The Walters Agency Podcast

Rising Costs: Why Your Insurance Premiums Keep Climbing

• Timothy Walters • Episode 11

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Recently, Premiums Appear To Be Going Up Across The Board - Why Is That Happening?

The mystery of skyrocketing insurance premiums finally explained! Licensed insurance agent Timothy Walters cuts through the confusion to reveal why your coverage costs keep climbing—and no, it's not just your agent trying to squeeze more money from you.

Behind every premium increase lies a complex web of economic forces. First, there's the unavoidable reality of inflation. When your car needs repairs after an accident or your home requires rebuilding after a disaster, those costs have increased dramatically year over year. Insurance companies must adjust premiums accordingly just to keep pace with these escalating expenses.

The conversation takes a fascinating turn as Timothy explains how population growth and development patterns have transformed previously vacant land into dense housing communities—often in disaster-prone areas. What once might have been a tornado destroying a barn now becomes a catastrophic loss of multiple million-dollar homes. Meanwhile, insurance carriers, operating across state lines and even internationally, must absorb losses from wildfires in California, hurricanes in Florida, and floods in the Midwest, spreading those costs across their entire customer base.

Perhaps most revealing is Timothy's explanation of how reinsurance (insurance for insurance companies) and state regulations create a domino effect that ultimately reaches your wallet. When states prevent carriers from charging realistic rates while mandating coverage for high-risk properties, companies eventually exit markets entirely—leaving fewer options for consumers and higher prices from those who remain. Through it all, Timothy offers practical advice for working with your agent during these challenging times, emphasizing that approaching the conversation constructively yields better results than confrontation. 

Ready to better understand your coverage options and potentially find savings despite market conditions? Call The Walters Agency at 423-417-2070 for a free consultation.

To learn more about The Walters Agency visit:
https://www.brightway.com/agencies/tn/knoxville/0237/team
The Walters Agency
7009 Asheville Hwy
Knoxville, TN 37924
423-417-2070

Speaker 1:

Welcome to the Walters Agency podcast, where insurance meets peace of mind. Hosted by licensed insurance agent and owner, timothy Walters, we're here to help families, homeowners and small business owners throughout East Tennessee protect what matters most Our mission creating win-win-win solutions for insurance. Let's dive in.

Speaker 2:

It's not just you. Insurance costs are climbing, but it's not random and it's not necessarily somebody else's fault. In this episode we dig into the macro forces driving up rates and what it means for everyday folks trying to stay covered. Welcome back everybody. Skip Monaco is producer back in the studio with licensed insurance agent and owner of the Walters Agency, mr Timothy Walters. Timothy how's it going?

Speaker 2:

I'm doing just fine. Doing just fine, although I'm a little stressed about my insurance premiums going up and I know we've talked a little bit about this, about what you can do in previous episodes to mitigate some of that, but it seems like recently they're really climbing, and you know why is that happening from your perspective?

Speaker 3:

Well, no, it's like everything else. There's a thousand factors that go into insurance races, like there's a thousand factors that go into the price of any product or service on the market.

Speaker 2:

Yeah.

Speaker 3:

Yeah, yeah, I don't know. I mean, if maybe you can find me an insurance dues and hatch them out at the house or something, I don't know. But uh, I have some homegrown stuff, I don't know. It know, but, uh, I have some homegrown stuff, I don't know, that wouldn't work because I don't think I'd get insurance on my house if I had a goose. Think about it. But uh, yeah, I mean, there's a lot of factors and is what I tell people is, literally there are I mean, really are a thousand factors that go into the price of insurance and again, the general trend is is up and the insurance rates are going to continue to go up by and large. You know you're going to see plateaus and temporary dips and everything. But because one of the major driving factors is inflation I've talked about this before like everything else, you know, the dollar buys less every day.

