Some of the country’s largest insurers have told industry regulators that “extreme weather patterns caused by climate change” is behind the decision to stop writing certain coverages in some regions, as well as excluding protections from various weather events and raise monthly premiums and deductibles.
“In the past three months, 5 insurance companies operating in California have either stopped accepting all new homeowner insurance applications or put severe limits on how many new applications can be accepted in a year,” the Globe reported in August. “State Farm became the first company in May to no longer accept new applications for any kind of insurance other than personal vehicle insurance. In June, Allstate made a similar announcement, saying that they had already not accepting new applications all year. Farmers was the next to announce last month, reducing the overall number of new monthly policies that they would accept.”
Additionally, AmGuard and Falls Lake announced limitations on insurance options for homeowners. This is all on top of several insurance companies, including AIG, leaving the California homeowners insurance market. The Washington Post named Allstate, American Family, Nationwide, Erie Insurance Group and Berkshire Hathaway making the announcement to curtail policies.
“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 who regulate rates and policy forms,” the Washington Post reported.
We are witnessing in real time the collision of foolish political policies, and a favored lobbying industry loathe to pay out on policies when disasters strike out of bankruptcy concerns. And in California with an “annual wildfire season,” this is a man-made disaster and very political.
Insurance providers are also more willing to drop existing policies in some locales – foothill and rural communities – 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, WaPo reports.
WaPo reports the staggering amount of claims just this year:
“U.S. insurers have disbursed $295.8 billion in natural disaster claims over the past three years, according to international risk management firm Aon. That’s a record for a three-year period, according to the American Property Casualty Insurance Association.”
“Natural catastrophes in the first six months of 2023 in the United States caused $40 billion in insured losses, the third costliest first-half on record, Aon found.”
“’There’s no place to hide from these severe natural disasters,’ said David Sampson, president of the American Property Casualty Insurance Association. ‘They’re happening all over the country and so insurers are having to relook at their risk concentration.’”
Californians already felt the pinch with homeowners fire insurance, particularly following the deadly and disastrous 2018 Camp fire in Northern California. Hundreds of thousands of California homeowners in foothill, rural and mountain regions were dropped entirely from insurance policies, or provided exorbitant renewal quotes. The State created the Fair Plan which “provides basic fire insurance coverage for high-risk properties when traditional insurance companies will not -” insurance coverage with very high rates.
Insurance coverage is the amount of risk or liability that is covered for an individual or entity by way of insurance services.
Many in the state worry that additional insurers could pull out later this year and into 2024, potentially leading to a collapse of the home insurance market in the state, leaving many homeowners uninsured or faced with a very limited number of options.
In late August, California State Republican Senators delivered a letter to California Insurance Commissioner Ricardo Lara, urging him to take more direct action in fixing the state’s faltering homeowners insurance market. It’s been crickets since.
“The insurance industry is broken and only you have the power to fix it – and the responsibility,” Senate Republicans said in the letter. “Proposition 103 gave California the unique situation of having an elected Insurance Commissioner responsible for regulating the insurance industry. Our caucus has pushed for legislative fixes for years now – even decades – to try to prevent the homeowners’ insurance market from collapsing. Unfortunately, our efforts fell on deaf ears and major insurers have now left the market, and we fear more will be following suit.”
Now with major insurers blaming something as ambivalent as “climate change,” Democrats are faced with managing this disaster – will they admit that climate change-created disasters is a myth and natural disasters occur naturally, or will they double down on their nonsense? Will Insurance Commissioner Lara pull his head out of the sand and do his job?
Lara, whose entire career has been in politics with no private sector experience, appears like a deer caught in the headlights, and may be wishing his political career didn’t lead him to the Insurance Commissioner’s office. If the state, which is running a huge budget deficit, gets involved even more in the insurance businesses, could the state go bankrupt?
Remember, Lara was in the hot seat in 2019 following massive statewide fires, when he was caught accepting tens of thousands of dollars in political contributions from people with ties to companies he regulates,” California Globe reported. Following “revelations that Lara took oodles of money from the industry prior to making decisions in their favor, Lara was under fire for his secretive speech to a convention of industry executives where he expressed support for revamping consumer protection laws in their favor.” Is it a stretch to hope Lara can effectively address this insurance crisis?
The purpose of homeowners insurance is to provide financial protection against catastrophic loss. With insurance companies announcing they will exclude natural disaster protections because of “climate change,” the insurance becomes worthless or insignificant at best. Will policy holders be faced next with health insurance that excludes the cost of expensive surgeries and cancer treatments, and auto insurance which excludes collision coverage?
I don’t think insurers can blame cancer, surgeries and collisions on climate change – thus the fallacy of this argument.
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