The Storm After the Storm: How Climate Change is Driving an Insurance Crisis
By Deanna Noël
Is your insurance going up? You’re not alone. Across the country, people are getting hit with higher home insurance premiums, losing coverage, or finding out that the insurance company they’ve paid into for decades has suddenly left their state.
At the heart of the growing crisis is climate-driven extreme weather. As the planet heats up, extreme weather is becoming more frequent, severe, and costly. Wildfires fueled by record heat and drought plague the West. Hailstorms batter the Midwest. And each year, hurricanes grow stronger and reach further inland, while catastrophic flooding hits everywhere from Texas to Vermont to New York City. Many communities find themselves still cleaning up from one disaster when the next one hits.
Climate disasters leading to higher insurance costs and fewer options
In response, home insurers are raising rates, cutting coverage, or abandoning high-risk areas altogether, leaving people with fewer and often more expensive options. The crisis is hitting homeowners across the country and renters too, who feel the impact through higher rent, with severe weather expected to drive up home insurance rates in all 50 states. And as more claims are filed, insurers are paying out less—more than one-in-three weather-related claims go unpaid on average, putting the financial burden directly on the people suffering the loss.
Too often, people only discover after a disaster that their coverage was quietly dropped, scaled back, or didn’t cover the damages they thought it would. And without home insurance, you can’t get a mortgage, pushing home ownership out of reach for families already struggling to make ends meet.
As private insurers pull out of high-risk areas, more homeowners and businesses are being pushed onto state-run insurers of last resort, often called FAIR plans (FAIR stands for fair access to insurance requirements). While these plans can operate as a safety net for people in high-risk areas, they often cost more and offer less coverage than private insurance. Now, with climate change driving up risk across more parts of the country, these state-backed plans are overstretched, shifting costs onto taxpayers and straining state budgets.
Insurers cash in while fueling the climate crisis
Major insurers like State Farm and Allstate often claim they have no choice but to raise rates or leave markets because of rising disaster costs. But the truth is, they’re still pulling in massive profits and paying their executives more—not just by offering less coverage, but by investing the premiums we pay. As powerful investors, insurers put our premium dollars in investments like stocks, bonds, and real estate—and fossil fuels. In fact, insurers invest around $582 billion in coal, oil, and gas, the very industries driving the climate disasters that threaten our homes and communities.
The financial risks associated with climate change shouldn’t be a surprise. Scientists and economists have warned about them for decades. Since 1980, the federal government has tracked billion-dollar disasters in the U.S, and the numbers have skyrocketed. Over the past decade, we’ve lived through nearly 20 major billion-dollar-or-more disasters each year, causing close to $750 billion in damages. Fifteen major U.S. insurers are losing more money due to climate-driven losses than they make in premiums from fossil fuel projects. Given that fossil fuel investments and premiums make up only a tiny slice of insurers’ business, it would make financial—and moral—sense for them to walk away from fossil fuels instead of walking away from communities.
Advocating for insurance reforms that put people first
Insurance is supposed to protect people from risk, offering affordable coverage and a lifeline when disaster strikes. But instead, the industry is exacerbating risk and shifting more of the cost onto us while padding its own profits.
So, where do we go from here?
Public Citizen is taking on the insurance industry and fighting for bold reforms that put people over corporate profits by:
- Holding insurance companies accountable for fueling the climate crisis by demanding they stop insuring and investing in the fossil fuel industry that is driving more extreme weather. To bring down the risk, polluters and the industries that profit from the real estate market and the climate crisis should pay. We’re urging states to pass legislation that would require the insurance and fossil fuel industries to fund climate resilience and clean energy through their investments, as well as through taxes, fees, and penalties.
- Pushing for stronger regulations in the public interest. The insurance industry is notoriously secretive, making it harder for the public to understand the risks we face, the decisions underpinning premium increases, coverage denials, and other policy changes, or to fight unfair practices. We’re demanding more information and transparency, not less.
- Urging Congress to tackle the insurance crisis head-on by defending federal programs that protect communities from disasters and opposing cuts to agencies and programs that help us stay informed, prepare for, and recover from disasters and their broader financial impact. We’re also urging Congress to establish strong national regulations and to explore public alternatives to the private industry, such as a public insurance backstop.
- Demanding state-level insurance commissioners put policyholders over insurer profits. These elected or appointed officials are top decision-makers in determining whether insurers can raise rates, cancel policies, or leave communities behind. We’re demanding they do their job and protect their state’s policyholders over corporate interests.
- Investigating predatory insurance practices. We’re exposing how insurers are squeezing consumers, shifting risks, and threatening the stability of housing markets and the broader economy, and using that data to push for change.
- Partnering with advocates across the country from the Gulf Coast to the Midwest and beyond to build a just, people-centered insurance system that puts people before corporate profits.
You have a voice in this fight too. Tell your state insurance commissioner to stand up for you and your neighbors and put policyholders over insurer profits.
Together, we can demand a fairer system—one that protects people from harm and builds stronger, more resilient communities in the face of the climate crisis.
See how the home insurance crisis has unfolded in your state. Below, you can explore an interactive map depicting how insurance costs have changed over time.