Nov 26, 2019

Climate change rains insurance misery on homeowners

Illustration: Aïda Amer/Axios

Climate change is making home insurance unavailable or unaffordable in the riskiest areas for hurricanes, wildfires and flooding.

Why it matters: As insurance companies pay record amounts to homeowners who have suffered partial or total losses, they retreat from or raise premiums in places where claims are owed.

What's going on: Company payouts for natural catastrophes in 2017 and 2018 stood at $219 billion, the highest ever for a consecutive two-year period, according to Swiss Re, a company — known as a reinsurer — that underwrites risks for home insurance and other policies.

  • Insurers continue to write policies in areas prone to disaster, but tend to hike monthly premiums to offset the cost.
  • Every state saw annual premiums rise between 2007 and 2016 (the latest year which data is available from the National Association of Insurance Commissioners).
  • States in tornado alley saw the biggest jump: Oklahoma saw a $654 increase over a decade, while Kansas saw premiums rise $501 on average.

Yes, but: The rise masks that insurers are limiting coverage in areas deemed too risky.

  • The 2018 Camp Fire in northern California was the most destructive in property damage the state's history.
  • Insured losses topped $13 billion last year, according to the California Department of Insurance.

Fearing bigger losses, insurers are pulling back from high-risk areas in California, leaving homeowners scrambling.

  • In the last three years, the counties at greatest risk for wildfires saw the number of new and renewed homeowners’ insurance policies fall by 8,700, according to the California Department of Insurance.

In Florida, homeowners have seen insurance costs rise as areas are considered more at-risk by insurers.

  • For residents by the beach or coast: Mortgage companies require flood insurance, a separate policy that's usually provided by the federal National Flood Insurance ~ typically $700.
  • Private companies, which once considered the risk too heavy, are dipping their toes back in —for a price.
  • The number of private companies offering flood insurance rose to 120 in 2018, (vs. 90 in 2017 and 50 in 2016, according to the Insurance Information Institute).
  • These players took in $541 million in premiums in 2018, an increase of 11.5% from the prior year.

Homeowners also need wind-related insurance, on top of regular homeowner's insurance, which are sometimes sold as a package.

  • "A huge portion of homeowner policy is wind- or hurricane-related in South Florida," Shahid Hamid, a professor at Florida International University, tells Axios.

The bottom line: Writing these policies could eventually put the insurers out of business.

  • Last year, California-based insurer Merced Property & Casualty filed for bankruptcy after it was unable to pay out millions of dollars in claims to policyholders after California's Camp Fire, per CNN.
  • "Regulators are becoming concerned about insurer solvency in the face of increasingly severe weather-related losses," according to a report by Deloitte.

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Insurers resist price hikes from their own insurers

Data: Guy Carpenter; Note: Index shows changes to global property catastrophe pricing from its starting point of 100 in 1990; Chart: Axios Visuals

Insurers are resisting rate hikes from their insurers, including the property reinsurers that act as a safety net if insurance companies’ losses reach a certain level.

Why it matters: Reinsurers, which in the past have bid up rates as insurers accumulated more losses than expected, are competing more with alternative capital.

Go deeperArrowNov 26, 2019

Health care spending grew again in 2018 thanks to higher prices

Data: Centers for Medicare & Medicaid Services' Office of the Actuary; Chart: Axios Visuals

Americans spent $3.65 trillion on health care in 2018 — 4.6% more than the year before. That growth also was higher than the 4.2% rate from 2017, according to revised figures from independent federal actuaries.

Between the lines: U.S. health care spending climbed again not because people went to the doctor or hospital more frequently, but because the industry charged higher prices. And private health insurers didn't do a particularly good job negotiating lower rates.

Go deeperArrowDec 6, 2019

People hate shopping for health insurance

Illustration: Aïda Amer/Axios

Americans rarely switch to new health plans when the annual insurance-shopping season comes around, even if they could have gotten a better deal.

The bottom line: People loathe shopping for health plans, and many are bad at it, for one major reason: "It's just too hard," Tricia Neuman, a Medicare expert at the Kaiser Family Foundation, told me last year.

Go deeperArrowDec 3, 2019