Climate change drives up homeowners' insurance costs

Thunderstorm capable of producing tornadoes approaches grain silos in Iowa. Photo by John Huntington, available via Shutterstock.

Rick Morain is the former publisher and owner of the Jefferson Herald, for which he writes a regular column.

A few weeks ago, our homeowner’s insurance carrier sent me our annual premium notice for the 12-month period beginning April 10, 2024. The valuations of our house, garage, and personal property had climbed almost 7 percent higher than they were for the previous 12-month period. That wasn’t a surprise. In fact, I was somewhat gratified by what the carrier says is the replacement cost of our property now.

But the premium! Ay, there’s the rub. It was more than 50 percent higher than the previous 12-month renewal contract.

How could that be? I had no idea.

So I took the new premium notice and the one from a year earlier to our local homeowners’ insurance agent. We decided to sharply increase the policy’s deductible to hold down the premium hike. But what I learned from our agent opened my eyes. I knew how inflation had impacted construction costs, whether actual or as protection against potential loss. That was part of the premium increase, of course. That made sense.

I was shocked to learn that high levels of property damage statewide and nationally over the past three years, caused by storms, wildfires, and floods, were contributing heavily to the jumps in property insurance premiums. It isn’t just Kathy’s and my home—it’s the homes all across both Iowa and the United States.

You may have experienced a similar eye-opener recently as well.
 The bottom line: climate change, and its resulting weather-related damage, are driving up homeowners’ insurance costs at a rate not hitherto experienced across America. Whether we’ve had property losses or not, we’re paying for the sharp jump in the incidence of weather-related losses everywhere in this nation.

Traditionally, insurance companies look to past events to determine future risks and how those risks should affect premium costs. But climate change in recent years makes those rear-view-mirror calculations nearly irrelevant. Long heat waves cause kinks in metal. Sea-level rise floods coastal homes. High winds destroy rooftops. Long-term drought buckles asphalt in driveways. Wildfires wipe out whole communities.

The number of billion-dollar weather-related catastrophes in America has risen sharply since 1980. Careful calculations by insurance actuarial staffs, and by the U.S. Office of Management and Budget, predict that climate change could reduce the U.S. gross domestic product (GDP) nearly 7 percent by 2050, and 10 percent by 2100.

Worldwide the situation is even more dire. If nations across the planet contain the world’s heat rise to 4.7 degrees Fahrenheit—which is about what current policies would result in—GDP across the world could drop by 14 percent. If nations take additional steps to limit heating to a rise of just 3.6 degrees, the drop in GDP could be held to 11 percent.

California’s wildfires in 2017 and 2018 wiped out 25 years’ worth of insurance company profits in that state. In just the three years of 2016, 2017, and 2018, insured losses from wildfires globally equaled more than 70 percent of those same kinds of losses in the almost four decades from 1980 to 2018.

Given those conditions, it’s not surprising that insurance companies are raising their customers’ premiums. In the 18 months following January 2022, 31 states experienced double-digit rate increases, and six states had increases from 20 to 30 percent. Rates have continued to climb since then.

Iowa’s situation is worrisome enough. It’s even worse in coastal states like California, Florida, and Louisiana. Some major companies have reduced, or even denied, coverage to homes along the East Coast because of potential flooding, and to those in the West because of wildfires.

As a result, an increasing number of homeowners are having to go without insurance. So unless government or philanthropists step in, those homeowners bear the entire loss in disasters. States and local communities could ease some of the pressure by adopting building and land-use practices that reduce risk to homes, but the number that take those steps is depressingly small.

An example: North Carolina has a statewide buyout program, which uses government funds to buy out homes at high risk from flooding. But from 1996 to 2017 the state saw ten new homes constructed in the flood plain for every property removed.

As of yet, no state has developed a building and land-use plan to combat the effects of climate change, nor has the federal government. The standard response in the U.S. has been to kick the climate change can down the road. Perhaps rising homeowners’ insurance premiums—or inability to find an insurer willing to offer coverage—will finally accomplish what jawboning has failed to do: force people, businesses, political parties, and governments to get serious about climate change.

