Climate Change Drives Soaring Insurance Costs: Homeowners Face Reduced Coverage and Skyrocketing Premiums
September 26, 2024The growing reliance on government-backed insurers raises concerns about financial stability, especially in the event of a major disaster.
Homeowners are facing reduced coverage and higher deductibles, prompting some to forgo insurance altogether, which further exacerbates the rising costs.
Climate change is increasingly driving severe weather events, which in turn leads to rising damage claims and escalating insurance costs.
Rheinländer estimates that approximately 10% of the anticipated price hikes in insurance can be attributed to climate change, while the rest is due to increased costs for spare parts and labor.
In response to these challenges, insurance companies are revising their business models to better incorporate climate risks, an area they previously overlooked.
Florence Lustman emphasizes the importance of preventive measures to mitigate future rate increases, although many insurers have not publicly addressed this issue.
Recent legislation in Oklahoma promotes home strengthening through grant programs, with similar initiatives being pursued in other states to reduce future risks.
As private insurers withdraw from high-risk markets, state-backed insurers like California's FAIR Plan and Florida's Citizens Insurance are becoming the primary providers of home insurance.
The BC Non-Profit Housing Association is working on strategies to stabilize insurance premiums by pooling risks across regions, aiming to lessen the impact of rising costs.
Despite the price increases, the overall damage-cost ratio for insurers is projected to remain between 104% and 106%.
Proposed rate hikes have included increases of up to 99% in certain coastal areas, leading to significant public opposition and extensive testimony against them.
Reinsurance rates have surged by 37% in 2023, making it increasingly difficult for insurance companies to provide coverage in high-risk areas.
Summary based on 28 sources
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Sources
Yahoo Finance • Sep 26, 2024
Large Property Insurers Respond to Climate Change by Denying Homeowner Claims