Climate change and your insurance
Why climate change matters
Growing evidence suggests that the worsening effects of climate change are causing droughts and severe weather such as heavy rain, hurricanes, tornadoes and floods.
Natural disasters can destroy homes, cars, businesses and crops, leading to an increase in the number and severity of insurance claims.
As a result, insurers in some parts of the country have stopped offering certain types of insurance coverage and many insurers have limited the types of coverage they offer. This has also led to higher insurance premiums that are often unaffordable for consumers. As a result, some consumers buy policies that don’t provide as much coverage as they need, while others go without insurance.
Climate change is not just a property and casualty issue. It can also affect consumers’ health. For example, poor air quality can lead to an increase in the number of people with asthma, which can also lead to an increase in health insurance claims.
What is the Office of the Insurance Commissioner doing about climate change?
Commissioner Mike Kreidler chairs the National Association of Insurance Commissioners’ (NAIC) Climate Change and Global Warming Working Group (www.naic.org). The group’s goals include:
- Reviewing risk-management efforts by insurers regarding the effects of climate change.
- Investigating the use of modeling by insurers and reinsurers regarding climate change impacts.
Since 2010, the Office of the Insurance Commissioner has partnered with other states to require insurers with a certain dollar amount of premiums to reply to a survey regarding their preparedness to address climate change risks.
The survey asks insurers questions regarding how they’re addressing climate change impacts to their business, such as increased claims for property insurers for losses from extreme weather or increased claims for health insurers resulting from climate change impacts on consumers’ health.
A group called Ceres has summarized the carriers' survey responses in a report:
- 2014 Climate Risk Survey findings and recommendations (PDF, 1MB)
- 2012 Climate Risk Survey findings and recommendations (PDF, 1MB)
- 2011 Climate Risk Survey findings and recommendations (PDF, 1MB)
In addition, the Office of the Insurance Commissioner led a work group that developed the guidance for other state regulators to use when they evaluate insurers’ climate change risks and investments during financial examinations and analyses. In March 2015, several of the agency’s financial examiners and analysts participated in a practice run of the training, which will assist other states’ departments of insurance in helping insurers identify climate change risk to their business and evaluate how these factors may affect their claims and investments.