An article published on the CNBC website on July 29th made the claim in this headline: “Homeowners insurance premiums rose 21% last year. Climate change is partly to blame, experts say.” The article goes on to say, “Experts say a rise in severe weather largely contributed to the increase, but it’s hard to tell how insurers are factoring climate risk into the cost of policies.”
This is false; several lines of data and research show that severe weather has been decreasing over the past several decades despite a modest warming of the climate.
The basis of the claim in the article is this:
Between May 2022 and May 2023, home insurance prices rose an average of 21% at renewal time, according to Policygenius.
A rise in catastrophic severe weather events contributed to this jump, experts say, and the rate of price increases is not expected to slow. As insurers face higher costs, they pass those along to consumers in the form of pricier premiums.
The first mistake they make is that a one-year period is not indicative of the influence of climate change. Climate operates on a much longer time scale spanning decades whereas weather operates on the short time scale found in days to a single year. What we experience on a day-to-day basis are weather events, not climate events. As has been said many times, weather is not climate. If during the same year there was actually less severe weather, it would not be related to climate change either. However, this is a choice that has been made to bolster the claims in the article.
The article itself contradicts the claim in the headline with this paragraph,
Though home insurance premiums jumped significantly in price last year, it isn’t a new phenomenon. To that point, between 2012 and 2021 the average premium rose from $1,034 to $1,411, according to the Insurance Information Institute.
Clearly insurance premium increases are not solely tied to weather in a single year.
The headline cites so-called experts in saying “climate change is partly to blame.” Sadly, not one of the people mentioned in the article has any climate expertise.
The data on severe weather compared to climate change is very clear. Many real world data sets show that there has been no increase in drought, or heatwaves; no increase in flooding; no increase in tropical cyclones and hurricanes; no increase in winter storms; and no increase in thunderstorms or tornadoes, or associated hail, lightning, and extreme winds from thunderstorms.
Further the Intergovernmental Panel on Climate Change (IPCC) has published research showing that severe weather has not made itself known in linkage to climate change. As can be seen from the Table 12.12 on Page 90 – Chapter 12 of the UN IPCC Sixth Assessment Report Emergence of Climate Impact Drivers (CIDs), there is no evidence of any increase or decrease, globally or by region, in the frequency, severity or extent of; frost, mean precipitation, river floods, heavy precipitation and pluvial floods, landslides, aridity, hydrological drought, agricultural or ecological drought, fire weather or wildfires, mean wind speed, severe wind storms or tornados, tropical cyclones or hurricanes, sand and dust storms, snow glacial or ice sheets, heavy snowfall and ice storms, hail, snow avalanche, relative sea levels, coastal floods, coastal erosion, marine heatwaves, ocean acidity, air pollution weather or radiation at earth’s surface.
The most compelling evidence though comes in terms of insurance losses related to severe weather. Clearly, the trend in property losses has declined as the Earth has modestly warmed over the last several decades.
Since climate change is not causing increasingly extreme weather, it cannot be causing increasing insurance premiums; the data simply does not support that premise. Other factors must be at play. For example this article by the National Association of Realtors shows that two states with the highest propensity for hurricane impact, Florida and Louisiana, have the greatest increases in insurance rates Even though the number of major hurricanes hitting the United states is down over the past decade.
The likely factor is increasing coastal populations. People like to live by the ocean. The population of coastal counties in the United States has been growing, increasing by 40.5 million people, or about 46%, from 1970 to 2020. This is despite the fact that coastal counties make up less than 10% of the total land area, but account for 39% of the total population. The population is projected to increase by over 10 million people, or 8+% into the 2020s.
With more people on coastlines, the risks to life and property increase, even though there’s been no trend in coastal storms. The insurance increases appear to be driven mostly by demographic changes, not climate.
There is no evidence that climate change is worsening the extreme weather events impacting the nation. It was irresponsible for CNBC to publish this article, as it has many inaccuracies and misleading claims. But that seems to be “par for the course” in the media these days.
Anthony Watts is a senior fellow for environment and climate at The Heartland Institute. Watts has been in the weather business both in front of, and behind the camera as an on-air television meteorologist since 1978, and currently does daily radio forecasts. He has created weather graphics presentation systems for television, specialized weather instrumentation, as well as co-authored peer-reviewed papers on climate issues. He operates the most viewed website in the world on climate, the award-winning website wattsupwiththat.com.
Discover more from Watts Up With That?
Subscribe to get the latest posts sent to your email.
Insurance companies are spreading some of the real cost of EV insurance among all their customers. Otherwise EVs would be prohibitively costly to insure. This way all homeowners subsidize EV ownership.
As do all taxpayers.
CNBC stupidity is on the rise, Climate Change is to blame
Climate Change Ideology Causes Inflation, Their Hysteria and the worthless projects they create, throwing money away to fix a non-problem, wildly increasing our national debts and making our money worth less are the cause of inflation of everything.
Real property insurance and automobile insurance are separate policies. This article is about real property (homeowners) insurance.
