Contact: Insurance Division Consumer Services Section
(800) 964-1748 or dfr.insuranceinfo@vermont.gov
MONTPELIER, VT - Many policyholders are experiencing significant increases in insurance premiums for auto and homeowners insurance. “Premium” is the amount you pay to an insurer to buy or keep an insurance policy in force. The Department of Financial Regulation (DFR) is issuing this consumer advisory to explain DFR’s role in the review of proposed rate increases and to help consumers understand why these premium increases are happening.
DFR Regulation of Insurance Premiums
DFR’s Insurance Division does not set insurance premiums for auto and homeowners insurance policies. Instead, the Department’s legal role is to analyze requested premium changes to verify that the proposed premiums are not excessive, inadequate or unfairly discriminatory. Premiums must not be excessive for consumers, but they must be enough to maintain the financial health of insurers. This promotes a competitive insurance market in which consumers have options available for their insurance needs and insurers can pay consumer claims as they arise.
The premium that insurers file with DFR is an average premium and is requested by the insurer to maintain the necessary capital and reserves to operate their business. Each individual insured’s premium is determined using several pieces of information. These can include coverage limits, age of insured, credit score, location and claim history. This means that consumers may see higher or lower premium increases depending on their individual circumstances.
Why Are Premiums Increasing?
Some of these increases are due to a rise in the number of claims and increase in average cost of claims resulting from catastrophic events, inflation, the rising cost of supplies and repairs, supply chain disruptions and an increase in the cost of reinsurance to insurers. These circumstances have caused significant rate increases in all states across the country. The impact of the filed rates on each individual consumer’s insurance premium will vary.
In addition to the various cost drivers noted above, increasing insurance costs are also impacted by increasing coverage amount adjustments that may be built into your homeowners insurance policy to keep pace with rising repair or replacement costs. For example, a policy with $300,000 of dwelling coverage may renew with a coverage amount of approximately $315,000 to provide consumers with the proper insurance protection going forward.
Consumer Rights
Insurers and agents must provide consumers with a clear explanation of premium increases, if one is requested. This explanation should be understandable and specific to the individual consumer.
Consumers may wish to contact their agent or insurer if a direct writer to discuss ways the consumer may be able to lower their rate or ask how a coverage or deductible change may impact their premium. Additionally, consumers may shop for insurance from other insurers to see if they can find coverage at a lower cost. When shopping around, consumers should be sure the premiums being quoted are for comparable coverage. If you decide to change to a new policy, you should not cancel the existing policy until you verify that a new one is active in order to avoid a gap in coverage.
Any consumer who requests an explanation of their premium increase but is not provided one should call or email the Insurance Division’s Consumer Services section at (800) 964-1748 or dfr.insuranceinfo@vermont.gov.
Downloadable PDF of this Consumer Advisory available.
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