How U.S. Home Insurers Are Responding to Climate Change
Key Insights
| Despite mounting climate damages, U.S. home insurers are still raking in record profits by abandoning people in higher risk areas and hiking premiums nationwide. This decreases their liabilities and increases the amount of money they have to invest in financial markets. Insurers are profiting from a crisis they helped create. They continue to underwrite and invest in fossil fuels, the leading cause of climate chaos. Meanwhile, intensifying extreme weather is giving the industry cover to offload risk and inflate prices across the board. For consumers, the waning availability and affordability of home insurance is a genuine crisis. For insurers, on the other hand, climate breakdown presents a short-term opportunity to maximize profits. “Pricing climate risk” does not mitigate it. For that, we need comprehensive disaster risk-reduction measures, including a fossil fuel phaseout, improved land-use planning, and transformative investments in the built environment (including new housing in safer places). |
As property insurers respond, belatedly, to the reality of climate change, they’re relying on proprietary, black-box projections of risk to curtail coverage and mark up premiums in neighborhoods across the United States. While it’s true that extreme weather risks and damages are growing in general, that shouldn’t entitle insurers to indiscriminately impose double-digit rate hikes. Insurers possess opaque, multiyear projections of climate risk and yet they reprice or cancel policies annually with little transparency. As long as the industry’s fiercely guarded information asymmetry goes unchallenged, it’s hard not to conclude that insurers are taking advantage of a turbulent situation to fleece consumers.
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Photo: An aerial view of damage from the Palisades Fire in Los Angeles County, California. Taken in January 2025 by the California National Guard and licensed under CC BY 2.0.