As the impact of climate change becomes increasingly costly to insurers, they are reducing protection.
Some of the United States’ largest home insurance companies are announcing that the increasingly frequent and severe weather caused by climate change is leading them to raise premiums and remove certain coverages relating to natural disaster protection.
Major insurers are increasingly finding themselves facing an unmanageable risk from natural disasters.
That said, this type of decision is leading home insurance customers in some of the most vulnerable areas without the coverage they require the most.
Allstate, American Family, Berkshire Hathaway, Nationwide, and Erie Insurance Group have all told regulators that climate change-caused extreme weather patterns have forced them to cease writing coverage in regions that are the most affected by those patterns. In other affected areas, they are continuing to write coverage but with certain weather events excluded, while they increase premiums and deductibles.
According to major insurers, they are beginning to eliminate the damage caused by weather events such as wind, hail and hurricanes from their policies. Moreover, they are also reducing or eliminating policy underwriting for properties most at risk of wildfires or that are located along coastlines. This information was reported through the results of a voluntary survey conducted by the National Association of Insurance Commissioners (NAIC). NAIC is comprised of state officials regulating rates and policy forms.
Home insurance companies are dropping existing policies in areas most at risk of natural disaster.
The majority of homeowners’ policies have annual terms, which means that insurers are not required to renew after that period has expired. Therefore, many property owners who had once considered their coverage against natural disasters to be secured could find themselves losing the protection they’ve leaned on the most for peace of mind and financial protection against such exposures.
This trend may only worsen as the planet continues to warm and the natural disasters caused by these climate changes lead to greater threats of damage and, therefore, a higher number of home insurance claims. Moreover, with inflation and the rising cost of repairs, those claims are also only getting more expensive.
