Insurance Premiums To The Moon

(This post does not belabor why most people want or need insurance. That has been extensively discussed: What makes buying insurance rational?, When Is Insurance Worth It?, Money threshold Trigger Action Patterns.)We the people have not been loving our insurance premiums, which has outpaced both inflation and wage increase in the US. Many insurance companies cite policy changes or natural disasters as the reasoning, while a growing population thinks corporate greed is the dominant factor (possibly because of Luigi?). What's happening and what can we do about it?Where Do Your Premium Dollars Go?To begin reasoning about the phenomenon, let's first break down where the money went. The majority of each dollar you pay in premiums is spent paying claims and benefits, or waiting to be paid out as benefits (in reserve). Operating expenses are also a liability: employee salaries, commissions for brokers (if that's the distribution system), software, licensed contractors such as inspectors. Then, if there's anything left over, it becomes the profit of the insurance company.Variance is high company-to-company. One reason is that these companies don't all insure the same risk pool, sometimes due to adverse selection loop, sometimes due to natural diversification of product offering.Why do Premiums rise?When premiums rise, there are five possible overt explanations.Circumstances: external circumstances that cause more frequent or expensive claims, e.g. a less healthy population, wildfires and earthquakes, used cars become more expensive, more frequent travel. Or: external circumstances that cause more uncertainty and need for larger reserves and more expensive reinsurance, e.g. COVID-era travel patterns, climate change.Greed: increasing profits by raising premiums, which may sometimes be enabled by competitive insurers exiting certain markets, leaving less competition behind.CapEx: investment in technology or re-orgs that may reduce future costs.Inefficiency: bloated operations,