Climate Change Causes Insurance To Cut Coverage

 The following is part of an op-ed by Jacob Bogage in The Washington Post:

In the aftermath of extreme weather events, major insurers are increasingly no longer offering coverage that homeowners in areas vulnerable to those disasters need most.

At least five large U.S. property insurers — including Allstate, American Family, Nationwide, Erie Insurance Group and Berkshire Hathaway — have told regulators that extreme weather patterns caused by climate change have led them to stop writing coverages in some regions, exclude protections from various weather events and raise monthly premiums and deductibles.

Major insurers say they will cut out damage caused by hurricanes, wind and hail from policies underwriting property along coastlines and in wildfire country, according to a voluntary survey conducted by the National Association of Insurance Commissioners, a group of state officials that regulates rates and policy forms.

Insurance providers are also more willing to drop existing policies in some locales as they become more vulnerable to natural disasters. Most home insurance coverages are annual terms, so providers are not bound to them for more than one year.

That means individuals and families in places once considered safe from natural catastrophes could lose crucial insurance protections while their natural disaster exposure expands or intensifies as global temperatures rise.

“The same risks that are making insurance more important are making it harder to get,” Carolyn Kousky, associate vice president at the Environmental Defense Fund and nonresident scholar at the Insurance Information Institute, told The Washington Post. . . .

Typical home insurance policies cover damage from all manner of perils, including fire and smoke, wind and hail, plumbing issues, snow and ice, and vandalism and theft. Floods are generally covered by a separate federally administered program.

Under the policy changes many large insurers are reporting to regulators, firms will continue to offer baseline policies to clients in disaster-prone areas, but without protections for damage caused by those disasters. For example, a policy in a region afflicted by hurricanes may exclude coverage for wind or hail damage, or in wildfire country, a policy without fire and smoke protection. . . .

Insurance markets, especially those that serve many regions across the country, rely on relatively stable risk projections when it comes to natural disasters. By balancing wildfire risk during the late spring in the Pacific Northwest with hurricanes in the early fall in the Southeast and winter storms in the Upper Midwest, insurers can spread risk across constituencies. In theory, providers can collect monthly premiums from a broad clientele without paying out claims on too many large-scale disasters at once.

But weather patterns are changing as the planet warms.