Speaker 3:

It seems like, you know, I kind of ask people to think of it like this. You know, when they're angry about their insurance rates going up, I understand that. But think of it this way If you have a loss, if you wreck your car, and the insurance will cover the damage to the car, isn't it cost more or less to make the same repairs to the car now as opposed to this time last year. Most of the time it's going to be more. I mean we all know that that's kind of inescapable. So of course the insurance companies are going to have to cost. You know they have to charge more to the clients to help cover that spread because they're dealing with, in some cases, millions and millions of clients, thousands and thousands of claims. I mean they're dealing with big numbers. So they have to make those adjustments or else they're going to go bankrupt. I mean, that's just economics, okay. Same with homeowners insurance. It's going to cost more to make a repair to damage to your house now, today, in 2025, than it would have this time last year, in 2024 and the year before that and the year before that. So that's the inflation effect. That's a big one. It's not the only one, of course people don't think about this. Insurance is very interconnected. Most insurance companies are large interstate or even international corporations. They cover risks across the entire United States, most of them, or even United States and Canada. Some of them are literally global. They have interests in whole other continents.

Speaker 3:

I don't know if anybody's been watching the news, but hurricanes, fires, natural disasters of all sorts have been causing a lot of damage, partially because there are people living in places that they didn't used to live. We see that here in Tennessee, especially in middle Tennessee. I've noticed where towns that used to be small, like Cookville, where my cousin grew up he was a realtor, awesome guy, asked me about his information if you want to buy or sell a house my cousin grew up, he was a realtor, awesome guy Asked me about his information if you want to buy or sell a house. Played you in Bill.

Speaker 3:

But Cookville has blown up in the last 15 years. It's exploded, went out through there last year I didn't even recognize the place. So there are these condos, houses, top-packed housing communities in places that used to be cow fields, right, so the tornadoes will come through there where the same place they used to hit and maybe they blow away a cow on a fence or knock down a barn or something like that. Well, now they're damaging in some cases billion-dollar homes, because it costs a million dollars to buy a home in Tennessee. It seems like now. So a lot of this. Like I said, people are living around in California. They built in the desert in these fire traps and are surprised when they burn down, also when they don't have any water or on a hillside and surprised when there's a mudslide

Speaker 3:

Right, exactly. So all this stuff is going on. A lot of the losses, I think, are being driven by overdevelopment areas where there used to be these weather events where there wasn't a lot of damage incurred, but the insurance companies are still paying for it. So the retail insurance companies a lot of times are operating on a loss. So they're actually paying out more in claims and overhead because they got to pay their employees, they got to pay for all the things they got to pay for to actually conduct business. So a lot of times they're operating at a loss the last five or 10, 15 years. So they have a thing called reinsurance.

Speaker 3:

And what a reinsurance company is? It's insurance for the insurance companies. So if an insurance company, you know ends up you know operating at a loss, you know on a year, the reinsurance company pays them. You know ends up, you know operating at a loss, you know on a year, the reinsurance company pays them. You know, basically, the difference to keep them in operation, keep them from going under. And reinsurance companies have been paying a lot of money, a lot of money globally, billions and billions of dollars, over the last you know five or 10 years especially. So they're having to raise their rates and economics 101, everything rolls downhill. In the end, the individual client, the individual consumer is the one who is going to have to pay for those increases Because, again, that's the only way it can work.

Speaker 3:

That's economics. It's not spite. It's not because the insurance companies are necessarily greedy, as a lot of people like to say. They're literally just trying to conduct business in a way that they can stay in business and hopefully make a profit. And this is America. Profits shouldn't be a bad thing because it allows for other things to happen. But, yeah, those are two big driving factors I think that people don't think about, because it affects both the home and the auto markets and, again, that's not something that a lot of people think about.

Speaker 2:

Well, especially the overpopulation centers growing. I used to live in Murfreesboro and south of Nashville and when I lived there there was 50-.

Speaker 3:

Beautiful little town.

