How climate risk, disaster era are changing the cost of home

Frequent weather catastrophes, induced in part by climate change, are bearing down on homeowners and would-be buyers.

Some home insurers have opted to stop writing new business in heavily impacted states like Florida — currently under threat from Hurricane Idalia — and California, or in other pockets of the country. In other cases, insurers are raising prices, or reducing coverage, and there’s likely to be a continued ripple effect across the country, as weather events tied to climate change proliferate, insurers tighten the reins on risk and reinsurance becomes harder to come by, according to industry experts.

Global insured losses from natural disasters topped $130 billion last year, according to Aon. That was driven by the second-costliest event on the books — Hurricane Ian — which caused catastrophic storm surges and damaging winds and flooding in Florida and Cuba, accounting for roughly $50 billion to $55 billion of the global insured loss, according to Aon.

“Consumers everywhere are going to be faced with tougher choices with respect to limits that are available, the coverages they can purchase and deductibles,” said John Dickson, president and chief executive at Aon Edge, which offers private flood insurance and other insurance products.

Here’s how consumers can navigate the home insurance market amid increasing climate-driven weather risks:

The home insurance market disruption is going to get worse

Things are likely to get worse for homeowners and would-be buyers. Between wildfires, thunderstorms, tornados, hail, floods and other natural disasters, “insurers are having to rethink their risk concentration in any one of those areas,” said David A. Sampson, president and chief executive of the American Property Casualty Insurance Association.

Insurance companies have regulated pricing in most states — they can’t just charge consumers whatever they want, said George Hosfield, senior director and general manager of home insurance solutions at LexisNexis Risk Solutions. But they can decide to pull out of a market if the economics no longer work, a tactic some insurers have exercised.

State Farm, for example, said in May it would stop accepting new home insurance applications in California. Allstate announced a similar move in June. Also in June, Farmers Insurance became the latest insurer to pull out of Florida, a market that’s been roiled with turmoil for many years.

Policyholders should expect to pay more

The average cost of homeowners insurance nationwide is $2,777 a year, with rates varying by state, according to Insurance.com, a consumer comparison service. Oklahoma is the most expensive state for home insurance at an average cost of $5,317 a year. Contrast that with Hawaii, the least expensive, which has rates averaging $582 a…