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Who Is John Galt and Why Is Insurance SO Expensive?


The Silent Struggle: Unveiling the Reality of Money Dysmorphia

March 03, 2024

As a throwback to the iconic novel Atlas Shrugged, by Ayn Rand, the rhetorical question that was reiterated throughout the book was "who is John Galt?" It was a question that dismissed a concern that was brought by someone who was frustrated with the state of things. It was also a question that was stated as an act of exhausted acceptance to the new status quo. Spoiler alert, John Galt is the protagonist who decided that enough was enough with the government overreach in all aspects of people's lives. He was the man who encouraged the great minds to go on strike against the people and authorities who did not create or think of new ideas. It was a strike against the moochers who did not contribute to the betterment of life but instead demanded that others sacrifice in order to make others' lives better. Sound familiar? Needless to say, Ayn Rand was either extremely prophetic 70 years ago or she saw something in her home country and wrote this novel as a cautionary tale for those that followed to ensure it didn't happen again.

What does this have to do with Insurance and everything else that is getting so expensive? The governmental overreach and over regulations are causing more problems than they fix. Like Reagan said, "The nine most terrifying words in the English language are: I'm from the Government and I'm here to help." With all the best of intentions, governmental leaders fight for higher pay, easier workloads, limits on price increases and the attempt to create more affordable living situations. Those intentions, once implemented, force business owners to hire less people, rely on automation, cut corners or move their business elsewhere.

Recently, there are insurance companies that are hitting the breaking point in certain areas of the country. The main purpose of insurance is to spread the risk of all the policy holders to ensure that someone is made whole during a catastrophic event. However, California has more wildfires than Kansas and Florida has more hurricanes than North Dakota. Insurance companies are having to increase premiums across the board to balance out their increased claims. It isn't just the catastrophic claims. A minor fender bender is costing an auto insurance company thousands of dollars. A bumper repair or replacement used to be a few hundred dollars but with the new sensors and cameras, it could cost over $3000. Even side view mirrors are 10 times more expensive today due to the high tech inside of them.

Auto insurance companies have had to increase their premiums by almost 50% in the last 9 years which is higher than normal inflation. Not surprisingly, the most expensive states are CA, FL, LA, NY, and MI due to their high population density, age of population or natural disasters like storms and wildfires. Insurance companies state that the cost of repair is getting higher due to the recent inflation spike, supply chain issues (can't find parts), and the inability to find people to perform the needed repairs (shortage of labor). This all contributes to a higher cost for the insurance company. The same is true in the Home Owner's Insurance world.

To make matters worse, California (with the best of intentions) requires that an insurance company get an approval before they can raise their rates more than 7% after they issue a policy (California Prop 103). The big players have decided to take their ball and go home. Most notably, State Farm and AllState announced that they will not write any new policies in California due to all the above mentioned factors of increased cost of repair/replacement, increases in natural disasters and the fact that they can't increase premiums without jumping through governmental loopholes. Some of the smaller companies have announced that they will not re-issue policies upon expiration. And, as a twist of irony, when fewer insurance companies are in the field (supply vs demand), the price will go up or, in California, the consumers have to revert to the backup plan for insurance (California's FAIR plan). This is now putting an undo strain on the "back up plan."

So, what can be done? For one thing, reach out to a local elected official to pass reasonable laws that reduce regulations and allow companies to compete and adjust prices according to the needs of the area. Secondly, take action and find ways to reduce premiums.

Below are a few bullet points on controllable ways to keep insurance premiums low:

  • Good Driving Record
  • Good Credit Score
  • Low mileage
  • Drive cars with low cost repairs
  • Sign up for a Higher Deductible
  • Lower type of coverage (risky but helps lower premiums)

Below are some factors that may be beyond control but will keep insurance premiums low:

  • Where you live
  • Your age
  • Driving experience
  • Married with a home
  • Type of Job
  • Education level
  • Gender

These strategies to keep insurance premiums low can also be beneficial in home owners and renters insurance. Lastly, always review the policy coverage and shop around for the best coverage on an annual basis. Most companies will adjust their premiums each year so it never hurts to get a second opinion.

If you would like to receive more information on making smart money moves for your future, be sure to contact us today!


Financial Moves for Fifty Year Olds

About the author

Brian Watson

Brian Watson

Vice President, Private CFO®

Brian is a true Atlanta native and graduated from Walton High School. He got his Bachelor's degree in Business from Samford University in Birmingham, AL and then his Master's degree from Beeson Divinity. He is blessed to be married to his best friend, Jen, and they have 4 amazing kids (age range 7-13). He is active in his community by serving as a deacon at Johnson Ferry Baptist Church and helps lead their Children's Worship Service called Kid's Church. He is a baseball and soccer coach each season through the Upward sports program and even serves on the board for his kid's school, East Cobb Christian School. And if there is ever any free time from all this, he likes to run with his dog or sit on the back deck with friends/family or just read a good book.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice. Investor Disclosures: https://bit.ly/KF-Disclosures

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

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Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice. https://Bit.ly/KF-Disclosures

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