Experts warn that in the next decade or so, the insurance crisis could reach a tipping point if uninsurable areas become more widespread.
What's happening?
As rising global temperatures lead to increasingly extreme weather events, such as wildfires, floods, and hurricanes, home insurance companies are either exiting certain markets or limiting their coverage.
As NPR reported, more intense storms driven by the overheating planet have caused insurance premiums to rise by around 24% in the last few years, according to the Consumer Federation of America.
Major insurance companies and banks have refused to offer coverage in parts of high-risk states, including Texas, California, and Florida, leaving homeowners with the difficult decision of either finding a new provider, often with higher premiums, or risk going without insurance.
"If you fast-forward 10 or 15 years," Federal Reserve Chair Jerome Powell said, "there are going to be regions of the country where you can't get a mortgage."
If huge swaths of the country are uninsurable and people can't get home loans, that would have cascading impacts on communities. Property values would plummet, and without sufficient revenue from property taxes, cities would struggle to fund essential public services, including schools, police and fire departments, infrastructure projects, and other vital needs.
In Lake County, California, one of the areas most impacted by the insurance crisis, residents are facing an uphill battle to keep their homes insured while fighting off increasingly frequent and destructive wildfires.
Jessica Pyska, a county supervisor, said at a Senate hearing in May that "since 2015, nearly 70 percent of Lake County's land has burned, resulting in the loss of more than 2,000 homes."
While many homeowners have taken steps to fortify their homes by installing fire-resistant roofs and siding, insurance premiums remain high.
"We are doing as much as we can right now," Pyska told NPR, "and everything is on the line."
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Why is a lack of home insurance concerning?
If homeowners don't have insurance and are struck by a natural disaster, they must bear the financial burden of rebuilding or repairing their homes, which is normally not an option except for the extremely wealthy. They may start from scratch in an area more protected from disasters, but with home loans and insurance policies being harder to find at affordable rates, it's certainly not ideal.
NPR explained that even in cases where homeowners make their homes more resilient, it's not guaranteed that insurers will reward them with cheaper rates.
"For [insurers], they need to have some assurance that not only you've hardened your home, but the community has done that larger, broad-scale risk mitigation — [and] that we can quantify it," Jason Hajduk-Dorworth, the director of administrative services of Tahoe Donner, a homeowners association in Northern California, said.
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Definitely 🥰 What's being done to help communities retain insurance?
Dave Jones, California's former insurance commissioner, explained to NPR that some state lawmakers, including those in Colorado, are requiring insurers to consider home hardening measures that communities undertake when assessing properties for insurance purposes.
In California, Gov. Gavin Newsom signed an executive order requiring homes, businesses, and public structures in the highest fire severity zone to install a five-foot defensible space to protect properties from fires.
Some insurers in the state are also utilizing catastrophe models to better predict which areas will be most heavily impacted by wildfires in the future, which could help stabilize the insurance market.
Ultimately, though, prevention is the best cure, so being proactive by reducing our reliance on fossil fuels and switching to cleaner energy sources will target the root of the problem.
By investing in a rooftop solar setup or switching to a heat pump from a gas boiler or furnace, for example, you can save money on energy bills and help communities even hundreds of miles away be better protected from extreme weather.
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