How is climate change altering society? This is a question that those in the insurance field must grapple with as storms, fires, and floods become more frequent. California Insurance Commissioner Ricardo Lara wrote the nation’s first climate insurance law to help the insurance industry join in the discussion about disasters such as fires and sea-level rise.
Catastrophic Loss Claims Are Skyrocketing
Catastrophic insurance losses have moved from the low billions into much higher numbers even in just the last few years. While the period from the 1980s into the early 2000s was fairly stable, more recently losses have started to mount. According to the Insurance Information Institute, "the Property Claim Services unit of ISO reported that (in 2017) insured losses for catastrophes in the United States soared 370 percent to $101.9 billion from $21.7 billion in 2016, according to PCS."
It's Getting Harder to Insure In Certain Areas
An article in Rolling Stone described California's new housing crisis this way: "It’s simply become too risky to insure houses in big swaths of the wildfire-prone state." While events such as tornadoes and other high winds tend to cause the most catastrophic loss claims, problems such as hurricanes, fires, and even winter storms are on the rise. This is problematic for insurance companies that now need to determine whether or not it makes financial sense to insure some existing or prospective clients.
At the same time, people continue to build on cliff sides, oceanview properties, in fire zones, and on floodplains. They're taking on that risk of building in a more disaster-prone area, and insurance companies will need to determine if they can insure those properties in the future.
There Are Health Implications As Well
For those insurers who cover life and health insurance, the devastation of a forest fire or flood brings more than property damage; it also causes mental and physical health issues. For instance, poor air quality can lead to more claims for health insurance, while people may need counseling to recover from a fire that destroys their neighborhood. This means that insurers play a dual role in protecting peoples' homes and property and protecting their physical and mental health as well.
Insurance Companies Can Step Into the Role of Educator
While it can be hard to insure in certain areas due to the risks from fire, flood, or wind, insurance companies do have a role to play in making it easier to insure buildings. For instance, programs that encourage homeowners to remove brush around the house, use fireproof home building materials, and avoid storing wood outside the home can help reduce the risk of fires that begin at home and spread to become a wildfire.
Are you ready for the future of insurance? At this year's Alliance Convention insurance conference, you'll find speakers who are able to inspire thoughts about the future of the industry, making you better prepared for the future. Register for the annual Alliance Convention to learn more about how the insurance industry is emerging into the future; contact us today.