Climate Change Is Upending The Home Insurance Market

Across the country, premiums are rising and insurers are pulling out of markets that are most at risk for climate change-fueled disasters.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

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• 0:14Ira Flatow?

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• 0:31Flora Lichtman?

  Hey, it's Flora Lichtman, and you are listening to Science Friday.

• 0:37Flora Lichtman?

  Today in the podcast, a climate change consequence many people cannot ignore: the changing home insurance market.

• 0:47Speaker 03

  This has led to many homeowners I talked to being priced out, or they're being dropped altogether if they're found to be a risk, if the insurance company does it, like, how long it's been since they've changed their roof. They say, hey, you know, we're not going to renew your policy.

• 1:02Flora Lichtman?

  You cannot get a mortgage without home insurance. But in some parts of the country, it's becoming harder and harder to find a plan. Insurance companies are dropping homeowners, even pulling out of entire states, as flooding, wildfires, and storms become more frequent and intense. In Florida, for example, one in five people don't have home insurance right now. And in counties across the Mountain West, insurance cancellation rates have tripled since 2018. My next guests have both reported on how climate change is impacting home insurance in their states. Rachel Cohen, Mountain West News Bureau reporter for KUNC in Greeley, Colorado,

• 1:42Flora Lichtman?

  and Jessica Mizaros, climate change and environment reporter for WUSF in Tampa, Florida. Welcome to you both to Science Friday.

• 1:50Speaker 03

  Thank you.

• 1:51Speaker 04

  Thanks for having us.

• 1:52Flora Lichtman?

  Rachel, how is access to home insurance changing out West?

• 1:57Speaker 04

  Yeah, what we're seeing in the West is that a crisis that was, you know, really once thought to be largely limited to places like Florida or California is is now really hitting states like Colorado, Nevada, Utah. And this has really developed in the past few years. One Consumer Report out this year found Utah was the state that had the biggest premium increases of any state in the country. Between 2021 and 2024, they went up 59%. And climate change is definitely a major driver in our region. It's more destructive wildfires, but also hailstorms. Hmm. In your piece, you talked to homeowners. What did you hear from them?

• 2:43Speaker 04

  Homeowners across the Mountain West are really feeling the squeeze. Our reporting featured Sandy and Dave Nabafeld, the couple that lives in rural Idaho. And they have had their insurance dropped twice because of wildfire risk in the past five years. Both times, the company talked about reducing its wildfire exposure. And they have been able to find a third company to write their policy, but they're worried about the same thing happening again. And, you know, we heard from many more homeowners like this, and also ones who feel like increasingly, they're doing everything they can to protect their

• 3:24Speaker 04

  homes from wildfires, like cutting down trees, or, you know, they're removing their wood decks and clearing brush, but they're still seeing their premiums increase. Are they stressed? It sounds so stressful. Yeah, they're definitely stressed. They're worried, even angry, because they've been paying their bills for sometimes two decades on the same house. And then, all of a sudden, they learn that they're dropped.

• 3:51Flora Lichtman?

  Jessica, how's the situation in Florida different?

• 3:54Speaker 03

  I don't know that it's different, except that maybe we've been dealing with this for a while. Since 1992, we started to see this cycle with Hurricane Andrew coming through. That's when a lot of big national insurers started backing out, leaving the state in a panic of how are people going to get mortgages? They need to have insurance. And so what we know about climate change is obviously the earth is warming and that's warming the waters and warm waters fuel hurricanes. It makes them stronger. It makes them wetter. So the state is becoming much more risky over time. And this has led to many homeowners I talked to being priced out, so like crazy high prices, or they're being dropped altogether if they're found to be a risk.

• 4:38Speaker 03

  If the insurance company doesn't like how long it's been since they've changed their roof, they say, hey, we're not going to renew your policy.

• 4:46Flora Lichtman?

  What do people do if they can't get insurance? Let's start in Colorado.

