Insurers bail on climate change coverage
Uh oh (via Tom Paine):
In the wake of skyrocketing insurance claims due to natural disasters—hurricanes, wildfires, droughts, blizzards and the like—insurers have been imposing steep rate hikes and, in some cases, fleeing high-risk areas, leaving consumers out in the cold. It's gotten so out of hand, consumer advocates say, that insurers now are even crying climate change as a factor in raising premiums or dumping clients.
As the crisis mounts, hard hit states such as Florida and Louisiana are increasingly stepping up as insurance companies check out, providing coverage for residents dropped by their insurers.
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"If circumstances change due to global warming that alter the level of risk, insurance companies need to be free to reflect that risk," says David Snyder, vice president and assistant general counsel for the American Insurance Association (AIA). "The reality is that in some places the risk is so severe that [these locations] are uninsurable."
Over the past year alone, insurance companies have dramatically raised homeowners' annual premiums in parts of Texas, Louisiana, the Carolinas, Massachusetts and New York State. In the Florida Keys, for instance, windstorm insurance rates for a 1,900-square-foot home in Monroe County soared from $3,000 in 2004 to nearly $16,000 in 2007. In South Carolina private companies have stopped insuring homes valued at less than $500,000. In Rhode Island some agencies have refused to cover any coastal properties. Allstate, one of the largest residential property insurers on the east coast, elected not to renew 30,000 policies covering coastal properties in New York City, Long Island, Westchester County and Connecticut, and is considering reducing coastal area coverage in Massachusetts and along the Gulf.
Insurance companies externalize as much risk and cost as they can get away with. That's fundamental to their business model. As climate change continues, so will this trend. This is irreversible.