Home insurance rates are rising due to climate change. What could break that cycle?

This episode delves into the escalating costs of home insurance due to intensifying climate-related disasters, and explores potential solutions to mitigate this financial burden.

1. Home insurance premiums are increasing significantly across the U.S., particularly in disaster-prone areas.
2. The rise in insurance costs is directly tied to the increasing frequency and intensity of climate-related disasters.
3. Discussions at a HUD summit addressed how these costs affect housing affordability and market stability.
4. There is a need for more data to understand whether insurance companies are using climate change as a pretext to increase rates.
5. Potential policy changes and industry adjustments are necessary to address the impact of rising insurance costs on housing affordability.

1. Introduction

Ari Shapiro introduces the topic and explains the link between rising home insurance rates and climate change, focusing on the economic implications. Ari Shapiro: "As climate risks increase, so do home insurance costs. What can be done to fix this cycle?"

2. Industry Impact

Discussion on how insurance companies are adjusting their policies in response to increased risks, with examples from affected homeowners. Beth Pratt: "You have to have insurance, so policies probably need to change."

3. Government Response

HUD's summit on rising home insurance costs is highlighted, featuring comments from Adrienne Todman on potential government interventions. Adrienne Todman: "Increased insurance costs are now impacting our general ability to provide affordable housing."

4. Data and Accountability

The need for better data to evaluate insurance companies' pricing strategies in light of climate change is discussed. Adrienne Todman: "We don't have the data yet to suggest insurers are using climate change as an excuse to hike prices."

1. Review your insurance policy: Regularly check your home insurance policy to ensure it matches your current needs and risks.
2. Improve home resilience: Invest in home improvements that enhance resistance to weather-related damage.
3. Stay informed: Keep up-to-date with local climate risks and insurance market changes.
4. Advocate for transparency: Support initiatives that demand greater transparency from insurance companies regarding rate increases.
5. Explore government programs: Look into government and community programs that offer support for climate-resilient housing.

A warming planet is making storms and wildfires more intense, and more destructive. That's making homeowners insurance more expensive and harder to find.

Insurance companies are raising their rates because, they say, they need to cover increasing losses from extreme-weather-related property damage.

This week the U.S. Department of Housing and Urban Development is holding a summit to address this spike in premiums. HUD Acting Secretary Adrianne Todman explains what the federal government is looking to learn.

People

Ari Shapiro, Adrienne Todman, Beth Pratt

Companies

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Ari Shapiro
If you want to buy a house, you probably need a mortgage. And if you want to get a mortgage, you need homeowners insurance, which is hard when insurance companies decide they no longer want to do business where you live. I just got a letter, not even a hey, we want these things done. It was, we're not renewing you. That's Beth Pratt speaking with NPR last year.

She lives outside Yosemite National park in California, where wildfires are becoming more frequent. Her insurer of 31 years said the fire risk in her area was too great and simply declined to cover her anymore. These are not luxury items for myself or others. You have to have insurance. So, you know, I think that policies and how we insure people probably has to change.

Even if private insurance companies stop short of pulling out of a region, they're often raising premiums. Often, they say, that's to cover the increasing losses from weather related property damage. Home insurance costs across the country are up 21% since 2015. It's even more in high risk areas like Hurricane Florida, where insurance cost more than three and a half times the national average last year. And the thing is, climate change is making storms and wildfires more intense and more destructive.

Last year, the US had a record 28 disasters that cost more than a billion dollars in damage. Climate risk makes things uninsurable. No insurance makes things unmortigageable. No mortgages crashes the property markets crashed. Property markets trash the economy.

In a Senate budget committee hearing last month, Chairman Sheldon Whitehouse, Democrat from Rhode island, compared the state of home insurance today to another recent housing market disaster. This all sounds eerily reminiscent of the run up to the mortgage meltdown of 2008. Consider this as the risk of climate related disasters goes up, so does the cost of home insurance. Can anything be done to fix that cycle?

From NPR, I'm Ari Shapiro. This message comes from NPR sponsor the Capital one venture card earn unlimited two x miles on every purchase. Plus earn unlimited five x miles on hotels and rental cars booked through Capital one travel. What's in your wallet terms? Apply.