• 4:50Speaker 04

  You know, it depends, and none of the options are great. If you have a mortgage, you're required to have insurance. And if you own your home outright, maybe some people are choosing to go without insurance altogether, but that's really risky. In Colorado, in anticipation that more people would be in this situation, the state actually did set up a new last resort program. These are called fair plans. Colorado was the first state to start a brand new one in the last 40 years, and it's up and running as of this spring. So how many people sign up for that in the first six months or so? It could provide us a window into how many people really can't find insurance because

• 5:35Speaker 04

  in order to qualify for this, you have to be rejected by three private companies. The problem is that these policies are more expensive and they don't cover as much. But policymakers are definitely feeling the pressure. In our region in the Mountain West, we counted over a dozen bills this year in state legislatures that tried to address these issues. And so there's a sense of kind of a tipping point that we're at now or an impending crisis if this continues.

• 6:05Flora Lichtman?

  Wow. Have you, either of you heard from people who are considering leaving the state because they can't find insurance?

• 6:13Speaker 03

  One person in particular comes to mind, an optometrist that I talked to in St. Petersburg, Florida. And he was being charged $15,000 for his insurance. And it obviously, it went up a whole lot since when he had first started. And he was a semi-retired optometrist when I spoke to him. And he was trying to go full retirement, but he couldn't because of how high the insurance was. So he and his wife had been discussing, you know, if the rates keep going up, if the premiums keep going up, that they were planning to move. And I think there's a lot of people in that boat and maybe just a lot of people who won't buy homes. I mean, I know a lot of people, I'm in my 30s and there are a lot of people my age who that's just not an option for them.

• 6:52Flora Lichtman?

  That's about all the time we have for now. I'd like to thank both of you for coming on to talk to us.

• 6:57Speaker 03

  Thank you.

• 6:58Flora Lichtman?

  Thank you for having me. Rachel Cohen, Mountain West News Bureau reporter for KUNC in Greeley, Colorado, and Jessica Mazzaros, Climate Change and Environment reporter for USF in Tampa, Florida. We have to take a break. And when we come back, why the future of home insurance may be a wake-up call on climate change.

• 7:18Speaker 05

  And I think it's that direct hit to the pocketbook that is going to force a lot of people to reevaluate their views on what's changing, why it's changing, and why are my costs changing?

• 7:32Speaker 00

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• 8:45Speaker 07

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• 8:57Flora Lichtman?

  Insurers aren't just dropping or canceling plans in Florida or Colorado. This is happening nationwide. So what does it mean for the housing market? And what does it mean for homeowners? My next guest has studied this in depth. Benjamin Keyes studies the impact of climate change on the real estate market at Penns Wharton School. He's based in Philadelphia. Ben, welcome to Science Friday.

• 9:20Speaker 05

  Yeah, thanks so much for having me.

• 9:22Flora Lichtman?

  Let's talk about this big paper you put out last year that breaks down how climate is impacting home insurance across the country. What did you find?

• 9:32Speaker 05

  Yeah, well, we realized there was a dearth of data available on homeowners' insurance premiums. And so we started digging in mortgage data and using mortgage escrow payments actually backed out a quite large database of how much households pay to their homeowners' insurance policies each year. What we found was a very sharp increase in the cost of insurance. Insurance premiums are up about 20% in real terms since the beginning of the COVID pandemic. And that's real dollars for most households sitting around the kitchen table, trying to figure out how they're going to pay the bills this month.

• 10:10Flora Lichtman?

  20% is huge, and it's just been over a couple of years.

• 10:13Speaker 05

  Yeah, it's happened over quite a short time period, a time period that's seen a large uptick in inflation, that's seen rising costs of materials and labor, that's seen increases in house prices, and also seen changes in the cost of capital for insurers and reinsurers when they're thinking about what policies to write and what markets they might want to exit.

• 10:35Flora Lichtman?

