View of a damaged property after the arrival of Hurricane Idalia in Horseshoe Beach, Florida, August 31, 2023.
Julio Cesar Chavez | Reuters
WASHINGTON — Low-income policyholders will probably be hit hardest by rising insurance premiums because the frequency of natural disasters brought on by climate change increases and insurers pull out of some coverage areas, witnesses argued before a Senate panel on Thursday.
“We now have seen our property and casualty insurance costs (increase) 400% in six years,” said Michelle Norris, executive vice chairman of external affairs and strategic initiatives for National Church Residences, a nationwide inexpensive senior housing organization.
“Even developers and owners with very large portfolios, like ours, have little bargaining power in today’s industry,” Norris added in her testimony before the Senate Banking Committee.
Some insurers have stopped adding latest policies in states like Florida, California and others which were heavily affected by climate-related events, making disaster recovery harder for people in those regions and reinsurance tougher to realize, in response to experts.
Persistent weather events have led to rate increases and reductions in coverage offered, often overburdening low-income residents. The common cost of property insurance has soared lately, in response to an evaluation by credit standing firm S&P Global Rankings.
“Without insurance, thousands and thousands of families will probably be at greater risk for climate crises,” Sen. Elizabeth Warren, D-Mass., a member of the committee, said through the hearing. “And as whole communities lose access to insurance, the impact goes to be felt all through our economy.”
Some Republicans, nevertheless, argued that state policies are causing an exodus of insurers from certain markets.
California’s Proposition 103, the 1988 law that required the state’s Department of Insurance to approve property and casualty insurance rates and ordered insurers to “roll back” rates by 20%, was cited for instance through the hearing.
“When you possibly can’t make a profit, you don’t remain in those states,” said Sen. Tim Scott, R-S.C., rating member of the Senate Banking Committee. “It’s certainly one of the the reason why you see, slightly a State Farm, AIG, the insurance firms that we just named, leaving markets. It’s because rates sufficiency is not possible to get there.”
Insurance regulation can also be burdening Florida and resulting in higher premiums, said Scott. But litigation, not hurricanes, is the driving force. Insurers in Florida handle 9% of all homeowners insurance claims within the U.S., but make up 79% of householders insurance lawsuits over claims filed, in response to reporting from the Insurance Information Institute.
Douglas Heller, director of insurance for the Consumer Federation of America, testified that the federal government should put money into tax-free incentives to strengthen homes to cut back risks and produce down costs.
“What we actually should be doing is putting our money upfront,” Heller said. “If we protect homes with $1, we haven’t got to rebuild with emergency funds with $5, $6 and $7 after the actual fact.”
The Senate committee’s hearing on the property insurance market comes a day after Democratic senators, led by Warren, sent a letter urging Treasury Secretary Janet Yellen and Steven Seitz, director of Treasury’s Federal Insurance Office, to gather comprehensive data in regards to the impacts of climate change on the insurance industry.
Natural disasters led to roughly $130 billion in insured losses globally last yr, in response to Aon. Hurricane Ian, which caused severe flooding in Florida and Cuba in 2022, accounted for around $50 billion to $55 billion of that quantity. The Sunshine State is currently recovering from the devastation of Hurricane Idalia, while the destructive Maui wildfires in August is estimated to cost Hawaii between $4 billion and $6 billion in economic losses, in response to risk assessment firm Moody’s.
