The U.S. Senate Budget Committee recently released a report on the home insurance industry’s struggles against waves of climate-induced disasters, and it warns of a brewing crisis.  

What’s happening?

The report, which was released in December, itemized the top U.S. counties where insurance coverage was falling the fastest. This was measured by non-renewal rates gathered across 23 insurance companies, covering 2018 to 2023. The committee estimates that this data represents about 65% of the market.

California has three of the top 10 U.S. counties with the fastest-falling home insurance coverage: Lake, Nevada, and Shasta. (The former county, which saw the highest 2023 non-renewal rate at 7.56%, only had a 1.24% non-renewal rate in 2018.)

Mississippi has two top-10 counties in Jackson and Harrison, while South Carolina owns one in Beaufort. Florida unenviably leads the pack with four: Collier, Brevard, Polk, and Flagler.

“The failure to deal with climate change isn’t just driving up the cost of homeowners’ insurance, it’s making it harder for families to even find homeowners’ insurance, and that makes it harder to get a mortgage,” Senate Budget Committee member Sheldon Whitehouse told Business Insider.

Why is this report concerning?

Besides the fact that insurance premiums are rising as warming global temperatures have supercharged our weather — and some insurers are leaving homeowners without coverage altogether — the report paints a stark picture if things remain on the same trajectory.

“In certain communities, sky-high insurance premiums and unavailable coverage will make it nearly impossible for anyone who cannot buy a house in cash to get a mortgage and buy a home,” the report warns. “Property values will eventually fall — just like in 2008 — sending household wealth tumbling. The United States could be looking at a systemic shock to the economy similar to the financial crisis of 2008 — if not greater.”

Insurance companies have already started pulling out of some areas, with California and Florida among the states seeing an exodus of companies willing to risk coverage. 

What’s being done about home insurance?

California legislators are already moving to force insurance companies to increase coverage in fire-prone areas, though consumers will still end up eating additional costs to cover the extra risk.

Meanwhile, one company believes artificial intelligence can assist with insurance risk management, which could open up policies for more homeowners (it’s worth noting that the plan could come with some unintended side effects given early AI models’ energy consumption).

The best way to bring down insurance costs in the long term, and ensure homeowners have policies to begin with, is to reduce pollution associated with changing global temperatures and its associated disasters.

Actions we can take at an individual level include making healthy changes to our diet, such as by having one meat-free day per week and choosing an electric vehicle rather than a gas-guzzler the next time you need a new car. Or take advantage of public transit if you live in a city with a robust public transit system.

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