Your Homeowners’ Insurance Bill Is the Canary in the Climate Coal Mine

NYT OPINION: Your Homeowners’ Insurance Bill Is the Canary in the Climate Coal Mine
By Benjamin Keys
Section: Opinion
Source: New York Times
Published Date: May 7, 2023 at 03:00AM

Wharton’s Ben Keys on how climate change is already reshaping the insurance and housing markets — and how our denial is only making the problem worse.

If you don’t think you’ve been affected by global warming, take a closer look at your last homeowners’ insurance bill: The average cost of coverage has reached $1,900 a year nationwide, but it’s $4,000 a year in New Orleans and about $5,000 a year in Miami, according to Policygenius, an online insurance marketplace. And that is pocket change compared with the impact climate change may ultimately have on the value of your home. We have reached a turning point: Climate risk is driving insurer decisions like never before. After recent years of paying out claims for about 20 disasters a year with damages of over $1 billion, a sixfold increase from the 1980s, insurers are getting serious about new pricing models that incorporate the costs of a warming climate. Across the United States, premiums jumped 12 percent from 2021 to 2022, according to Policygenius estimates, and they are expected to continue to rise. Even with higher premiums, unpredictable losses are wreaking havoc on insurers’ bottom lines. Ten insurers have gone belly up in Florida in just the last two years. And in many cases, insurers are pulling back in risky areas, leaving state-backed insurance plans holding the bag. Both private and government-backed insurers are undercapitalized for dealing with the potentially massive disasters we could be facing in coming years. This shortfall foreshadows more premium increases, which will drag down house prices. And losses will not be borne by those residing in higher-risk areas only; they will be borne by policyholders everywhere.

Read more at: https://www.nytimes.com/2023/05/07/opinion/climate-change-homeowners-insurance-housing-market.html