insurance
Newsletter
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Climate change impacts insurance availability in high-risk areas
Increasing natural disasters driven by climate change are making insurance unaffordable or unavailable for many homeowners, especially in states like California, Florida, and Louisiana.
In short:
- Homeowners in high-risk areas struggle to find affordable insurance as companies withdraw or hike premiums.
- States offer insurers more flexibility, but risk becoming the insurers of last resort.
- Rising disaster costs and population growth in risky areas exacerbate the problem.
Key quote:
“Insurance companies have basically become our land-use officials.”
— Doug Heller, director of insurance with the Consumer Federation of America
Why this matters:
Without affordable insurance, homeowners may be forced to relocate, which could lead to broader economic and social impacts. The increasing financial strain on homeowners is just one of many symptoms of a planet under stress. For families, this isn't just about rising costs—it's about the stability and security of their homes and lives.
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Learning about flood damage through social connections can impact your climate change readiness
A study reveals that social ties influence flood insurance uptake after major hurricanes, highlighting the role of social learning in climate preparedness.
In short:
- Researchers analyzed flood insurance trends post-Hurricanes Harvey and Irma, using the Facebook Social Connectedness Index.
- Areas with strong social ties to flooded regions saw significant increases in new flood insurance policies.
- The study suggests leveraging social learning to enhance climate change awareness and mitigation efforts.
Key quote:
"Our evidence of social learning suggests that a short episode of a regional climate disaster can stimulate persistent adaptation behavior in the entire social network up to 3 years after the disaster."
— Study authors
Why this matters:
These findings suggest that individuals are more likely to secure flood insurance if they observe friends, family, or neighbors doing so, emphasizing the influence of social learning on climate preparedness. As flooding risks rise, leveraging social connections could boost community resilience and adaptation.
Related:
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Rising insurance costs leave more homeowners uninsured
A growing number of homeowners are opting out of insurance as policies become more expensive and climate-related disasters increase.
In short:
- Many Americans, facing rising home insurance costs, are choosing to go without coverage.
- Insurers like State Farm are pulling out of high-risk areas, leaving homeowners with expensive alternatives.
- The rate of uninsured homeowners is rising, particularly among those who own their homes outright.
Key quote:
“It’s very unrealistic for any homeowner to think they can pay for catastrophic losses out of pocket.”
— Mark Friedlander, director of corporate communications, Insurance Information Institute
Why this matters:
As disasters become more frequent, the lack of insurance exacerbates the vulnerability of communities, making recovery slower and more challenging. It also emphasizes the need for robust climate action and adaptation measures to mitigate the risks and reduce the long-term costs associated with climate-related disasters.
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Insurance woes increase as climate change impacts profitability
In Iowa, a state typically seen as low-risk for insurers, companies are withdrawing due to increased losses caused by climate change.
In short:
- In Iowa, increased frequency of severe weather events like hail and wind storms has led to significant insurance company losses.
- Homeowners face cancellations and difficulties in finding new insurers, potentially leading to financial ruin without coverage.
- The situation mirrors broader national trends where climate change impacts are destabilizing insurance markets.
Key quote:
“Insurance is where many people are feeling the economic impacts of climate change first. That is going to spill over into housing markets, mortgage markets, and local economies.”
— Carolyn Kousky, associate vice president for economics and policy at the Environmental Defense Fund
Why this matters:
The retreat of insurance providers from Iowa is primarily due to an uptick in severe weather events, including more intense and frequent storms and flooding, which have led to higher-than-expected payouts. This pattern is indicative of a larger, more worrying trend that could reshape the insurance industry nationwide. As weather patterns become less predictable and more extreme, insurance companies are forced to reassess their exposure to risks they had previously underestimated.
A 2023 story by Derrick Z. Jackson reports that nearly 15 million homes were impacted in 2021 by climate disasters.
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Farmers grapple with scarce insurance options amid climate threats
In the face of escalating climate-related risks like droughts and floods, many fruit and vegetable farmers are struggling to find affordable insurance, jeopardizing their livelihoods and food supply.
In short:
- The availability and affordability of crop insurance for small farmers, especially those cultivating specialty crops, have sharply declined, reflecting the growing impact of climate change on agriculture.
- Legislation to improve access to crop insurance for these farmers faces challenges in Congress, amid a divide between large commodity growers and small, specialty crop farmers.
- The disparity in insurance coverage underscores the broader vulnerabilities and inequalities within the agricultural sector, with small farmers often bearing the brunt of climate-related adversities.
Key quote:
“We had two extremely wet years, sandwiched around one of the driest years I’ve ever seen. We can't sustain another year like last year."
— Bernie Smiarowski, farmer
Why this matters:
For farmers, insurance is an important safety net, protecting against the loss of their crops or livestock due to adverse weather conditions. However, as the risks associated with climate change increase, insurance companies are becoming more hesitant to offer policies to farmers, or they are increasing premiums to levels that are often unaffordable for the average farmer. This leaves farmers in a precarious position, having to bear the brunt of climate change's unpredictability without the financial protection insurance once provided.
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Weather events drive up insurance losses in 2023
A string of severe weather events, rather than a single major hurricane, has led to a significant increase in insurance losses, signaling a costly trend for policyholders.
In short:
- Insured damages from natural catastrophes are expected to double within a decade, with premiums rising to match the risk.
- Last year, smaller events like thunderstorms were the main culprits behind the damages, with the U.S. experiencing the brunt of the costs.
- Climate change contributes to the frequency and intensity of these events, though inflation and behavioral changes also play significant roles.
Why this matters:
The nature of global markets means that insurers can no longer afford to ignore the broader impacts of climate change. Disruptions in supply chains, infrastructure damage, and business interruptions stemming from extreme weather events all have ripple effects on insurance costs.
Disasters are not natural. We—humanity and society—create them and we can choose to prevent them.
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Connecticut's new bill targets insurers of fossil fuel projects with fees
Connecticut has proposed a fee on insurers backing fossil fuel projects, aiming to fund climate resilience efforts.
In short:
- Connecticut's legislation could make insurance companies pay for supporting fossil fuel projects, using the fees for climate resilience.
- The bill, having passed a state senate committee, targets the insurance industry's dual role in the climate crisis.
- Funds raised would support infrastructure like sea walls and urban flood protection, addressing the state's vulnerability to climate disasters.
Key quote:
"It’s important to begin to hold [insurers] accountable for how they’ve played it both ways in terms of climate change."
— Tom Swan, executive director of Connecticut Citizen Action Group
Why this matters:
This initiative is designed to mitigate the environmental impact of continued fossil fuel extraction and use, and to align insurance industry practices with global sustainability goals. By restricting insurance coverage, the bill seeks to make it more difficult and expensive for fossil fuel projects to operate, thereby accelerating the transition to renewable energy sources.
Will the Inflation Reduction Act mark the time when fossil fuels begin to fossilize?
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