  Yeah, I mean, I want to talk a little bit about that. Was the impact the same across the country? Were there climate havens? Were there places that were especially impacted?

• 10:44Speaker 05

  One of the things that jumped out to us was how different premium increases were in different parts of the country. It seems like premiums have gone up everywhere to some extent. They've gone up much more sharply in the areas that are affected by disaster risk. And so if you look at the, you know, top quintile of ZIP codes in the country, measured by their expected annual losses through disaster risk, their premiums are up over $1,100 in just the last four years. And so that's a sizable increase out of pocket, especially for homeowners that might have previously paid off their mortgage or on a fixed income and were expecting their payments to stay fairly fixed over time.

• 11:24Flora Lichtman?

  And where specifically did you find the prices were going up the most?

• 11:28Speaker 05

  We saw large increases in the Gulf, Florida, Louisiana, along the eastern seaboard. But we also saw large increases in parts of the Midwest that are exposed to hail and severe convective storms. And so places like Nebraska and Oklahoma have seen large increases. And a state like Colorado, which previously was sort of middle of the pack when it comes to the cost of insurance, has now seen their insurance premiums put them in the top five most expensive markets in the country. So rising insurance premiums are not just a Florida or Colorado problem. We're seeing widespread increases in so many different markets around the country. And that's having impacts on the decisions that households have to make

• 12:11Speaker 05

  about how much insurance to take on, whether to drop their insurance policy at all, and then whether it makes sense to move elsewhere or look to move to a market that's out of harms way.

• 12:21Flora Lichtman?

  What is this doing to the housing market?

• 12:23Speaker 05

  Well, this is presenting a big challenge for current homeowners looking to sell their homes in some of these markets. And a new buyer is going to see the cost of insurance going up much faster than inflation and say, I don't want to pay that much for this house. If those costs are rising, this is what economists would call the capitalization of costs into asset values. And so what we're seeing is a relative decline in house prices in those areas most affected by. Rising insurance premiums and that's been borne out in the housing market data from this year. If you look at where housing markets are weakest, it really closely tracks the

• 13:03Speaker 05

  places that are experiencing highest insurance increases. And so that's areas like Cape Coral, Florida, it's areas in Louisiana, along the coast, and a number of other markets where we're seeing house prices softening quite a bit from their pandemic peaks. And part of that story has to be related to rising insurance premiums and associated expectations that those may continue to rise.

• 13:30Flora Lichtman?

  I mean, if you can't find insurance, if insurers are pulling out of a state entirely or an area entirely and you can't find insurance, you know, if you need a mortgage, you can't buy the house at all, which also means you can't sell that house, you know?

• 13:43Speaker 05

  Absolutely. Insurance is an essential element to the well-functioning housing market. You can't get a mortgage without an insurance policy and most home buyers can't afford a house without a mortgage. And so that chain depends very heavily on finding access to insurance that covers the value of the mortgage at the very least. What we've seen is states step into the void when private insurers say they're not willing to write policies in a given area. So a state like Florida relies very heavily today on the state insurer of last resort, the so-called Fair Plan. So Citizens Property Insurance in Florida is actually the largest insurer in the state. And so if we think about, well,

• 14:25Speaker 05

  when are these markets going to break? I would argue that the private market broke a long time ago in some of these states and instead we have a stopgap solution with the state taking on an enormous amount of risk for programs that were never intended to take on this scale, all in the hopes of keeping the housing market functioning smooth.

• 14:46Flora Lichtman?

  Well, and if the state is stepping in, doesn't that actually just mean the taxpayers are paying for this?

• 14:52Speaker 05

  Exactly. It means that the taxpayers are ultimately the ones on the hook. And different states have used different models for exactly the structure of these fair plans. But at the end of the day, it's the taxpayers across the state that are ultimately subsidizing insurance to their riskiest neighbors. And you can understand where you might get pressures to kick the can down the road and have someone else bear those costs. And that's partly why the Senate Budget Committee was interested in this topic in the first place, because they were wondering, well, is this going to fall on the national budget in some way if a state's fair plan looks for a bailout?

