Guest essay by Linnea Lueken
Yahoo News reposted an article from Realtor.Com titled “Would You Drop Insurance To Stay Put in Your Neighborhood? Most Owners Say Yes,” claims that increasing “climate risk” is forcing people to go without insurance and insurers to pull out of high risk areas. This is only partially true, insurers are pulling out or increasing rates in some areas, and some people are foregoing insurance. But, what isn’t true is increased “climate risk” as the reason. Historical data clearly shows extreme weather is not becoming more intense or frequent.
Realtor.com has their own economic research analysts, one of them claimed that “climate-related events” are increasing. The article also makes a puzzling claim, that “[m]ore than $12.7 trillion worth of U.S. real estate now faces severe or extreme climate risk, according to a recent Realtor.com Housing and Climate Risk Report.” This statement implies that these conditions are new and/or worsening.
Looking at the report cited, the risks highlighted are flooding, hurricane wind damage, and wildfires. The problem for Realtor.com is that none of those weather conditions have increased over time.
As Climate at a Glance has shown, flooding is not getting worse. In fact the costs of flooding in the United States have actually declined as a proportion of the U.S. GDP. (See figure below)
Studies from the Journal of Hydrology and Hydrological Sciences Journal both found only low confidence in any global flood trends, if there are any trends at all.
Similarly, hurricanes are not getting worse, and especially not in the United States, which just went more than a decade from 2005-2017 without a single major hurricane making landfall, representing an all-time record hurricane drought.
The amount of acreage burned by wildfires globally has declined, as Climate Realism discusses in greater detail in dozens of posts. In the United States the earlier parts of the 20th century saw more widespread fires, and recent upticks in wildfires correspond more strongly to forest management than any increase in fire weather itself.
So what is causing an increase in the amount of property value at risk from these weather events?
The answer is rising property value and new construction in previously unsettled hurricane and fire prone areas.
This argument from Realtor.com is not new. Climate Realism has covered this dozens of times, including here, here, and here as examples. It is a favorite talking point that always has the same errors built in.
What is interesting in the Realtor.com piece is that they admit this in a roundabout way by saying that “insurers hope to drive broader risk mitigation: tougher building codes, retreat from fire zones and flood plains, and fewer new builds in disaster-prone regions.” They also say that “[o]nly 30% of buyers have researched natural hazard data for a home they’ve purchased or considered.”
If people are not doing their due diligence in buying homes in disaster-prone areas, that is not an indication of extreme weather getting worse, it is an indication that more people are placing themselves in risk prone areas.
As my colleague Anthony Watts said in a previous Climate Realism post on this subject, “scapegoating non-existent “climate risk” allows adjusters, insurers, and lenders justify higher premiums, interest rates, and stricter credit standards while diverting attention from the actual causes of rising mortgage costs and insurance rates and claims.” The truth is that overbuilding in coastal areas especially but also fire prone regions is leading to more costly damage when the storms do come, despite the fact that they are not increasing in frequency or severity.
On the fire issue, however, there is something of a human-caused aspect, because as more people live in fire prone areas, they increase the likelihood that a wildfire will be sparked, as humans account for the vast majority (up to 90 percent) of wildfires by not controlling campfires and grills, arson, fireworks, negligently disposing of cigarette butts, and other accidental ignitions. But this, again, does not mean that “climate hazards” are increasing and forcing insurance higher.
If Realtor.com and Yahoo wanted to be fully transparent and honest, they would honestly look at measured data and not just projections by activists when it comes to “climate hazards.” Data does not show that these conditions are becoming more frequent, and so they are not increasingly responsible for higher insurance rates and insurance companies abandoning regions.
Linnea Lueken is a Research Fellow with the Arthur B. Robinson Center on Climate and Environmental Policy. While she was an intern with The Heartland Institute in 2018, she co-authored a Heartland Institute Policy Brief “Debunking Four Persistent Myths About Hydraulic Fracturing.”
Originally published at ClimateRealism
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Insurance companies are almost certainly USING the climate change meme to increase premiums above what they need to be. Why wouldn’t they !!
Build more houses on floodplains… more houses get flooded
Build more houses in or next to bushfire-prone areas… more houses burn in bushfires.
Build new houses that are twice the floor area than was built 40-50 years ago.. premiums go up
The realtor take is what is still much too high. It needs more investigation and lawfare.
You have looked at it the only realistic way over time as a percentage of GDP. The fools like realtor.com are using just raw loss numbers forgetting that will always happening because of inflation and a growing economy.
It’s almost baked in that insurance will rise year on year because the cost to replace is increasing year on year.
Yep. I renewed my house insurance recently. The premium was up considerably and when I asked why was told it was due to the increased cost of both materials and labour. No mention of climate change, though.
Often, too often, used is the Consumer Price Index. Not inflation. Not GDP.
CPI is how inflation is measured, they aren’t different things.
GDP is Gross Domestic Product. It is the value of all things produced in a country. It is influenced by inflation, but it isn’t a measure of inflation.
“CPI (Consumer Price Index) is not the same as inflation; rather, CPI is a widely used measure of inflation. Inflation is the general increase in prices and fall in the purchasing value of money, while the CPI tracks the average change in the prices of a basket of consumer goods and services. The CPI is used to calculate the rate of inflation, indicating how much prices have increased over a period.”
Correct – GDP is a better metric than inflation rate
There are two problems with using the inflation rate to compare insurance losses
1 – it doesnt take into account population increase 180m in 1960, 227m in 1980, 334m today.
2 – homes are both larger and higher interior finish out costs. Those two factors have raised the cost of housing approx 1.5x to 2.0x faster than the rate of inflation.
There should be an increase in insurance losses by approx 1.5-2.5x since the 1960’s after adjusting for inflation.
How exactly does the output of a manufacturing plant in Indiana influence insurance costs in Florida?
If that plant shuts down, do insurance costs in Florida drop?
your question is not related to my comment or to the topic in general
The real issue is: the increase in insurance claims is not an indication of more and more intense storms or climate change.
Insurance companies are for profit organizations. They will do what they will do to keep complaints down to a dull roar while ensuring their bottom line is black (not red).
All of the factors discussed related to rate increases and outlays, etc., are valid, but need to keep making the point that it is not “climate change.”
Commonly, when an industry faces negative growth it employs advertising to change bad perceptions by potential clients. Here in Australia, there is now massive advertising bombardment, especially by commercials promoting insurance to offset funeral expenses (which are insensitive BTW to those over 80 like me).
So, I deduce that insurance is in trouble. It has taken decades for consumers to realise that insurance is a large, voluntary overhead that adds $$$ to damage recovery costs. Just look at the tallest, most expensive building in many big cities – bought by insurance premiums that were never needed or exercised.
Geoff S