Climate Change Insurance 2022 | Money

It’s official: it’s been a record year for severe weather. Among its legacies, unsurprisingly, there could be higher costs to insure your home in 2022.

The weather data for 2021 is truly dire. According to the National Oceanic and Atmospheric Administration, the United States has suffered 18 unprecedented weather disasters that each caused more than $ 1 billion in property damage. And the NOAA list isn’t even complete, as it ends on October 8 – meaning it doesn’t include the financial tally of December’s devastating tornadoes in Kentucky and other states.

The billion dollar eruptions occurred in all regions and seasons, and included drought and wildfires in the west; a hailstorm and thunderstorms in the Midwest; spring flooding and Hurricane Ida in the south; and a severe winter storm in the northeast.

While these disasters have created a tsunami of home insurance claims, the weather is not the only thing driving insurance costs up. Labor and building material shortages linked to the pandemic have increased the costs of repairing and replacing homes. And the costs of flood insurance – which requires a separate policy – are on the rise for many homeowners due to new flood risk assessments.

Here’s what insurance professionals say you should expect when insuring your home over the next few months, along with a major addition to consider to top it off – the addition of an insurance policy. flood insurance.

Prepare for higher rates and fewer insurers

Whether your home or rental insurance costs increase in 2021, and by how much, will depend on your insurer and where you live, says Robert M. Lajdziak, director of insurance intelligence at JD Power and Associates. “But… yes, we’re going to see the prices for the blanket go up. “

The increases can be substantial, according to Dick Lavey, chairman of Hanover Agency Markets at The Hanover Insurance Group, who expects average increases in “the 8% to 10% range, which is higher than general inflation.” (These would also be much higher than the change for most homeowners from 2020 to 2021, when homeowners ‘and renters’ insurance premiums actually declined slightly on average, according to the Bureau of Labor Statistics.)

Insurance companies that have suffered huge losses in recent years from the California mega wildfires, for example, are devoting resources to sophisticated modeling technology. Adjustments to insurers’ risk modeling programs don’t just lead to premium increases. Some companies are taking more drastic measures, such as withdrawing completely from certain markets.

“During the last week, an insurance company told me that it would no longer underwrite insurance policies in the states it admitted,” says Robb Lanham, sales manager for HUB International Personal Insurance . “They can’t make a profit.”

Consider flood insurance

Despite the prospect of more expensive premiums, Lajdziak predicts continued growth in the number of people seeking flood insurance policies, driven by escalating extreme weather conditions of all types, and the role water plays. in much of the property damage.

“The main cause of loss in the United States for homeowners is water,” Lanham said. “The storms we have, the hurricanes we have, are fiercer and bring more rain.”

Torrential rains that accompany more storms mean that even people who do not live on the coast could find themselves at risk of flooding: Flooding of inland streams and rivers is a growing concern across a wider region. part of the country.

Increasingly, Lanham adds, natural disasters occur in places where structures are not built to withstand these elements. “There are no safe states,” he said, noting that “Hurricane Alley” has spread far from the coasts of Florida and the southeastern Atlantic coast.

It is true, as noted, that flood insurance is getting more expensive overall, as the federal agency that writes most policies has adjusted its rates to more accurately reflect the flood risk a homeowner faces. . More than 75% of the roughly 5 million people with flood insurance will see their premiums increase, but for the most part the increases will be modest – $ 10 a month or less, according to FEMA. And many of the remaining homes – many of which are more modest homes – will actually benefit from lower rates, as the new system eliminates what FEMA says are homeowner subsidies that have helped keep rates low for them. large properties in riskier locations.

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The exact location of your home may further affect your rates

The same trend towards hyper-localized risk assessment that changes flood insurance is also found in home insurance.

Rather than relying on generalized area maps that award premiums based on neighborhoods, advances in artificial intelligence and algorithmic analysis allow insurers to sift through a greater amount of highly granular data such as than surrounding vegetation, which could affect its fire risk. This makes it possible to identify to a much more precise degree which properties are most vulnerable.

Lavey says most major carriers now use models that incorporate between 40 and 60 different variables to calculate both existing and emerging risks. This higher level of accuracy means that some owners will end up paying more, as a risk that might have gone unnoticed before is now included in their premium.

But homeowners can make this sophisticated technology work in their favor, Lavey says, since algorithms in use today allow insurers to award both fees for factors that indicate higher risk as well as credits for tools. and risk mitigation strategies (such as reinforcing a roof or adding smart surveillance technology).

It should also be noted that these new tools will not be used without regulatory checks and balances. State insurance officials will be responsible for protecting homeowners and ensuring that this complex technology is used for the benefit of consumers.

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