Extreme weather and extremely high insurance rates may have to go together as insurers try to manage losses

At least 26 deadly tornadoes hit the U.S. in 2023.
(NOAA artist rendering, Unsplash)

After catastrophic losses from extreme weather and wildfires, insurance companies asked for significant increases in auto and home insurance rates, but state regulators told them no. Insurers like Allstate went to the "nuclear option," reports Jean Eaglesham of The Wall Street Journal. The company threatened to "stop renewing auto insurance for customers in three states that hadn't given in to its demands, which would have left those policyholders scrambling for coverage. . . . The states blinked. New Jersey approved auto rate increases for Allstate averaging 17%, and New York, a 15% hike."

Ten years ago, getting auto and home insurance was generally affordable. That's no longer the case for many Americans. Eaglesham writes, "Homeowners and drivers are facing sharply rising premiums, less coverage and fewer, if any, choices of insurer. In some places, the only options are bare-bones coverage or none at all. That can make homes worth less and harder to sell, and cars less affordable."

With insurers coming off of some of their worst years on record, along with the unpredictable costs of nature's calamities, insurance expenses are not likely to come down. Eaglesham reports, "The past decade of global natural catastrophes has been the costliest ever. Warmer temperatures have made storms worse and contributed to droughts that have elevated wildfire risk."

Barry Gilway, a 52-year veteran of the industry who retired in 2023 as head of Florida's Citizens Property Insurance, a state-created insurer of last resort that sells plans to people who can't get coverage elsewhere, told Eaglesham, "I have never seen the overall market this bad."

For consumers, shopping around, if possible, offers one panacea. "Nancy Piel, who lives Lake Forest, Ill., a Chicago suburb, contacted three agents last year after Nationwide increased the cost of insuring her two homes and 2011 minivan to $18,000," Eaglesham reports. "According to one agent, Chubb quoted even more: $29,000. She ended up insuring with Cincinnati Insurance for $10,500. The coverages were all very similar, she said."

States that have been deserted "by many big insurers are trying to tempt companies back by making it harder for policyholders to sue them," Eaglesham explains. "Despite some concessions from regulators, insurers are bracing for a tough future. Allstate Chief Executive Tom Wilson said that everywhere in the country is at some risk from increasingly severe weather. 'There is no place that's safe,' he said, 'and no place that's not going to be impacted.'"