EV fires that burn down houses will affect homeowners insurance.
But pointing out a similar problem with EVs is relevant.
But the same insurance companies handle both policies. And what they lose in one department, they have to compensate in another.
This spreading of cost must stop. Of course, that’s the idea of insurance, but they charge people with a history of motor vehicle violations more- so there is some “discrimination” when data exists to justify it. Same with coastal homes and EVs.
That’s exactly where politics will destroy AI.
If enough data exists there can be no fair cost spreading.
“Fair”.
What should a new $1M life insurance policy cost a 50 year old if his doctor’s computer knows he’ll die at 51? This is why not to get a genetics test.
The cost of repairs, materials etc is being massively inflated, not by climate change, but by the climate change agendas such as Net-Zero, anti-CO2 taxes, massive government subsidies for erratic electricity, in the US the “Inflation causing act” is also a major driver of costs.
“Experts say …”
You don’t need to know who these alleged experts are.
a secret priesthood, obviously
Experts in the insurance industry are actuaries. Actuaries model ALL information available into risk assessment so that insurance companies won’t go broke from offering insurance for a certain hazard by exceeding the value of the insurance pool.
Since the actuaries assumptions are now proven false by CNBC’s excellent reporting staff, lawsuits against insurance companies for failure to regulate their product rates properly can now proceed.
How can you tell an actuary from an accountant?
(Well, an accountant stares at his own shoes while he’s talking to you, whereas and actuary stares at your shoes while he’s talking to you)
The only experts who matter are the insurance company actuaries. They are perhaps the best statisticians in that their analytical conclusions have a direct impact on the companies success or failure. Being wrong about risks and costs leads to either financial losses or uncompetitive pricing. AFAIK their analyses of risk and expected claims are considered a critical trade secrets so do not expect insurance companies to provide detailed information on what determines premiums.
The most obvious reason for insurance rates going up is simple inflation — the repair or replacement cost of property being insured has increased dramatically.
Bingo! Now add that to the propensity to build homes on the Atlantic and Gulf coasts (spitting into the wind of hurricane season), the “wildland interface” in the western coastal States (where they await the next wildfire like charcoal lighter soaked briquets), and in flood zones (need I say more), and you know what are the drivers of higher insurance losses and hence higher insurance premiums.
Of course that is a huge part of insurance premium increases. Construction costs escalated by 40% between 2021 and 2024 per national construction cost databases.
Repair and replacement costs are of course current costs having no relationship to the original construction costs for damaged or destroyed facilities.
That inflation of course was courtesy of the Democrats in Congress and the White House who went on a humongous spending binge when they controlled everything in the Federal government. It was only in 2023 til now, with the GOP back in control of the House, that finally reigned in, at least partially, the Dems who had been spending our tax dollars like drunken sailors.
And surprise, surprise! At least some spending discipline since then has brought inflation down from 10+% to near 3%.
Inflation is not a bug of Dem economic policy – it is a feature.
The Dems may be able to fool low information voters … but they can’t fool the free markets.
And it is the “climate change AGENDA” that has pushed inflation and cost of materials upwards.
Not climate change per se.. but the stupid political responses like Net-Zero, anti-CO2, “Inflation Causing Act”, and all the other greenie-type restrictions and costs on energy, transport, forestry etc etc etc
Oddly enough, the cost of lumber peaked on May 10, 2021. Since then it has fallen.
Insurers may have planned using the peak and raised policy premiums. That would make economic sense. They should be making money for a year or three.
If you happen to be arguing that x, y or z is due to climate change it’s surprising how few people will argue against that.
Peer pressure in the adult world.
Let me fix that last statement of yours
Peer pressure in the
adult worldIdiocracy.Increased population resulting in more people damaged by weather events should not mean increased costs per capita to insurers. Only people who buy insurance can expect payouts from the insurers and each of those clients is paying into the insurance pool. The only realistic cause of increased insurer costs is increased value of property damaged, not the number of properties damaged.
Some of that increase might be for more property built to standards that are supposed to be immune to weather damage (more expensive property) that turned out not to be immune, but then the premiums should have been higher on such property to cover its higher value. The most likely real reason for increased insurer costs is the rapidly inflation that makes repair and replacement much more expensive than the original building.
If a hurricane makes landfall in a sparely populated or low income area the damage will be less costly than when it lands in the high rent district of Florida.
The total damage might indeed increase with population and more infrastructure to be damaged, but the insurance policies only covers paying customers. Without an increase in rebuild costs over original build costs of customer property, there would be no increased costs to the insurance companies if they had priced their policies correctly to begin with. Hurricanes and whatever are expected risks and the policies should have been priced to cover expectations.
However, with Biden Economics in play it may not be possible to predict the consequences of that folly.. The replacement costs would still be much higher even if there had been zero increase in population. However, policies I’ve seen always have stated maximums for each catagory of whatever they are covering.
It could be the case that EV ownership by any policy holder who could not or did not adequately separate the EV from the house was not factored into the policy but that is the same as screwing up the policy by missing other factors (poor house wiring, too restricted access for fire department response, etc.) that should be factored into the price of each individual policy..