Speaker 2:

It used to be a little town. There was 55,000 people there when I lived there. There's now 55,000 people there. When I lived there there's now 150 or 160,000 in the city of Murfreesboro. So I could imagine yeah, I was surrounded and that's Tornado Alley too. I mean, tornadoes have always come through there, you know, up through Alabama into Tennessee. But well, speaking of Tennessee, the states like Tennessee, north Carolina and Virginia, do they have any say-so over how quickly or steep premiums can rise as a regulations on that?

Speaker 3:

Yeah, no, Insurance is one of the most heavily regulated businesses in the country. A lot of people don't realize that when they yell at me about their insurance premiums.

Speaker 3:

a lot of times the state, and again this varies by state to state. Insurance is primarily regulated at the state level. The feds don't have a whole lot to do with it right now anyway. So yeah, state regulations can absolutely have a major effect on rates, some states like California, for instance. So let's use them as an example.

Speaker 3:

The government likes to win brownie points with the voters by saying by saying we're going to put these greedy insurance companies in their place and we're not going to let them raise their prices Again, prices in a free market.

Speaker 3:

They kind of hit supply and demand thing where the company that's doing the business has to make enough money to stay in business, at least break even if not make a profit. Has to make enough money to stay in business, at least, you know, break even if not make a profit. Otherwise why are you doing it? And some states basically force the insurance companies to one accept risks that they wouldn't accept otherwise. You know, maybe they say you have to accept this home that's falling apart, you know, into your insurance program, or this home that's in a high risk area that is clearly going to burn down the next time there's a fire X, y and Z, you have to take those risks and then, oh, also, we're not going to allow you to raise your rates, for I think in California's case they went like five years without allowing the insurance companies to effectively increase their rates across the board, like they were needing to.

Speaker 3:

So that causes insurance carriers to begin exiting markets because, if they're going to be, they know something's going to happen and that they are not making enough money to have a reserve of cash to effectively absorb that kind of loss. So they started exiting the market. Famously, state Farm left California. Basically right before that big fire last year. Everybody was mad. But State Farm, they realized like, look, they knew all the factors, the fact that they were allowing these homes to be built in areas that were in the desert. They were not clearing out the brush, they had demolished the dams that had previously had reservoirs for the water. They weren't keeping reservoirs of water in the city.

Speaker 3:

Listen, the insurance companies. These are multi-billion dollar companies. They understand, they track all of that. They have connections to government, they know what's going on and since California put them in a position where for years they hadn't been able to increase their rates or manage their risk portfolio effectively, they're like you know what peace out, we're going to have to exit stage right, and they did. And then California came out after the fire and tried to retroactively make them pay for all those losses. I think that's still in court, if I'm not mistaken. So that's just one example, there's other states, like Tennessee is actually not a bad state as far as insurance regulation. I think they kind of have a pretty good balance of protecting the individual consumers and also looking after the business interests, you know, making sure that companies can operate effectively. I think Tennessee is actually one of the better states as far as regulation is concerned, but we're still tightly regulated. I mean it's a thing that we have to deal with.

Speaker 2:

What about North Carolina?

Speaker 3:

I don't really know that much about North Carolina. I'm not licensed in North Carolina. I could probably I know a lot of North Carolina agents, so if we ever do one of your podcasts where they talk about North Carolina, I'd be happy to bring somebody on, but I really wouldn't be able to effectively speak about North Carolina specifically. Like I said, it's very much a state-specific subject. All the different states have different regulations and laws governing different insurance products.

Speaker 2:

Well, if I had to guess, I would say North Carolina is more heavily regulated than Tennessee because Tennessee generally with income tax and is less regulatory. I would think.

Speaker 3:

Yeah, I mean it may be like I said. I know North Carolina is probably a little bit more of a regulatory state than Tennessee, but you never know. Sometimes you get surprised by how states govern things.

Speaker 2:

True, I know our sales tax is higher, but I'm originally from North Carolina and love the no income tax and when you buy a car there you might want to step across the line.

