Housing

By Alex Martin, Policy Director, Climate Finance and Caroline Nagy, Associate Director of Housing Policy

Today, senior level insurance insiders issued a wake-up call in a new report, “Sounding the Alarm,” released by Inside Track, that details their decades of cumulative experience in the industry. Their exposé confirms what we’ve long suspected: our long-term climate trajectory is incompatible with continued insurer profitability. In response, insurers intend to make as much money in the short-term as possible before they ultimately drop coverage for many of us, leaving people poorer and even more exposed and risking the next global financial crisis.

According to industry insiders, “someone else” will have to pay for property damage caused by climate change–it just won’t be the insurance companies. The insurance industry plans to extend their highly profitable gravy train by maximizing premiums and profits for as long as possible, then exiting communities and regions before disaster strikes. We already see this happening to policyholders in the aftermath of disasters now. 

Families and communities will pay the price instead

When insurance companies exit whole communities, who will be left holding the bag? U.S. families, whether they own or rent, and the government (read: all of us). This move will upend household finances, strain rental affordability even further, and place huge burdens on limited government disaster response resources.

Meanwhile, many state insurance commissioners continue to cater to insurers in an ill-fated attempt to maintain a crumbling status quo. But this will only result in increased misery for their residents, as insurers plan to keep decreasing the quality of coverage and ultimately withdraw, risking destabilizing our entire housing market and economy.

Voluntary climate adaptation efforts will fail

Decades of industry lip service to climate adaptation have not produced meaningful reinvestment in risk reduction, because the status quo maximizes short term profit. The insiders write: 

“Our customers, our investors, governments and regulators alike should all be deeply concerned because our voluntary industry initiatives and current collective strategies will not deliver the protection society needs.”

Years pass, stakeholder roundtables multiply, regulators nibble at the edges, but the trajectory gets worse and regular people and governments are left holding the bag. 

This moment calls for decisive action from insurance commissioners 

Insurance regulators must require insurance companies to serve their customers, pay claims fairly, and work to reduce the system wide risk through climate mitigation and adaptation. Consumers deserve and need far better insurance than they are currently receiving, with insurers denying claims at record rates while benefitting from skyrocketing profits.

Policymakers at all levels of government must promote climate mitigation and adaptation, and hold responsible corporations accountable for the harms their pollution has created. And they should explore public alternatives to a short-term, profit maximizing industry to provide this vital function for our housing and financial system.