Why home insurance rates are rising so fast across the US. Climate change plays a big role

[Pelican Press 0]

This is the hidden content, please

• Sign In
• or
• Sign Up

Why home insurance rates are rising so fast across the US. Climate change plays a big role

data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///ywAAAAAAQABAAACAUwAOw==

Credit: Pixabay/CC0 Public Domain

Millions of Americans have been watching with growing alarm as their homeowners insurance premiums rise and their coverage shrinks. Nationwide,

This is the hidden content, please

• Sign In
• or
• Sign Up

between 2017 and 2023, and they

This is the hidden content, please

• Sign In
• or
• Sign Up

across much of the country.

To add insult to injury, those rates go even higher if you make a claim—

This is the hidden content, please

• Sign In
• or
• Sign Up

.

Why is this happening?

There are a few reasons, but a common thread:

This is the hidden content, please

• Sign In
• or
• Sign Up

, and insurers are responding to rising damage claims. The losses are exacerbated by more frequent extreme weather disasters

This is the hidden content, please

• Sign In
• or
• Sign Up

, rising construction costs and homeowners experiencing damage that was once more rare.

Parts of the U.S. have been seeing larger and more damaging hail, higher storm surges, massive and widespread wildfires, and heat waves that ***** metal and buckle asphalt. In Houston, what used to be a 100-year disaster, such as Hurricane Harvey in 2017, is now a

This is the hidden content, please

• Sign In
• or
• Sign Up

,

This is the hidden content, please

• Sign In
• or
• Sign Up

at First Street Foundation suggest. In addition,

This is the hidden content, please

• Sign In
• or
• Sign Up

into

This is the hidden content, please

• Sign In
• or
• Sign Up

and wildland areas at risk from storms and wildfires.

Just a decade ago, few insurance companies had a comprehensive strategy for addressing climate risk as a core business issue. Today, insurance companies have no choice but to factor climate change into their policy models.

Rising damage costs, higher premiums

There’s a saying that to get someone to pay attention to climate change, put a price on it. Rising insurance costs are doing just that.

Increasing

This is the hidden content, please

• Sign In
• or
• Sign Up

lead to more extreme weather, and that means insurance companies have had to make higher payouts. In turn, they have been raising their prices and changing their coverage in order to remain solvent. That raises the costs for homeowners and for everyone else.

The importance of insurance to the economy cannot be understated. You generally cannot get a mortgage or even drive a car, build an office building or enter into contracts without insurance to protect against the inherent risks. Because insurance is so tightly woven into economies, state agencies review insurance companies’ proposals to increase premiums or reduce coverage.

The insurance companies are not making political statements with the increases. They are looking at the numbers, calculating risk and pricing it accordingly. And the numbers are concerning.

The arithmetic of climate risk

Insurance companies use data from past disasters and complex models to calculate expected future payouts. Then they price their policies to cover those expected costs. In doing so, they have to balance three concerns: keeping rates low enough to remain competitive, setting rates high enough to cover payouts and not running afoul of insurance regulators.

But climate change is disrupting those risk models. As global temperatures rise,

This is the hidden content, please

• Sign In
• or
• Sign Up

from fossil fuel use and other human activities, past is no longer prologue: What happened over the past 10 to 20 years is less predictive of what will happen in the next 10 to 20 years.

The number of

This is the hidden content, please

• Sign In
• or
• Sign Up

in the U.S. each year offers a clear example. The average rose from 3.3 per year in the 1980s to 18.3 per year in the 10-year ******* ending in 2024, with all years adjusted for inflation.

With that more than fivefold increase in billion-dollar disasters came rising insurance costs in the Southeast because of hurricanes and extreme rainfall, in the West because of wildfires, and in the Midwest because of wind, hail and flood damage.

Hurricanes tend to be the most damaging single events. They caused more than US$692 billion in property damage in the U.S.

