Following last week's elections in the U.S., it seems that for every two pundits you find three opinions about what the elections tell us about the prospects for the mid-terms coming up in a year. But seemingly everyone has settled on a theme that politicians must and will hit hard:
Affordability.
That word is everywhere, and not just among Democrats, who used it to win elections for governor in New Jersey and Virginia, for mayor of New York City and for a host of down-ballot offices, including in areas thought of as Republican strongholds. President Trump has vowed to wrest ownership of the affordability theme from Democrats, and a high-profile acolyte of his running for governor of New York says affordability will be her watchword, too — as does the current governor, who will represent the Democrats. Everybody loves affordability.
No matter who wins the arm wrestling match, you can be sure that billions of dollars in ads will run in the next 12 months hammering home the need to make goods and services more affordable in the U.S.
That represents an opportunity for the insurance industry.
If you want to understand more about how hard politicians will push on affordability for the next 12 months, here are two good articles:
- The Atlantic explores how Democrats turned affordability into victories across the board, adapting the core theme for a wide variety of offices in a host of different political environments. The article warns that the winners now have to live up to their ambitious promises, which will likely be hard to do. "Politics isn’t just about the words you put on your bumper stickers," the article cautions. "It’s about what you do if the bumper stickers work." But the writer predicts that affordability will show up in just about every imaginable form in Democratic campaigns across the country.
- The New York Times documents how Trump, and by extension the whole Republican party, has repeatedly claimed that everything is already affordable. Even though economic cheerleading by the Biden administration and the Harris campaign failed to convince voters in the 2024 presidential election, Trump has strained to create an alternate reality where grocery prices are down (they're up 3.1% in the past year), where inflation has disappeared (it's 3% in the past 12 months and has been rising, albeit slowly), where gasoline prices are plunging toward $2/gallon (they're down a penny since Trump took office, at $3.08/gallon, and show no signs of plunging), etc. He will surely continue making up numbers — he always has — but since last week's elections, the Times says, Trump has declared that "affordability" is "a new word" and has vowed to claim it for his own. Buckle up.
I think insurers can ride this wave.
That may seem like a stretch at a time when rising car prices and disrupted supply chains have combined with some dangerous driving habits to send auto claims soaring and when natural disasters have exacerbated similar inflationary issues for homeowners insurance. There are obvious limits to what the industry can do to make insurance more affordable. Rates have to be sustainable.
But policyholders are already sensitized to rising insurance premiums, and the drumbeat will continue. Just in the past week, the National Association of Realtors reported that the average age for a first-time home buyer in the U.S. has soared to 40, from 33 in 2020 and 28 in 1991, and insurance premiums are part of the problem. The flood of advertising and attention by politicians in the next year will, if I'm remotely correct, heighten the concerns. So the industry can either ride the wave or be swamped by it. I vote for riding, both by creating messaging about helping policy holders manage costs — and then by doing it.
For carriers, maybe the best approach is to emphasize the Predict & Prevent approach as much as possible. Homeowners insurers can subsidize sensors that detect the potential for fires and water leaks, or even offer them for free if that makes economic sense — as it increasingly does. Carriers can alert people to anything about their properties that increases exposure to wildfires, floods or storms, while offering discounts if the homeowner takes appropriate action. Even outside the insurance equation, carriers could offer advice on preventive maintenance or anything else that could help people manage down costs.
Auto insurers could emphasize programs to help people drive safely (and lower premiums), to prevent theft, to get the car under cover as a hailstorm approaches, and so on. Anything to show customers that we're on their side as much as we can be.
Claims departments and third-party administrators could work even harder than they already are to expedite payments — and let the world know about their efforts — because people are feeling financial pressure. If there's a way to advance even a partial payment, that would help some people a lot.
Agents and brokers are where the rubber meets the road. They can pay even more attention to financial anxieties among clients and help them maintain the coverage they need while minimizing increases in premiums.
Those are just some very rough ideas. I'm sure you have better, more sophisticated ones than I do.
My point here is just to note that affordability is going to be a hot button for at least the next year, if not longer. We should get in front of the issue.
Cheers,
Paul
P.S. There's an old joke about a young politician asking an aging veteran what the secret of his long-term political success has been.
"Sincerity," the old politician replies.
"Once you learn to fake that, you've got it made."
To be clear, I'm not suggesting faking anything.
A) It's the wrong thing to do.
B) The industry couldn't get away with it. Politicians' claims of "fake news" may absolve them of just about any wrongdoing these days, but regulators and insurance customers are far more discerning and critical than voting blocs are.
I'm saying insurers should do whatever they can to address the affordability problem — then take all due credit.