Excerpts Insurance

Insurers as an Inflation Play

But the auto insurance, which we’ve done big through Geico, the average price of our policy when I went in in 1950 was, I don’t know, 50 or 60 bucks, and now it’s over $2,000 a year.

And we even went the whole auto insurance industry went from pricing the stuff for a yearly policy, to changing it every six months. I mean, we are not issuing any 20-year policies or 30-year policy.

And it’s not a special risk for insurers. You just keep adjusting your prices to the risk as the risk changes. And you can argue, I sure as hell don’t wish it on anybody, but you can argue inflation is basically good for insurers because you write – it writes bigger premiums on much bigger coverages.

And that’s actually happened in auto insurance, well, what with the autos have gotten safer, you know, and everybody isn’t driving terribly compared to the way they drive 20 years ago, the accidents per 100 million miles driven, you know, has gone down a lot.

But the price of insurance, auto insurance, has gone up, like, 30 or 40 for one. And it went up – it was going up at a fast enough rate that insurance companies said, “We’re not going to say give you a one-year policy. We’re going to give you a six-month policy.”

said Warren Buffett

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