Uh, no. You clearly don’t understand the issue. “Covering” risk is through pooling of amounts insufficient to pay for the loss of each, but in total can cover those unlucky enough to actually experience a loss.
The amount for each is multiplied when there are accumulations of risk that can all be impacted by the same loss event.
Also, rising property values as reflected in property tax assessments.
If the assessed value of the property increases, is it not logical that the insurance premiums follow suit?
Many factors might require increased policy rates but those are generally independent of population increases, the subject of this article. Increased population indeed increases “things” that might be damaged but should not effect each individual insurance policy. Homeowner policies are issued to individual property. Likewise, no increase in population should effect life insurance policies. A policy only covers the individual insured. The number of other people in the area are irrelevant.
The answer Bidenomics, better known as Bidenflation.
Homes are prohibitively expense. If course insurance rates are up.
And building material inflation has hit hard.
Even the cost for Elon to produce more space ships is skyrocketing
Yellen, and others in this administration, have given the green light to insurance companies to increase their reserves in preparation for the impacts from climate change related severe weather. This has allowed them to successfully push back on insurance regulators, who are likely dupes of the climate alarmist propaganda.
Hopefully their reserves aren’t invested in novel MBS.
What does “push back on insurance regulators” mean?
“The likely factor is increasing coastal populations.”
I just hope the rest of us, not living on the coast, don’t have to subsidize the insurance of those on the coast.
I thought you established that earlier – cost spreading, the whole purpose of insurance. 20,000 people pay $1 so 1 person doesn’t have to pay $10,000. The other $10,000 builds a glass building downtown that looks great as a silhouette against sunset from the harbor and hires some guys that buy Teslas.
Yes, the rest of us subsidize the insurance of those on the coast.
You do, to a great extent. Ever hear of “wind pools?” If you live in a State along the Atlantic or Gulf coasts, there’s a good chance your State has one – at least for those States further south. They are government mechanisms to make insurance in risky coastal areas “more affordable.”
Translation: Those who choose to live in risky coastal areas pay lower premiums than they would without the “pool.”
At taxpayer expense, of course, thereby passing some of the cost of living in the “high risk” areas to those who don’t.
Proper building code changes should reduce per capita claims over time, and rates have no need to go UP on an inflation adjusted basis, as we can see from the article graph.
However CC is a good candidate for explaining why you need a rate increase on your policy. Fortunately most insurance companies have gone with “increased replacement cost” as their rate increase leader to disguise their profit motive. Maybe they are saving CC for next decade….
I grew up with a family of 4 in 1800 sqft. My parents then lived alone for 20 yrs as a family of 2 in 3000 sqft. The situation was not unusual for their demographic.
New middle-class construction is about 1000sqft per expected occupant, 1 bathroom per bedroom, enough outlets to put a screen in every room, including outlets for appliances in a 2 car garage. The setup would count as wealthy in 1970.
Point is – insuring “stuff” costs more because we have more “stuff”.
Not at all. Insuring “stuff” is no different than it ever was. What is different is that the money is worth less to buy replacement “stuff” due to rampant inflation.
You can thank Joe Biden and his administration for that. It all happened on his watch.
By the way, the National Debt of the USA just passed 35 trillion. It’s the largest in the world economy. In fact, it is larger than the remaining top 10 added together.
Well, that too. But the primary driver is we keep building more “stuff” in places prone to natural disasters.
Increased total damage, not increased damage to individuals.
anti-Biden talk might be on target, but I think the insurance increase trend would track standard of living better than the executive’s political party in the US.
Also the original comment was per-capita.
And more concentrations of “stuff” in high risk areas.
Excellent practical discussion of the home insurance situation. In agreement with common sense, backed by quantitative references and fits my limited recent discussions with Farmers agent.
Bill Rocks
And, did your insurance cost go down?
Ours went up some $600. from last year to this. Insurance companies leaving the State (WA.), and the “pool” not having enough in it.
“Climate Change” has replaced “9-11” as the go-to universal excuse for anything someone doesn’t want to take responsibility for.
The reason for insurance premium increases is pure greed, nothing else. There has been a zero rise in the cost base of insurance companies. Zero. They do not need raw materials, they do not need oil or gas, they do not need food from Ukraine. Nothing.
They just saw a chance, as a mafia cartel, to jointly raise all their prices hugely for one simple reason. Greed.
Wrong.
Materials, labor, transport, and all else to rebuild or replace a building are all up.
I have a friend who moved to the Florida Keys and he told me that it’s becoming increasingly common to self insure. Set up a conservative investment/savings account and pay yourself the annual premiums. If you have a loss use your own “insurance” to cover it. It takes a few years to have enough in the account to take care of losses..
Oddly enough, the cost of lumber peaked on May 10, 2021. Since then, it has fallen.
Insurers may have planned using the peak and raised policy premiums. That would make economic sense. They should be making money for a year or three.