Q: How is inflation affecting the insurance market?

A: The property sector is the most affected by inflation. Every time we write a homeowner’s policy or a rental policy or any type of term that a customer covers the property, we have to estimate the cost of rebuilding it. Labor costs have really risen in California, as have commodity prices. Gas prices are reasonable because transporting the goods is expensive. And we have the cost of not having enough resources, due to network issues. A few years ago, if I were to estimate the cost of replacing a three-bedroom, two-bathroom home, the cost would be about $300 to $350 per square foot. Now you’re looking at a three-bedroom, two-bathroom home that costs $400 to $450 per square foot.

Q: What happened to business insurance rates during the pandemic?

A: Most of their money is tied to their income: If you’re a restaurant serving $100,000 a month versus $700,000, your risk is lower. If your risk is low, then we go to the company and we take care of it. Any company or any type of business that reduced their income and their policy was based on being able to step in and do this. We had small businesses, like hair salons – some of them that couldn’t open called us and canceled their schedule. Most of those people … came back when they opened.

Q: What advice do you have for insurance buyers?

A: Be careful with your insurance. Look at what used to cost, what costs now. Make sure the amount paid is correct. Call your agent and shop around. It’s okay to send it to a few other companies and see what one has to offer and get a little education on how it works. Find three or four words. Try several agents – maybe find someone like us who is independent and can buy different properties. Most people don’t know how homeowner’s insurance works, even for a car. What is good for one person is not good for another. It’s not just about saving money because it can cost you a lot of money in the long run. The California Department of Insurance has a lot of information for online shoppers.

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Name: Steve Nelson

Raised in: Milpitas

Education: Milpitas High School; Mission College in Santa Clara

Family: Married, with two grown children and one in high school

Age: 48

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Five things you should know about Steve Nelson:

1: I like to spend time with my family

2: I love spending time with my dad working on his old cars. They have old hot rods.

3: I split my time between California and our new home in Tennessee.

4: I like Italian food.

5: I like being on the water, going to the beach.