• 15:27Flora Lichtman?

  Hmm. I'm curious about the insurance company's relationship to climate change. Or maybe a better way to put it is, I'm curious about how much insurance companies know about climate change. Are they like the best informed people on the planet about climate change prediction and how it's going to impact people?

• 15:48Speaker 05

  No question. They know the most about the changing disaster risk because that is their bottom line. This is all they do. They are spending an enormous amount of money on data and models in order to try to get the best and most accurate predictions of where disasters are going to hit and how much it's going to cost them. And so they are very clear-eyed about the changing risks over time. And, you know, their aim is to have insurance premiums reflect that risk.

• 16:16Flora Lichtman?

  Do you feel like we need laws to require insurers to cover people even in disaster-prone areas?

• 16:24Speaker 05

  I think there are a number of challenges in imposing a mandate for offering policies. I could see a few different policy solutions that might have some appeal. One is a larger public role in these markets, in the way in which we've seen the fair plans step in. Another is a backstop at a higher level of the market. So, you know, backstopping the insurance companies themselves rather than writing individual policies directly to the household. And that's something that we've seen some proposals around. I think ultimately, a well-functioning housing market requires insurance. And so the need for keeping insurance in place is going to create a strong enough political

• 17:06Speaker 05

  pushback that we'll see some larger public role going forward.

• 17:11Flora Lichtman?

  I'm Flora Lichtman and this is Science Friday from WNYC Studios, talking to Benjamin Keys about the future of home insurance as the climate changes. You know, we live in a country where a quarter of the people don't believe in climate change. Obviously, insurance companies do. Do you think that this issue, the rising cost of home insurance, might require people to sort of engage with climate change in a way that they haven't before?

• 17:42Speaker 05

  Absolutely. I think that the changing insurance premiums is the thing that's really hitting households' pocketbooks in a very direct way. And I think it's that direct hit to the pocketbook that is going to force a lot of people to reevaluate their views on what's changing, why it's changing, and why are my costs changing? And so I think that insurance holds a great deal of opportunity for shifting perceptions around disaster risk and hopefully motivating deeper discussions about how to reduce that risk.

• 18:17Flora Lichtman?

  What's your advice to homeowners, especially homeowners living in these disaster-prone areas?

• 18:23Speaker 05

  The first piece of advice would be to understand your risk and be clear-eyed about what the challenges are that you're facing. Go and find high-quality data on a variety of environmental risks that may affect your property, and then get a sense of what are some of the costs of bringing those risks down at the household level and at the community level. Some of those challenges are more straightforward for things like, you know, a small risk of flood, where you can elevate some of the systems in your home. Others, like wildfires, require a community-level response. And so I think part of this is information and awareness. And then the next step is collective action.

• 19:03Speaker 05

  And that requires making good decisions as a household and making good local decisions and electing local leaders who are focused on this problem. And then ultimately, at the national level, electing public officials who take these issues seriously, who understand the increased risk and the broader economic consequences, and are taking meaningful steps to reduce our risks.

• 19:27Flora Lichtman?

  Thank you, Benjamin. That's about all the time we have for now. Appreciate you coming on.

• 19:31Speaker 05

  Thanks so much.

• 19:32Flora Lichtman?

  Benjamin Keyes studies the impact of climate change on the real estate market at Penns Wharton School, and he's based in Philadelphia. Before we wrap, we want to hear from you. Has your home insurance coverage changed because of where you live? Are you having difficulties? What did you do? How has it impacted you? We want to hear your story. Give us a call at 877-4-CY-FRY. Thanks for listening. Don't forget to rate and review us wherever you listen, but only if you like the show. It really does help us get the word out and get the show in front of your listeners. Today's episode was produced by Kathleen Davis. I'm Flora Lichtman. Thanks for listening.