Saturday, July 6, 2013

Insurance Carriers Need to Adjust to Climate Change...That Could Mean Less Coverage, Higher Premiums

I just read an article at the San Bernardino Sun news paper that worries me. The article states that the California Insurance Commissioner is urging insurance carries to prepare for climate change.

Even if you don't believe in global warming, there is no doubt that there have been larger storms , large fires, floods and tornadoes each year. This is a huge problem not just for property owners and tenants, but for carriers too. They have had to make large payouts for these events. Add to that, carriers must also meet state solvency requirements and federal reserve requirements as well. That usually means that they have to be able to pay every policy they have placed, plus cover operating expenses (salaries, utilities, taxes, etc.) and have reserves. 

The California Insurance Commissioner, Dave Jones, sent out a survey to carriers asking about, among other things I'm sure, what carriers where doing to prepare for climate change. Of the 184 responses his department got back, only 23 had some kind of plan for dealing with climate change. You can read the article here

What worries me is that many carriers will stop writing policies in areas prone to wildfire, floods and other natural disasters, raise rates to incredible heights in those areas and that they will start placing more exclusions on coverage. Hopefully I am wrong. Only time will tell. 

Communities need to also prepare for climate change too. Increasing and maintaining flood control measures, enforcing brush clearing away from property, property owners keeping their buildings in good repair, and taking many other steps to prepare for natural disasters in their communities will all help. While it won't keep buildings and lives from being damaged or worse, it will make getting back to normal much less costly and time consuming. 

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