The effects of climate change are becoming more pronounced, both globally and domestically. In the U.S., the consequences of changing weather patterns and climate-related disasters are impacting various aspects of the economy, with homeowners in particular feeling the cost in a very direct way.
Average homeowners insurance rates increased 18.85% in 2023, according to a study by Guaranteed Rate Insurance LLC, which examined five years of data, including almost 50,000 policies and more than 70 carriers.
While the increase varies by state, the biggest hike occurred in Louisiana at 34.3%. The Pelican State is one of the most likely to be impacted by climate change, driving increases in premiums and a decrease in the availability of insurance itself.
Bundling with other policies like auto has on average provided homeowner insurance discounts of 5%-20%, according to Guaranteed Rate's head of insurance Jeff Wingate, though this has been less available in Florida, California, Texas, New York and New Jersey — states where fear of fire and flood risks have seen carriers pull out.
Read more:
In Florida, increases in insurance premiums and homeowners association fees are having a negative effect on the value of condos and the sale of condo units, which fell 6.8% in January from one year earlier. Condo price movements in the state are also bucking growth seen in the rest of the U.S., according to Redfin, the online real estate brokerage. The median price of a Florida unit came in at $317,000 in January compared to $340,000 nationwide.
Read more:
Despite the challenges, Florida also provides an example of how regulators and insurers are fighting back. The state Office of Insurance Regulation authorized six additional P&C insurers to enter the market in 2023, after the Florida Legislature approved reforms to the state's insurance industry.
However, there are concerns about the effectiveness and scale of these initiatives going forward. "Gov. DeSantis has unveiled his 2024 Florida budget proposal, which includes $431 million in property insurance relief for citizens," wrote David Kotok, co-founder and CIO of Sarasota, Florida-headquartered Cumberland Advisors in a December blog post. "Four-hundred-and-thirty-million dollars for a trillion-dollar risk? Readers: you decide. Florida homeowners and businesses: you decide, too."
While all parties recognize the urgent need to respond to the impact of climate change on the economy and the insurance industry, the question remains, will the concerted action be enough?
Catch up on these stories and all of our recent coverage of climate change in the industry.
