Rick Morain
A few weeks ago, our homeowner’s insurance carrier sent me an annual premium notice for the 12 month period beginning April 10, 2024. The assessments on our house, garage and personal property had gone up almost 7% over the previous 12 – monthly period. This was no surprise. I’ve actually been somewhat happy with what the conveyancer says is the replacement cost of our property now.
But the premium! Yes, that’s the problem. This was more than 50% higher than the previous 12-month renewal contract.
How is that possible? I have no idea. So I took the new premium notice and the one from a year earlier to our local home owners insurance agent. We have decided to sharply increase the policy deductible to contain the premium increase. But what I learned from our agent was an eye opener.
I knew how inflation affected construction costs, whether actual or as a hedge against potential losses. That was part of the premium increase, of course. It made sense.
But the part that shocked me was the fact that high levels of property damage statewide and nationally over the past three years from storms, wildfires and floods have contributed significantly to the jump in property insurance premiums. It’s not just Kathy’s home and my home—it’s homes in both Iowa and the United States. You may have experienced a similar eye-opener recently.
The bottom line: Climate change and the resulting weather-related damage are driving up the cost of property insurance at a rate never before seen across America. Whether we’ve had property losses or not, we’re paying for the spike in weather-related losses everywhere in this nation.
Traditionally, insurance companies look at past events to determine future risks and how those risks should affect premium costs. But climate change in recent years has made rearview mirror calculations almost irrelevant. Long heat waves cause kinks in the metal. Sea level rise floods coastal homes. Strong winds destroy roofs. The long-term drought is warping the asphalt on the driveways. Wildfires destroy entire communities.
The number of billion-dollar weather-related crashes in America has skyrocketed since 1980. Careful calculations by insurance actuaries and the US Office of Management and Budget predict that climate change could reduce US gross domestic product (GDP) by nearly 7% by 2050 and by 10% by 2100.
Globally, the situation is even more dire. If nations across the planet were to contain global warming to 4.7 degrees Fahrenheit—which is roughly what current policies will lead to—worldwide GDP could drop by 14%. If nations take further steps to limit heating to a rise of just 3.6 degrees, the drop in GDP could be kept to 11%.
The wildfires in California in 2017 and 2018 destroyed the profits of insurance companies in that state for 25 years. In just the three years of 2016, 2017 and 2018, insured losses from wildfires worldwide equaled more than 70% of those same types of losses in the nearly four decades from 1980 to 2018.
Given these conditions, it’s no surprise that insurance companies are raising their customers’ premiums. In the years and a half after January 2022, 31 states had double-digit rate increases, and six states had increases of 20-30%. Since then, the rates have continued to rise.
The situation in Iowa is alarming enough. In coastal states like California, Florida and Louisiana, it’s even worse. Some major companies have reduced or even denied coverage for homes on the East Coast because of potential flooding and for those in the West because of wildfires.
As a result, an increasing number of homeowners must go without insurance. So unless the government or philanthropists step in, these homeowners bear the entire loss in disasters. States and local communities could alleviate some of the pressure by adopting construction and land-use practices that reduce the risk to homes, but the numbers taking these steps are depressingly small.
Example: North Carolina has a statewide buyout program that uses state funds to buy back homes at high flood risk, but from 1996 to 2017, the state saw 10 new homes built in the floodplain for every property removed.
So far, no state has developed a building and land use plan to combat the effects of climate change, nor has the federal government. In the United States, the default response is to stop climate change. Perhaps the rising costs—or lack thereof—of insurance premiums will finally do what failure has so far failed to do: force people, businesses, political parties and governments to get serious about climate change.
Rick Morain is a reporter and columnist for the Jefferson Herald.