This is the hidden content, please

• Sign In
• or
• Sign Up

. But severe hail and windstorms, including tornadoes, are also costly; together, those on the billion-dollar disaster list did more than $246 billion in property damage over the same *******.

As insurance companies adjust to the uncertainty, they may run a loss in one segment, such as homeowners insurance, but recoup their losses in other segments, such as auto or commercial insurance. But that cannot be sustained over the long term, and companies can be caught by unexpected events. California’s unprecedented wildfires in 2017 and 2018

This is the hidden content, please

• Sign In
• or
• Sign Up

for insurance companies in that state.

To balance their risk, insurance companies often turn to reinsurance companies; in effect, insurance companies that insure insurance companies. But reinsurers have also been

This is the hidden content, please

• Sign In
• or
• Sign Up

to cover their costs. Property reinsurance alone increased by

This is the hidden content, please

• Sign In
• or
• Sign Up

. Insurers are passing those costs to their policyholders.

What this means for your homeowners policy

Not only are homeowners insurance premiums going up, coverage is shrinking. In some cases, insurers are reducing or dropping coverage for items such as metal trim, doors and roof repair, increasing deductibles for risks such as hail and ***** damage, or refusing to pay full replacement costs for things such as older roofs.

Some insurances companies are simply withdrawing from markets altogether, canceling existing policies or refusing to write new ones when risks become too uncertain or regulators do not approve their rate increases to cover costs. In recent years,

This is the hidden content, please

• Sign In
• or
• Sign Up

pulled back from California’s homeowner market, and

This is the hidden content, please

• Sign In
• or
• Sign Up

pulled back from the Florida market, which is seeing some of the highest insurance rates in the country.

State-run “insurers of last resort,” which can provide coverage for people who can’t get coverage from private companies,

This is the hidden content, please

• Sign In
• or
• Sign Up

. Taxpayers in states such as

This is the hidden content, please

• Sign In
• or
• Sign Up

and

This is the hidden content, please

• Sign In
• or
• Sign Up

have been forced to bail out their state insurers. And the National Flood Insurance Program has raised its premiums, leading

This is the hidden content, please

• Sign In
• or
• Sign Up

to sue to stop them.

About

This is the hidden content, please

• Sign In
• or
• Sign Up

have given up on insurance altogether, leaving an estimated

This is the hidden content, please

• Sign In
• or
• Sign Up

, including in high-risk states such as Florida.

No, insurance costs aren’t done rising

According to NOAA data, 2023 was the

This is the hidden content, please

• Sign In
• or
• Sign Up

“by far.” And 2024

This is the hidden content, please

• Sign In
• or
• Sign Up

. This general warming trend and the rise in extreme weather is

This is the hidden content, please

• Sign In
• or
• Sign Up

until greenhouse gas concentrations in the atmosphere are abated.

In the face of such worrying analyses, U.S. homeowners insurance will continue to get more expensive and cover less. And yet,

This is the hidden content, please

• Sign In
• or
• Sign Up

, chairman of the board of reinsurance giant Swiss Re, believes U.S. insurance is still priced too low to fully cover the risk from climate change.

Provided by
The Conversation

This article is republished from

This is the hidden content, please

• Sign In
• or
• Sign Up

under a Creative Commons license. Read the

This is the hidden content, please

• Sign In
• or
• Sign Up

.data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///ywAAAAAAQABAAACAUwAOw==

Citation:
Why home insurance rates are rising so fast across the US. Climate change plays a big role (2024, September 24)
retrieved 24 September 2024
from

This document is subject to copyright. Apart from any fair dealing for the purpose of private study or research, no
part may be reproduced without the written permission. The content is provided for information purposes only.

This is the hidden content, please

• Sign In
• or
• Sign Up

#home #insurance #rates #rising #fast #Climate #change #plays #big #role

This is the hidden content, please

• Sign In
• or
• Sign Up

This is the hidden content, please

• Sign In
• or
• Sign Up