A Storm is Brewing for Property Insurance

Homeowners face significant impacts to their property from escalating extreme weather amplified by potential climate impacts. As roughly 85% of homeowners have homeowner’s insurance, the rising likelihood of extreme and catastrophic weather events makes monitoring the frequency and impact of natural disasters a critical insurance regulatory function.

The NAIC (National Association of Insurance Commissioners) and CIPR (Center for Insurance and Policy Research) recently published a survey on extreme weather impacts on property insurance based on US homeowner opinions.

Three main questions were asked:

• To what extent do respondents see a connection between extreme weather events and their broader insurance coverage?
• What is the relationship between what respondents believe about extreme weather and what actions they have taken related to their homeowners’ insurance?
• How are homeowners segmented by their climate risk perceptions, which further depend on loss experience and insurance coverage?

Respondents were recruited through SurveyMonkey’s Audience panel. The survey was conducted March 9–16, 2021 and included 2,496 U.S. homeowners from age 18 to over 60 in every U.S. state and Washington, DC.

Some of the findings included:

• Most homeowners in our survey do, in fact, have homeowner’s insurance, though respondents making less than $25,000 a year were 13% less likely to have a policy than others with higher incomes. Affordability issues were the most prevalent factor indicated for not having coverage.
• A majority (56%) believe their homeowners policy covers flood, even though flood is not covered under standard policies and only about 4% of homeowners actually have flood insurance.
• Two-thirds of respondents said their homeowner’s insurance costs have gone up over the past three years, with “increase in natural disasters such as hurricanes and wildfires” indicated as a key reason believed to be driving the increase.
• People living in Pacific, West South Central and Middle Atlantic states are most likely to report trouble getting or renewing homeowner’s insurance due to an increase in natural disasters. Across all premium levels, homeowners paying more for their insurance report increasingly higher levels of trouble renewing insurance because of wildfires or hurricanes.
• More than two-thirds of respondents said they were aware of things they could do to protect their property from extreme weather events to reduce their risk, but this awareness does not necessarily translate into action. Only half had actually made changes, though more than threequarters said they would spend their own money to fortify their home in exchange for a reduction in their homeowners’ insurance premium.
• Four out of five homeowners expressed interest in knowing what insurance companies are doing to address changing weather patterns and other climate-related risks.
• Homeowners revealed conflicting attitudes about climate-related hazard risk. While many respondents indicated reluctance to move to areas with flooding, hurricanes or wildfires and 75% think extreme weather events are happening more frequently overall because of climate change, on average they believe the area where they live is slightly less vulnerable to extreme weather events than the U.S. average.
• Survey respondents demonstrated a high level of worry related to climate change, with 44% of respondents classified as “alarmed,” more than double the national average.
• Those having trouble obtaining homeowners insurance consistently indicate being alarmed about climate change.

With the current status of climate change, wildfires, hurricanes, and extreme weather-related events, this is valuable information for consumers of insurance as well and industry carriers.   For additional detail and the full report, click here.