Speaker 3:

Oh yeah, yeah, no. Yeah, I've never actually bought a vehicle outside the state of Tennessee, but I've heard that some of the taxes for transfers and title and that kind of thing can be pretty crazy. Oh yeah.

Speaker 2:

Love the gas price, though. I just traveled through Virginia and I was like man, I can't wait to get back to Tennessee where I can spend 40 cents to 50 cents less than Gallup Virginia's a beautiful state.

Speaker 3:

It's a little weird though, like I said, I really hate the fact that it is so weird because it is one of the most beautiful states I've ever been to. But they're definitely a little kooky on some things in my opinion. But, like I said, I guess that's why I'm a native Tennessean. I don't have plans to live anywhere else unless Knoxville comes out and eats us. Then I might have to move to Kentucky. Who knows what the future is going to bring.

Speaker 2:

That's right. Thankful to be in Tennessee and thankful that we're regulated less, especially on the insurance front, but on a lot of different fronts. Timothy, appreciate your clarity on premiums and why they're going up A lot to think about. That isn't necessarily just your evil insurance agent's fault. It's the matter of what's going on in the world.

Speaker 3:

I mean behind my eyebrows and my mustache.

Speaker 2:

Appreciate you helping us to feel a little less overwhelmed by why the costs are rising.

Speaker 3:

Like I said, anybody who's watching this. Like I said, I understand the frustration. You know my best advice to you when you talk to your agent, just understand that your agent has no controllable rates. Those are set by the individual insurance companies and the state that regulates the product. Our job as agents is to try to help our clients in the best way we can. If you talk to your agent and be like hey, listen, you know my insurance rates have gone up twice in the last two renewals. Can you shop it for me? A hundred percent, I'm sure, like they'll be happy to do that for you. Sometimes they can find a less expensive rate with same or better coverage. Sometimes they can't. Sometimes they might with same or better coverage, sometimes they can't. Sometimes they might come back and tell you say, listen, as far as our markets are concerned, this is the best place for you. And what I tell people, I say if it really is more than you can handle right now, we don't have all the markets. There are other agents out there who might have different markets. Or there are captive insurance agents out there. You know, like the big names farm bureaus, state farms, what have you? You can always check with them.

Speaker 3:

I want people to do what's best for them. Not saying I want people to leave because this is how I make my living, but most good agents that I know really do try to do the best for their clients. But if you come at somebody and just like dump on them, it's like you know, treat them like it's their fault, like it's they did this to you specifically on purpose. That's not true. And again the old adage you tend to win more friends with sugar than spice, right? So people will tend to work harder for you if you approach them in a reasonable manner. That is, not just screaming at them, cussing them out and I've had people do this to me, like right out the door, where they even tell me who is calling. You know, f-bomb this, you this. And then I find out that somebody called me because their insurance went up. You know $15 a month. And I'm like, okay.

Speaker 3:

I'll shop you, but you might go to the back of the line. And again, as I said, I try to be straight up. That's the line. And again, as I said, I try to be straight up. That's the truth, that's human nature. So just put that out there for anybody who's watching this, who's about to blow their insurance agent's ear off because they're a random number, let's consider that before you make that call.

Speaker 2:

Absolutely, and if any of our listeners happen to have an insurance agent that you talk to, which we always give advice Tim does to talk to your agent and you do and you don't feel like they're working in your best interest, call 423-417-2070, and this guy right here will take care of you.

Speaker 3:

Right, we'll take a swing at it. No guarantees, but we'll try it out, there you go, straight shooter.

Speaker 2:

Well, tim, thanks again and we'll catch you in the next episode.

Speaker 3:

Thank you Skip Appreciate it.

Speaker 2:

Yes, sir, thank you. Have a great weekend.

Speaker 3:

You too bud.

Speaker 1:

That's a wrap on this episode of the Walters Agency Podcast. Ready to find the right coverage for your home, business or family? Call or text 423-417-2070 for a free 20-minute consultation. Until next time, stay covered, stay protected and keep winning with the Walters Agency.