Chelsea, I have a bit of a... see, I don't know if this is sad or if it's just information to be conveyed.
It's about climate change and I know there's still people that debate that it's happening.
Do you know what's an easy group to look at who are incredibly
conservative in their forecasts and their predictions for the future that have definitely started making changes to their industry?
Because of climate change?
It's the insurance industry. The insurance industry has seriously made changes. This comes from August 28th, 2023.
It's in the Atlantic.
Title of this article is What Your Insurer Is Trying To Tell You About Climate Change by Juliette Kayam.
Having worked for decades in conservation nonprofits, Beth Pratt, who lives high in the Sierra Foothills in Mid Pines,
California, understands how climate change is putting her home an even greater risk. Her community is experiencing what she calls
quote, climate whiplash and quote, forest fires, record heat, massive snow dumps, mudslides, rock slides, and even a tornado.
When Pratt, now 54, bought her 1,400 square foot house in 1999,
she thought that the setting was ideal on a big lot near Yosemite National Park. As recently as a decade ago,
she told me by Zoom, one recent morning she didn't
particularly worry about wildfires, a problem that now plagues her area with disturbing frequency.
Pratt said she had been forced to evacuate three times.
Making her best effort at quote, coexisting with fire, end quote, as she put it, Pratt had metal roofing installed atop her house.
To all state, Pats longtime home insurer, her resolve appears to be irrelevant. The company dropped her as a customer in July,
she says. Given her professional expertise in environmental matters, Pratt is the California Regional Executive Director of the National Wildfire Federation.
She figured that growing climate risks might mean higher bills for insurance,
but she wasn't prepared to lose her coverage entirely. Quote, I have an NBA. I'm not anti-business. Just raise my rates. End quote.
As climate related disasters grow in frequency and intensity, major home insurers in some locations are concluding that no premium,
or at least no premium that customers are willing to pay and state regulators are likely to permit, will cover the potential loss.
Earlier this year, all state and California's largest insurer, State Farm, announced that they would hold off on writing new policies for homes in the state.
From 2019 to 2022, payouts to homeowners there more than double the premium revenues from customers increased by only a third,
according to the industry data reported by the Wall Street Journal. Rising home insurance rates reflects a lot of factors real estate costs building supply prices,
the whims of global financial markets, and yes, corporate bean counters, desire to maximize profits.
But more and more homeowners are also paying for the damage that climate change will cause to their property.
If the continuing risk of fires, hurricanes, and other weather related disasters isn't enough to make Americans think carefully about how and where to build a home,
perhaps the rising costs of insurance might concentrate their mind.
Yet policies at all levels of government suppress the signal that insurers are sending.
That's certainly true in deep blue California, even as prominent politicians there take pride in acknowledging climate risks.
The state's insurance regulation system is built to discourage premium hikes.
In many ways, that bias is justifiable, and not only in California, many people live in vulnerable areas, partly as a result of past racial or economic discrimination.
They buy homes in flood prone areas because more privileged people own all the higher ground.
A lot of Americans are underinsured because of genuine hardship and suffer more than their wealthier counterparts do from uncompensated losses.
In California, insurance companies are prohibited from using statistical modeling to assess future fire risks when setting rates.
Premium increases must be based on insurers' loss history, not on the growing likelihood of serious fires.
The state's pro-consumer rules can't hold off reality forever, and after all state dropped her, Pratt patched together coverage from other private insurers from the fair plan.
California's public insurer of last resort, but she said she's now paying twice as much in the past for coverage and slips comprehensive.
Certain regions of the country have long been prone to tornadoes, hailstones, and hurricanes, or other weather related disasters,
but this summer the dire signs of climate crisis seem to have multiplied.
July was the hottest month on record, a rare tropical tornado swept into southern California.
Wildfires tore through historic town on the Hawaiian island of Maui.
Fires in Canada brought dangerous levels of smoke through the northeast of the U.S.
You know what, I was hoping this included something here we go.
A lot of states have things like California's fair plan, however these systems of last resort are becoming insurers of first resort because so many insurance companies are dropping coverage.
After Hurricane Ian led to devastating losses in Florida last year, small insurance companies went bankrupt trying to satisfy claims,
and over the past two years the state's insurance system, Citizens Property Insurance Corporation, has doubled its number of policy holders.
It now covers about 13% of the homeowner's insurance market in the entire state.
Is this sustainable?
Professionals in my field disaster preparedness have one thing in common with insurers risk assessment experts.
We both spend a lot of time telling people things they don't want to hear.
The rights preferred form of denial is to brush off the importance of climate change.
When Donald Trump chided his Republican rival Ron DeSantis in July to quote,
get home and take care of insurance, and quote,
the former president presumably wasn't telling the Florida governor to rethink the low lying state's development rules and emergency preparedness policies in light of global warming.
In the past insurers have generally been able to diversify their own portfolios to balance current risks.
Historically insurers that do business across the country could afford a bad year in one or two states,
but the math becomes more challenging as disasters proliferate.
The cost of reinsurance, essentially coverage that insurers take out to protect themselves against big losses,
has shot upwards in large part because of growing climate change.
This didn't quite cover it.
Insurance companies have also started leaving Florida just because hurricanes have gotten so prolific,
and it's just like the damage is too much that they can't afford to cover it.
I wonder what that means as far as moving into the future.
I mean, people are going to be considering where they're living if they can't get insurance, and on the point of that...
That's not quite.
People who can afford to choose where to live will choose, hopefully, not to live in areas where they just can't get insurance.
That's true.
It's going, like they said earlier on in this article, it's the poor that are going to be hurt the most by this.
Yeah, and unfortunately our society is moving more and more toward
the poor.
It's stratified.
There's rich and poor, yes.
Yeah, and it's really unfair.
And you said something earlier in the article about people choosing where to build their homes,
but some people have been in their homes for, you know, how many years?
Oh, they either have an emotional attachment, a familial attachment to it,
or that's the only thing they can afford, and yes, you can move.
Exactly.
But moving does cost money.
Especially, I mean, I'm in Vancouver, so I'm in the worst case scenario.
Pretty much anywhere in the world, but not everybody can even afford to move.
If they can, I mean, it's not always a consideration of what is this going to look like in 10, 20 years,
when it's becoming very, very apparent in the last year even.
What climate change is doing, which is scary.
So it's not very fair, but I mean, insurance companies are insurance companies and they're looking out for themselves.
Exactly, but at the same time, they are looking out for themselves.
And this is why I think if you're ever having a conversation with somebody who, say, does not believe in climate change,
or has different things to say about it, you can say this, this shows, if we take risk assessment into account,
that many companies or corporations fully believe that it's real, and it's their entire job to protect or to account for that.
So if these insurance companies are leaving certain states because the climate change factors that are hitting them are going to cost too much,
it's something to take into account or at least be aware of.
I think it's more than be aware of. I can't believe people are denying climate change.
Look at this last year, people.
Yeah, yeah.
Interesting. I never even thought about what that would mean for insurance, but yeah.
Yeah, but it's the big thing.
And with that, hopefully that gives you 48 hours of introspection to think about the horrible state the world's in.
And hey, maybe on Friday we'll have something more fun to talk about.
Maybe. I filed that under bad news, by the way.
Yeah, yeah. Anyhow, see you guys on Friday.
Bye.