California’s insurance commissioner has announced it will allow insurance providers to consider risks related to the changing climate when setting policy prices.
“We are truly living in unprecedented times,” said Ricardo Lara, the current commissioner. “There’s no doubt that California is at an insurance crossroads. Making insurance more available is becoming critical for our entire economy.”
Along with allowing companies to look ahead when setting policy prices, the commissioner will also require the companies to insure more Californians living in high-risk areas.
Before the announcement, news outlets including CBS News reported a growing problem of insurance companies deeming many whole areas of California, Florida, and Louisiana as “essentially uninsurable” under the existing state laws. Companies like State Farm had already announced they would not take on new policies in at least one of the states because of the increased risk.
The change in policy intends to keep insurance companies willing to offer insurance to all California homeowners. Still, California residents are more concerned with higher premiums that may result from the initiative.
The threat of wildfires and catastrophic flooding is costly enough, and higher premiums will just increase the cost of living even more.
Critics of the policy also indicate the risk of price gouging due to the higher premiums, which will mean more money in their pockets rather than those affected by disasters.
One study cited by NBC News indicated that 39 million Americans can expect higher premiums in the coming years, with high-risk states like Louisiana and Florida expecting unprecedented increases in payments. Insurance agencies like Farmers Insurance have already backed out of offering insurance policies in states like Florida because it’s too risky for them to insure homes and automobiles or offer umbrella policies.
Despite the increased barriers to insurance in disaster-prone regions, some studies have revealed that more people are moving into these areas than ever.
In one study by Redfin, the influx of people to flood-prone areas across the country between 2019 and 2020 was 103%, while fire-prone areas increased in population by 51%. Experts correlate this increase in population to low taxes and warm climates, but the increased cost of insurance and remediation following a storm may cause some folks to reconsider.
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