Consumer Price Index
What Does Consumer Price Index Mean?
The Consumer Price Index (CPI) is a tool used to measure inflation in a specific area. It includes insurable assets such as healthcare, housing, and transportation in its calculations.
Insuranceopedia Explains Consumer Price Index
Insurance companies refer to the consumer price index to track price changes in the assets that they are insuring. For example, if a health insurance company looks at the consumer price index and notices that medical costs have risen 5 percent in the past year, they may have to raise their prices to keep up with this inflation. If they don’t, they may struggle to cover all of the claims. On the consumer side, higher medical CPI numbers are a signal to shop around or find ways to lower your health insurance rates before renewal.
The same thing happens with housing. When shelter costs rise, home insurers often follow, which is one reason the average cost of homeowners insurance has gone up over the last few years.