About the Author(s)

Rick Morain

  • Climate changes too slowly to be responsible

    The increase in home insurance costs is mainly driven by the sharp and lasting inflation we are experiencing since Biden took office. He has maintained the same level of overspending as during the Covid crisis, even though the crisis is over. Last year the federal budget was in the red for 1.7 trillion dollars. A lot of his spending sprees are shortsighted like his immigration policy and selective assumptions of student loans.

  • Rick Morain, thank you.

    Excellent essay.

    Iowa is kicking a number of environmental cans down the road. Climate change and farm pollution immediately come to mind. There are also the “kicked” costs of massive soil erosion, soil degradation, invasive exotic species, pesticide drift damage, biodiversity loss, bad land-use policies, etc. etc.

    Re climate change, many Iowa weather people, ag professionals, and others are still using the word “normal’ when it comes to weather. The cultural message that “normal” is gone has yet to arrive.

    Furthermore, the Weekly Crop Progress Report sent out by the Iowa Department of Agriculture and Land Stewardship has a state temperature map comparing current temperatures to “normal” temperatures. But the “Normals” are computed by using the years between 1991 and 2020, years when climate change was well underway.

    Short version, we are still in denial.

  • Per a previous comment, climate change is affecting insurance costs NOW.

    It took all of two minutes to find many stories from a wide variety of sources, from SCIENTIFIC AMERICAN to the WALL STREET JOURNAL to FORBES, pointing out that climate change IS significantly affecting insurance costs and will increasingly affect insurance costs in the future.

  • Ha!

    Biden has been president for three plus years. No way he could impact the property insurance market in such a short time. That’s laughable.

    The cause is climate change straight up. Biden and Democrats have been working diligently to address climate problem throughout the 21st century.

    But eight years of George W and four years of Trump – plus GOP majorities in Congress along the way – have blocked the path to address this matter in a meaningful way.

    The GOP has no vision beyond yesterday’s conspiracy theory. It’s really that simple.

  • Ok. Let’s call it climate change

    Try getting an offer for a water heater or a new roof. You will be quoted up to 100% more than 5 years ago. You may blame climate change, I am ok with it.

  • I Hear You

    Karl, inflation is a word-wide, post pandemic issue. The U.S. is recovering much quicker than other developed countries throughout the world.

    Recovery is slower than any of us wish it would be. But it’s been significant.

    Meanwhile, Trump is proposing huge tariffs on foreign goods. Sounds tough . . . but all it does is increase prices for consumers.

    He will also seek more tax cuts for the top 1 percent while doing nothing for the working class that supports him.

    A second Biden term with Democrat majorities in Congress will best serve hard working Americans.

  • Karl M is a MAGAT troll - Just ignore him

    Good golly people, don’t feed the trolls – that’s Internet 101

  • I have not taken Internet 101, nor do I know where the classes are held...

    …so I don’t really understand why, if the solution is not feeding trolls, there is so much concern about the spread of misinformation on the Internet and the impact it is having on U.S. politics. Should misinformation be countered or not? Should only certain kinds of misinformation be countered? Is it misinformation in comment sections of political blogs that can and should be ignored? Those are honest questions, and if informed guidance is provided, I will try to heed it in future.

  • PrairieFan is asking the right questions

    She knows and cares about conservation. And she rightly points out that climate change will increasingly affect our insurance costs in the future. The response of the climate to greenhouse gases is non-linear, which means that the worse is ahead of us and we are just seeing the beginning of these effects. Look at the recent ocean temperature hikes measured by NOAA, these temperatures are key drivers of hurricanes.

    As for internet 101 by JP, the rule seems quite simple. Call trolls those who challenge your worldview.

  • I was hoping, per my last comment, that some advice might appear on this thread...

    …and since it hasn’t, I will just try harder to do what I have been doing re BH comments. And that is to not respond to comments I disagree with unless it seems appropriate/necessary to respond with facts/reality within my area of knowledge. Climate change is affecting insurance rates now. It will affect them much more in future.