Climate Worries are Sending Insurance Companies Running

After Hurricane Sandy, private insurers were notorious for taking their time evaluating damage, and then for being stingy when the payouts finally came. As disruptive weather patterns continue, property insurance companies grow increasingly cagey, and the reason isn’t actually too hard to understand. At the moment, government subsidies are keeping flood insurance artificially low in many high-risk areas. This, in turn, encourages growth in locations that are dangerous for homeowners. Private insurance companies are then faced with large (and growing) populations with access to government-subsidized rates they can't match. What does this mean for you? In the short term, at least, your private insurance premiums may rise. If you live in a coastal area, you might already be feeling the pinch, but when and where it starts depends largely on your location. Unfortunately, higher premiums are only a symptom of a greater ill; what you should really be worrying about is the long term. Insurers can only raise rates so high before homeowners are unwilling or unable to pay them. And if they can’t make a profit on what their customers can afford, they’ll withdraw completely, leaving homeowners like you without options. Some have already attempted this in the areas most affected by Hurricane Sandy, only to be stopped by politicians. As The New York Times writes,

“The quandary for insurance companies, of course, is that they can’t give up writing insurance policies without eventually putting themselves out of business. And walking away from markets as they become too risky to insure is not sustainable.”

The bottom line? Be aware. Since many of these worries are just in the speculation phase, there isn't a whole lot for you to do right now, and not much helpful advice we can give. But that time may come soon, so keep an eye out, especially if you live in an area hard hit by bad  weather.