How will climate change affect the average consumer trying to purchase homeowners or car insurance?
As losses rise, so too will premiums. Similarly, deductibles can be increased or upper limits of coverage reduced. If done properly, this is appropriate. Like any industry, insurers need to cover their losses and generate a reasonable return for their shareholders. With the patterns of extreme weather events becoming more intense and more variable, the actuarial challenge will grow, and this will, in turn, put pressure on prices. More importantly, however, is the question of whether certain hazards will become uninsurable as has already happened, in part, with flood and crop risks related to weather. Questions along these lines are already being asked with regard to things like windstorm and wildfire. While obviously not weather-related, the recent history of terrorism shows what happens when the industry is faced with rapidly changing conditions and reduced predictability of losses — the government often has to step in and assume some risks. Ultimately, taxpayers finance spreading pub
