Before August 1992, the insurance industry hadn’t paid much attention to hurricanes. Then came Hurricane Andrew, a category 5 hurricane with wind speeds exceeding 165 mph. At the time, most insurance companies were using “crude formulas” instead of tracking property replacement costs. Andrew destroyed 50,000 homes, damaged another 100,000 homes, and cost the insurance industry over $15 billion.
Today, in the United States we are seeing yearly insured losses of $100 billion compared to $4.6 billion in 2000. Insurance premiums are much more expensive and in several states are significantly increasing every year. Because of the expense, many people are either underinsured or are completely foregoing insurance coverage. It is estimated that 39 million U.S. are “covered at prices artificially lower than their risk.”
To make matters worse, global natural catastrophes have increased by 28 percent and since 1970, economic losses in the U.S. have increased an average of 5 percent a year. Many of the smaller insurance companies have gone bankrupt and several of the larger insurance companies are pulling out of higher risk states like California, Florida, Texas, and Louisiana.
And what about flood insurance? Most homeowner policies do not insure for flooding, and you must get a separate insurance policy. Most flood insurance policies are purchased through the National Flood Insurance Program which is a government-backed program. Today, most natural disasters already involve flooding but only 4 percent of U.S. homeowners have flood insurance! As sea-levels continue to rise and we have more powerful rains like we have seen this past year, there will be more flooding. “By 2050, coastlines will see a national average of 45 to 85 days per year of high-tide flooding.” That’s just from high tides! Perhaps you think that if you live inland it will not be a problem, right? “…inland, rivers and streams are spilling over their banks more frequently, a type of flooding projected to increase by as much as 30 percent as temperatures rise.”Research also shows that extreme rain is becoming more common and “…suggests about 20 percent of the country [the U.S.] will now see a “once in a century” rainfall every 25 years.”
References:
https://grist.org/economics/in-wildfire-prone-areas-homeowners-are-learning-theyre-uninsurable/
https://grist.org/economics/what-happens-when-americas-flood-insurance-market-goes-underwater/
https://grist.org/economics/as-climate-risks-mount-the-insurance-safety-net-is-collapsing/
https://www.theguardian.com/us-news/2023/may/27/state-farm-home-insurance-california-wildfires?CMP=oth_b-aplnews_d-1
https://www.foxbusiness.com/features/more-insurance-companies-pull-out-louisiana-crisisBefor
https://www.reuters.com/business/environment/hurricanes-floods-bring-120-billion-insurance-losses-2022-2023-01-09/
https://www.theatlantic.com/science/archive/2023/10/climate-change-home-insurance-companies/675681/?utm_source=apple_news
https://www.iii.org/fact-statistic/facts-statistics-homeowners-and-renters-insurance
https://www.nationwide.com/lc/resources/home/articles/underinsurance#:~:text=About%20two%20out%20of%20every,underinsured%20by%2060%25%20or%20more.
Photo by Scott Webb: https://www.pexels.com/photo/white-and-red-wooden-house-with-fence-1029599/
