The Home Insurance Crisis Is Getting Even More Expensive

New York Times

15-05-2025

Just months after fires devastated parts of Los Angeles, one of the leading home insurers in California, State Farm, is temporarily raising rates 17 percent.
The sharp jump, after a 20 percent rate increase last year, is sure to strain family finances in what is already one of the nation's most expensive states for home insurance.
It is also just the latest example of the indirect but increasingly costly ways that climate change is affecting the American economy.
An insurance crisis is spreading across the country as extreme weather and rising seas batter homes and businesses. As Christopher Flavelle and Mira Rojanasakul reported throughout last year, insurance companies are pulling back coverage, homeowners are paying more and states are struggling to prop up an industry that is tottering as the planet rapidly heats up.
'Insurance is the climate crisis canary in the coal mine, and the canary is dying,' said Dave Jones, director of the Climate Risk Initiative at the University of California, Berkeley, Center for Law, Energy and the Environment.
Nowhere is the crisis more acute than in California.
Even before the fires struck Los Angeles, state officials were scrambling to stop insurers from abandoning the California market as wildfires grow more frequent and destructive.
The Los Angeles fires only made the risks to homeowners, and insurers, more apparent. The total economic toll of the fires, including property damage and longer term economic losses, is expected to top $250 billion, according to AccuWeather, making it one of the most expensive disasters of all time.
Carmen Balber, the executive director of Consumer Watchdog, an advocacy group that opposed the rate increases, told Rukmini Callimachi that the increase 'adds insult to injury,' noting that many homeowners insured by State Farm have reported problems collecting payouts following the Los Angeles fires.
In a statement published on its website, State Farm said 'we remain focused on helping our customers recover from the wildfire,' and that it had paid $3.51 billion in claims from the fires.
And it is this confluence of problems — more frequent disasters, insurers deeming some markets too risky and rising prices for consumers — that is only becoming more common.
'We're going to continue to see substantial rate increases across the country and even more acute increases in areas that have been hit hardest by climate change, like Florida and the West,' Jones said. 'No place is immune to this.'
The cost of catastrophe is rising fast. Last year, financial losses related to disasters reached a high of $151 billion, according to Verisk, a data provider for the insurance industry.
In the United States alone, there were at least 27 weather events that resulted in damages of at least $1 billion, according to data from the National Oceanic and Atmospheric Administration. (The Trump administration has said it will no longer collect this data.)
And with global temperatures still rising and the Trump administration slashing efforts to stop the pollution that is driving climate change, a difficult situation is poised to get worse.
'The trend is all bad,' Jones said. 'We're just going to see more and more extreme and severe weather related events killing more people, damaging more property and causing insurers more and more losses.'
Overall, American homeowners saw their insurance premiums increase by an average of 24 percent from 2021 to 2024, according to a recent report by the Consumer Federation of America.
The insurance industry's response to this swelling crisis has been twofold: raise rates and write fewer insurance policies. It has also pushed for less regulation.
But even in states like Florida, where insurance is lightly regulated, the market is breaking down.
'Florida has done all these things to deregulate their market and allow prices to be set as high as the insurers ask for,' Jones said. Despite that, some of the big insurers have stopped writing new policies in the state. 'That's where the rest of the country is going,' he added.
There is no easy solution to the insurance crisis.
Even when insurers push higher prices on homeowners who live in low risk areas, the economics of the industry often don't add up.
It is likely that longer-term efforts may do the most to repair the home insurance market. Transitioning away from fossil fuels and slowing the increase of global temperatures would surely help, Jones said.
Beyond that, stronger adaptation efforts would make homes and communities more resilient.
For homeowners, techniques include hurricane-resistantconstruction, fire resistant materials and landscaping that reduces fire risk.
Communities can limit the destructive potential of storms and fires by employing better forest management practices and by restoring natural habitats like salt marshes, which can reduce flooding and storm surge damage in coastal areas during hurricanes.
But in a rapidly warming world, even those measures may not be enough. As insurers abandon entire markets, some companies are refusing to write policies even for homeowners who have taken extensive steps to limit their risk.
'No state is immune to the impacts of climate change and the impact on insurance prices,' Jones said.
Have your home insurance costs risen over the last few years? Do you think climate change has affected your rate?
Write us at [e-mail], preferably with your city and state, and tell us your story. You may be contacted by a Times reporter.
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