Wildfires, hurricanes and other natural disasters exacerbated by climate change are causing billions of dollars in property damage every year, and the devastating trend could push home insurance premiums out of reach for homeowners in certain high-risk areas.
Last Friday, the government released a report warning of more widespread extreme events occurring more frequently and with more intensity. Recent history seems to bear these predictions out, as the last four years alone have seen six of the 10 most destructive wildfires in California history. With the increase of natural disasters related to climate change has come a commensurate increase in home insurance premiums. As of 2015, the latest year for which data is available, insurance rates have risen 50 percent since 2005.
More intense and more frequent natural disasters are forcing insurance companies to change how they do business in order to accommodate. In some states where insurance companies no longer not make a profit, they have simply stopped providing insurance there altogether. This has forced homeowners with no other options to resort to insurers backed by state and federal government. Federal subsidies to home insurance programs have put a strain on the U.S. Treasury, and without reforms to prevent the program from becoming insolvent, Congress is reluctant to reauthorize it.
Some states mandate that insurance companies offer premium discounts to customers who take proactive steps to minimize damage from a natural disaster to their property. Insurers, however, believe that some disaster mitigation efforts are more effective than others. Specifically, insurance companies view fire mitigation efforts with skepticism and generally do not offer homeowners discounts for taking steps to prevent fire damage.
The more frequent and intense the natural disasters that occur in the United States, the more insurance companies will pass the increased costs on to consumers. Those with questions or concerns about property insurance may find it helpful to consult an attorney.