Climate Change Forces Home Insurance Carriers To Vacate Some States

All State, State Farm, AIG Leave California

Recently, CNN posted an article about the cause and effect of ongoing climate change, severe weather and insurance carriers moving away from increasingly risky areas. The recent announcement of State Farm, AllState and AIG (some of the business) pulling out of California is just the latest in a nervous and changing home insurance market. Due to the increase in floods, wildfires and more severe storms insurance carriers are trying to adjust their exposure; some completely removing themselves form certain states. Florida has also been in the news recently as well. Home Insurance premiums and flood insurance coverage are expected to skyrocket in the coming year. Some fear the cost for flood or home insurance may soon become cost prohibited. The fear is an ever-increasing percentage of homeowners deciding not to carry insurance and risking losing their largest investment. However, is that really going to happen? Maybe a little; but doubtful.

Homeowners Insurance Cost on The Rise, But Not Gone

Yes, insurance carriers are rethinking how they insure homes and businesses. And yes, some have decided to leave certain states or limit the type of homeowners insurance they are willing to write. Some will most likely exclude wind, a common change today, or require a higher deductible. However, what this article fails to mention is that every state has a home insurance state funded and managed insurance ‘pool.’ In Massachusetts the Massachusetts Property Insurance Underwriting Association, or what we call ‘The Fair Plan’ provides homeowners insurance where the private insurance market is not willing to do so. For example, most carriers don’t like coastal property. But if you want to buy a home on the coast and have a mortgage you must carry homeowners’ insurance. If no private carrier (Travelers, Safety, etc.) is willing to write the coverage voluntarily then the alternative is your states home insurance ‘pool.’

Home Buyers Need Not Worry

Articles like the one I mentioned on CNN is just another example of the media using fear to sell news. It’s unfortunate and disappointing that even CNN is going this low to crank up ratings.  Not one mention of state programs that are there to fill in the gaps when private insurance companies leave the market. Yes, premiums will go up and the state program may be more expensive due to the increasing severe weather patterns. But the market will correct and homeowners and home buyers will always have an option to insure they can by that next home, or protect their home with reasonable homeowners insurance.

Here’s the link to the article.