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Ari Shapiro
It's consider this from NPR. I'm Ari Shapiro. This week, the US Department of Housing and Urban Development is holding a summit to address the spike in home insurance costs. Acting HUD Secretary Adrian Todman took a break from the meetings to talk with me about what her department can do to help break this cycle. Thanks for joining us.

Adrienne Todman
Oh, it's my pleasure. So if an insurance company decides that everyone's home in a certain area is at high risk of burning down or blowing away, what is wrong with that company saying, you know what? This is just a gamble we're not going to be willing to take. We're out of here? Well, the fact that you're asking that question is exactly why we felt the need to have this summit.

Because at the end of the day, what's really happening is increased insurance costs are now impacting our general ability to provide housing affordably to americans across the country. So we have first time homeowners who are unable to purchase a home because of the unexpected cost of insurance. We have some of our existing affordable housing providers who already provide affordable housing, seeing their insurance costs go up by levels they've never seen before, and they're having to make some financial decisions about what they invest in. Do they do some of the repairs that they need to do? Do they keep the level of staffing that they have?

And none of that is ever good for tenants. Insurance prices have gone way up. But is that necessarily tied to climate change and risk? I mean, do these two things correlate closely? Well, you know, we've had some of the insurance experts come and say absolutely that they are keenly aware of the impact that extreme weather is having on insurance costs and replacement costs as well.

They're keenly aware of rebuilding in certain neighborhoods that perhaps folks should not be rebuilding in is also creating some risk that they feel is unnecessary. So we've been able to hear from both sides, the folks who are providing affordable housing and also those individuals that represent the insurance industry. And it's been a very fruitful conversation so far. And our goal at the end of the day is to see are there areas where we can seek to improve the current condition of the impact of insurance is having on affordability. Climate change is real and the impact on insurance rates is clear.

Ari Shapiro
But have you also seen any evidence that insurance companies may be using climate change as an excuse just to gouge homeowners and hike prices? Well, I think that's one of the, one of the pieces of conversation that came up this morning was we don't have the data to really determine that. We don't have the data holistically or at the micro level, at the neighborhood level to know are insurers doing that? So, you know, some people will say, yes, that's exactly what they're doing, but we don't have the data yet to suggest that. And what, in fact, some of the insurers shared, can you get that data?

I mean, what's it going to take to get that data? Well, I think that was a large part of the conversation this morning. Who has that data? Does it existed? And again, the goal of the summit is to explore all of these different avenues.

I know that you want to be a fair arbiter between parties that are sometimes at odds, but when you look at the sharply rising insurance rates, do you think, well, yeah, that accurately reflects the increasing risk from severe weather that's caused by climate change, or do you think this is totally disconnected from reality? I will tell you that some of the stories I've heard seem rather curious. Rather curious. There's a diplomatic phrase. I mean, and again, I say that because as a, you know, at my level, data matters.

Adrienne Todman
And I don't necessarily want to say someone is doing something unseemly until it's demonstrated that that's what they're doing. But, you know, as I've traveled the country, I've listened to our development community. I listen to single family homeowners. It is rather curious the level of the increase that happens even year over year. Something else that's rather curious is where the increases are occurring.

I'm hearing that from some of our affordable housing providers that some of the insurance increase may be happening in certain types of their housing portfolio, but nothing, all part of their housing portfolio. So the steepest increases don't necessarily correspond to the greatest risks. That is correct. And so one of the reasons why I wanted to make sure we came together today is to have really a first look of what the issues are with everybody who has equities in rising insurance costs at the table. You know, there's already been some healthy debate and pushback about whether or not some of these increases are truly representing risk.

My goal is to have the dialogue so that we can do what we need to do with the powers we have and the perch that we have to make a difference for the american people who are counting on us. Adrienne Todman is the acting secretary of the US Department of Housing and Urban Development. Thank you for your time. Thank you. This episode was produced by Katherine Fink with original reporting from Rebecca Hersher, Michael Copley, and Nathan Rott.

Ari Shapiro
It was edited by Patrick Jarenwatinan with help from Neela Banerjee. Our executive producer is Sami Yenigun. And one more thing before we go. You can now enjoy the consider this newsletter. We still help you break down a major story of the day, but youll also get to know our producers and hosts and some moments of joy from the ALL ThInGs COnsidered team.

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