When climate disasters strike, insurance companies are forced to deal with the impact on their bottom line. This often results in insurers transferring more risk back onto policyholders. There are a variety of ways that this can happen.
One of the most extreme responses is when an insurer completely exits a market. This has happened in states like Florida, Louisiana, and California, where the combination of increased disaster risk and high rebuilding costs have made it difficult for insurers to continue operating. We saw this happen many times in 2022. When this occurs, policyholders are left with limited options for obtaining insurance coverage, leaving them vulnerable to financial loss in the event of a climate disaster.
In other cases, insurers may choose to raise their premiums or reduce coverage options to offset the increased risk. This can make it more difficult for individuals and businesses to afford insurance, further exposing them to potential financial devastation.
Another response is for insurers to implement stricter underwriting guidelines, meaning they may deny coverage or require additional mitigation measures for a policy to be issued.
*This is why we are always focused on giving homeowners tips on ways they can make their homes more attractive to insurance companies!*
Governments can also implement regulations and policies aimed at reducing the impacts of climate change, which can indirectly affect the insurance industry. For example, stricter building codes or land use regulations may reduce the risk of property damage from natural disasters, leading to lower insurance premiums.
One effort here in Louisiana is the Louisiana Fortify Homes Program, which rewards homeowners with grant money for replacing their roofs using methods that meet or exceed the Fortified Roof standard to strengthen roofs in order to better withstand hurricane-force winds.
We know that a hard market doesn't last forever, and while these increases are frustrating, we are here to help you get through it. Follow us on social media for tips on making your home appealing to insurance companies and updates on the state of the Louisiana Insurance Market.
As always, our team at Kastner Insurance Group is here to answer any questions you may have about this & more! We offer unbiased advice to ensure our clients are fully covered, and our customer service is unmatched.
Call us today or visit our website for a customized quote.
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