Triple-I Blog | Debt Negotiation Increases Heat for P/C Insurance ‘Replacement Cost Disaster’

Uncertainty caused by the credit crunch could lead to lower prices that have led to inflation – and, ultimately, consumer prices, according to a Triple-I economist.

“Whether we go five, 10, 20 days – or if we don’t have a shutdown – this shows that the market is doing well in the government’s actions,” said Dr. Michel Léonard, CEO of Triple-I. economist and data scientist in conversation with Triple-I CEO Sean Kevelighan. “This leads to higher interest rates … which increases inflation and slows growth.”

As material and labor costs rise, home and car repairs become more expensive, leading to higher insurance premiums and higher premiums. For P/C companies that are already struggling with high turnover and trying to grow with the economy as a whole, Léonard said, “This. [debt limit debate] it increases those problems.”

Kevelighan – whose background includes working at the US Treasury Department during the administration of George W. Bush – called that instead more money would be “new.”

“You have to look at the cost of transition over three years, and it’s high,” Kevelighan said. “Homeowner replacement costs are up 55 percent. We have our car replacement costs up 45 percent. And if inflation gets worse, we’re in a really bad place.”

Léonard also said that the government has closed 21 times since 1976, closing for 35 days or a few hours. In the questions above, he explains how this has happened and the types of events that can happen.

Learn more:

How Inflation Affects P/C Insurance Rates – and How It Doesn’t (Triple-I Issues Brief)

Commercial Lines Partially Separated from Personal Lines Lost in P/C 2022 Results (Blog Three-I)

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