Travelers Companies Inc (TRV), The Allstate Corporation (ALL), Hartford Financial Services Group Inc (HIG): Why You’ll Pay a Lot More for Insurance Soon

Why property insurance has gotten popular
These issues affect different insurance lines in similar ways. But, within the industry, there’s been a pronounced shift to focus on property and casualty insurance. Hartford Financial Services Group Inc (NYSE:HIG) has moved aggressively to divest its annuity and life-insurance businesses to focus on property and casualty lines, and American International Group Inc (NYSE:AIG) has largely accomplished its post-bailout goal of selling off ancillary businesses in order to return to its core insurance-market roots.

Even though insurers can point to low interest rates as a way to get premium hikes approved, they aren’t universally stuck with those low returns. Many insurance companies have benefited greatly by taking on more risk in their investment portfolios. Berkshire Hathaway Inc. (NYSE:BRK.A) is the most obvious example of an insurance company that retains heavy exposure to equities as part of its competitive advantage and a driver of its massive long-term returns, but increasingly, other insurance companies are following its lead, and investing in stocks and other higher-return, higher-risk assets. Lately, the stock market has cooperated, giving insurance-company shareholders some impressive stock appreciation, even in the face of major disasters.

What you can do
For consumers, the insurance environment could be tough for a while. What’s promising, though, is the attention that property and casualty insurance is getting among potential new entrants to the industry. Greater competition is the key to breaking the trend of rising rates, and eventually, the flood of insurers seeking high profits leads to slower growth in rates and, sometimes, even reductions.

For now, to cut costs as much as possible, make sure you have only the insurance you need. Appropriate policy limits are your best defense against unnecessary costs. You should also consider taking on higher deductibles, as remaining responsible for a higher amount on each claim can reduce your premiums substantially. Finally, if you have a clean loss record, take advantage of discounts that many insurance companies provide.

By doing all those things, you may not produce the insurance savings you’d like to see. But not doing them will cost you even more in premiums.

The article Why You’ll Pay a Lot More for Insurance Soon originally appeared on Fool.com is written by Dan Caplinger.

Fool contributor Dan Caplinger owns shares of Berkshire Hathaway and warrants on AIG and Hartford Financial. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends AIG and Berkshire Hathaway. The Motley Fool owns shares of AIG and Berkshire Hathaway and has options positions on AIG.

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