Severe Weather Impacts Hike Insurance Rates

March 5, 2012

Boston Globe:

Consumers, already contending with the rising cost of gasoline, food, and other necessities, could now also face sharply higher home insurance premiums.

After several years of modest increases, insurance companies are raising rates to offset a big jump in claims related to damage caused by tornadoes, severe snowstorms, and Tropical Storm Irene last year, according to industry executives. The increases, which must be approved by the state, will likely affect most of the state’s nearly 2 million policy holders, and if approved, homeowners will see their rates go up when they renew or buy new policies this year.

“Homeowners rates are likely to go up a lot this year,’’ said Chris Olie, chairman of Bunker Hill Insurance. in Boston. “It was a wake-up call from Mother Nature.’’ companies say they need larger increases now because they were hit so hard by wild weather, including a brutal winter a year ago that caused widespread damage from ice and snow; deadly tornadoes that swept through Western and Central Massachusetts in June; Tropical Storm Irene that caused flooding and wind damage in August; and an early snowstorm that downed trees and power lines across the state in October.

Andover Companies, for instance, said it lost $50 million on home insurance in the state last year – more than it earned on Massachusetts policies in the entire previous decade.

Livermore Labs – “Insurance in a Climate of Change”:

Allstate, for instance, has said that climate change has prompted it to cancel or not renew policies in many Gulf Coast states, with recent hurricanes wiping out all of the profits it had garnered in 75 years of selling homeowners insurance (Conley 2007). The company has cut the number of homeowners’ policies in Florida from 1.2 million to 400,000 with an ultimate target of no more than 100,000. The company has curtailed activity in nearly a dozen other states. In 2008, State Farm—Florida’s largest private insurer—stopped writing new policies in the state (Garcia and Benn 2008). This was after suspending sales of new commercial and homeowners policies in Mississippi the year before (Tuckey 2007). A few months later, after being denied a 47% average rate increase, State Farm announced a complete pull-out, (Hays 2009). About 1.2 million customers will be affected. The Florida Insurance Commissioner referred to the decision as “unnecessary destabilization of the insurance market” (Hays 2009). The editor of trade magazine published an editorial about the problem entitled “Like a Bad Neighbor?” (Friedman 2009).

Also in 2008, Farmers announced that they would stop writing homeowners policies throughout North Carolina and not renew existing ones. Such decisions are not taken lightly; Farmers will forego $55 million in annual premiums but claims that losses would be twice this amount (Hemenway 2008). These impacts haven’t been limited to the Gulf coast. According to one estimate, since 2004 one million policies have been canceled in the Mid-Atlantic and New England area, including 50,000 in the New York Metropolitan region (Nevala-Lee 2008).

Oddly, standardized data on insurance price changes are not systematically collected, forcing reliance on news reports and secondary sources. One study reports the following homeowners insurance price increases in the period 2001-2006 (Environmental Defense 2007):

  • Alabama: 42%
  • Florida: 77% (Miami Beach: 500%)
  • Georgia: 45%
  • Louisiana: 65%
  • Maryland: 76%
  • Mississippi: 63%
  • South Carolina: 56.4%
  • Texas: 50%
  • Virginia: 67%

7 Responses to “Severe Weather Impacts Hike Insurance Rates”

  1. witsendnj Says:

    It seems like the housing market is going to get even worse if people can’t get insurance – what bank will lend mortgages?

    I Posted charts from MunichRe about losses due to storms – more hockey sticks!

  2. […] Attorneys in Announcing Bankruptcy in …Top 10 North Carolina Car Insurance CompaniesSevere Weather Impacts Hike Insurance Rates « Climate Denial …YATES, MCLAMB & WEYHER ANNOUNCES FOUR NEW PARTNERS Filed: Auto Insurance tags: Carolina, […]

  3. kiwiiano Says:

    Wanna bet the deniers will claim the disasters aren’t related to climate warming, it’s just the Insurance companies using them as an excuse to rip us all off?

  4. rabiddoomsayer Says:

    My house is 180 feet above sea level, yet insurance rates seem to include a flooding risk which they do not cover anyway. After a few problems with the interpretation of the fine print, I am no longer insured. What point being theoretically covered if they do not pay out.

    The bank knows and has not worried about it. Their choices are pretty limited and I guess they are just happy the mortgage is being paid.

    • kiwiiano Says:

      There’s enough ice in Antarctica that if it all melted the oceans would rise about 100m, enough to put your house about 150ft underwater. However, as we found with the recent earthquakes in NZ, when a major disaster hits the Insurance industry, they do run into deep trouble. While they do put money aside for a rainy day, their shareholders get a bit cranky if they start putting money aside for fortnightly hurricanes, until we get two hurricanes in a month.

      Are you on top of the hill or is there ground above you that in a really fierce downpour could drain through your place, constituting a ‘flood’?

      • rabiddoomsayer Says:

        Not the top of the hill, but should be close enough. To flood my place the downpour would have to be well beyond anything experienced here.

        Yes if all the worlds ice melted plus isostatic rebound, that would be more than enough to flood my place. While I have doubts about the estimate of many thousands of years for that to happen, it still should well beyond the lifetime of the grand children I do not have yet. If it happened too soon, the insurance companies would not be able to pay anyway.

        Drought is the most likely problem for my city. One we just refuse to face. We have had some “mini tornadoes” through our new tornado alley, I hope that is not indicative of the future.

  5. kiwiiano Says:

    What worries me about ocean rise is that it won’t take a 50m rise to create havoc, 1-2m should do it, as folk realise “oh sh*t maybe it’s not a hoax after all” and confidence in any land below the 100m contour collapses. Land prices in major cities and coastal areas around the world will topple with huge knock-ons to commerce generally. Forget flooding insurance for sure.

    And here in Christchurch NZ, we’re about to start a major rebuild of an earthquake ruined city, when the steps of the late lamented cathedral are only 4m above sea level and the high tide mark on the nearby Avon River is barely a km away. Tragedy about to be heaped on tragedy.

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