There are several reasons why insurance professionals should keep an eye on the inflation rate, which hit 8.3% in April 2022, down just slightly from 8.5% the previous month. Both rates represent historically high prices in the U.S.
The higher the rate of inflation, the more it will cost insurance companies and agencies to run operations, according to Conning. This could result in lower income ratios, a decrease in reserves and ultimately, higher rates.
"Inflation will affect different business lines in different ways," Conning reports. "Using personal automobile as an example for a short-tail insurance, the business will be sensitive to inflation in the future costs of vehicles and as well as medical costs resulting from injuries. Workers' compensation insurance, as a proxy for a long-tail line of business, will not be as sensitive to the changing prices of automobiles but will be impacted by changes in wages, medical expenses and other related costs."
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Elana Ashanti Jefferson
Elana Ashanti Jefferson serves as ALM's PropertyCasualty360 Group Chief Editor. She is a veteran journalist and communications professional. Reach her by sending an e-mail to [email protected].
