Despite spending decades in the insurance industry, a few years ago I found myself in a position I never thought I’d be in: uninsured after heavy rains flooded my basement with sewage and untreated stormwater. More than a year later, I still lack the resources to return home.
I’m not alone. As my home state of Connecticut and the Northeast get battered by another storm, more and more individuals, communities, and even states in climate-vulnerable areas are being abandoned by insurance companies. Others, post-disaster, find they were inadequately insured as companies shift risk through low property value assessments or new coverage exclusions. As billion-dollar disasters become more frequent, too many people are left traumatized by the devastating shortcomings of the insurance industry.
A map of the U.S. plotted with 15 weather and climate disasters each costing $1 billion or more that occurred between January and July, 2023. NOAA map by NCEI.
A map of the U.S. plotted with 15 weather and climate disasters each costing $1 billion or more that occurred between January and July, 2023. NOAA map by NCEI.
A map of the U.S. plotted with 15 weather and climate disasters each costing $1 billion or more that occurred between January and July, 2023. NOAA map by NCEI.
Homeowner insurance premiums have been skyrocketing across the nation, with insurers doubling premiums and limiting coverage — insurers are proposing a whopping 42% rate increase in North Carolina, for example. Regulators, lawmakers, and everyday Americans need to ask why these companies pass on climate costs to consumers while continuing to breathe life into the very industry responsible for climate change.
Without insurance, the industries polluting communities across the U.S., especially communities of color, and heating up the entire planet could neither be built nor continue business as usual. Instead, insurance companies like Travelers, W.R. Berkley, and Liberty Mutual continue to insure new fossil fuel projects, designing loopholes in their climate commitments to do so, while insurers like State Farm and Berkshire Hathaway provide crucial support through their significant fossil fuel investments. Insurers also get help from fossil fuel industry lobbyists and trade associations that work to hinder climate-related regulations.
As insurers continue to fuel the crisis, low-income and communities of color will be hit first and hardest by the devastating impacts of climate change. Due to a history of government-sanctioned racist policies such as redlining and restrictive covenants, these communities face heightened exposure to climate impacts like wildfires, flooding, hurricanes, and sea-level rise. Living in the wake of fossil fuel devastation now comes with the added insult of disappearing coverage and unaffordable insurance costs.
But racist policies aren’t solely a concern of the past. These communities still confront exclusionary underwriting and claims practices that make it harder to obtain adequate, affordable insurance and fair claims. Despite the ban on using race in underwriting, various tactics, like using credit scores as a surrogate for race, enable insurers to sidestep scrutiny. Low-income and communities of color are often targeted by exploitative credit schemes and predatory lending, leading to consistently low credit scores due to difficulties meeting associated payment deadlines.
What makes this crisis so dire is that practically every financed transaction requires insurance. Consequently, systemic insurance failures are positioned to trigger both a mortgage and a more extensive financial crisis. The scarcity of insurance options will drive up premiums as ever-growing demand outstrips available supply. This will continue to have a calamitous impact, with reductions, withdrawals, and claim denials disproportionately affecting low-income and communities of color. The inability to pay insurance premiums in these communities will lead to higher foreclosure rates, rendering certain areas uninsurable and uninhabitable, causing a substantial decline in property values and exacerbating existing wealth disparities.
Addressing the problem starts with recognizing and rectifying the insurance industry’s unique lack of transparency. Without public data to study the impacts of climate change on insurance markets, how can we discern when insurers raise prices due to climate change or to exploit crises for profit? A recent effort by the Treasury Department to collect this data is a step in the right direction, but specific attention should be paid to marginalized communities. Advocacy groups also urge timely action from regulators to prevent insurers from leaving the public responsible for a bailout, as emphasized in a recent letter to Secretary Janet Yellen.
Yet amid this transparency crisis, industry-funded Republicans want to derail industry oversight and data collection by eliminating the oversight office altogether. When you follow the money, it all makes sense. Patrick McHenry, House Financial Services Committee Chairman, received $413,400 from the insurance industry during the 2021 – 2022 election cycle. Eight other Republican committee members also received hundreds of thousands of dollars each.
In the long run, we can only solve this issue by adapting climate-resistant building codes, retrofitting infrastructure, and reducing carbon emissions — which ultimately means drastically reducing the use of fossil fuels. The insurance industry must do its part by agreeing not to insure and finance new fossil fuel projects.
Finally, Congress should collaborate with impacted communities to craft solutions that prioritize investments in mitigation, resiliency, and premium assistance for low-income and communities of color, ensuring that those who contributed the least to the risk do not incur the highest costs.
If we don’t figure this out soon, we’ll all be under water.
Sharon Lewis is the Executive Director of the Connecticut Coalition for Environmental and Economic Justice (CCEEJ).
