Climate change effects are here, and they’ve been here for the last few decades. We’re starting to see frequenter, stronger natural disasters which are destroying physical properties, including commercial buildings, homes, and cars at incredible rates. Moreover, natural disasters are impacting our environment as they’re destroying natural formations, burning down forests, and affecting food supply.
Climate change is also causing our increase premiums to go up. As to how exactly that’s happening we’ll detail later, but it’s worrisome that it’s looking like there’s no end in sight to these increases. Is it inevitable that climate change will make insurance unaffordable for the general population? How do we combat climate change’s impacts on our insurance rates?
Read on to find out.
How does climate change affect our insurance rates?
Hurricane Ida went from a small hurricane to a Category 4 storm in the Gulf of Mexico, damaging Louisiana and the Northeast so much so that the damages capped out at around $75 billion.
All of Canada experienced record-breaking heatwaves in 2021, and its temperatures have now gone up for the 26th consecutive year. Canada’s North saw especially dramatic affects, with sea ice thinning and shrinking, sea levels slowly rising, and ice shelves have begun crumbling into the ocean.
The first tornado that Vancouver has seen in 45 years managed to touch down. Canada, as a whole, has never seen so many EF2 tornadoes in recent years, with winds exceeding well over 175 km/h.
What do these instances all have in common? Well, they all caused mass damages. They destroyed cars, wrecked homes, obliterated towns – and insurance companies have had to pay out billions of dollars’ in claims just to meet policy guidelines. To continue to be able to payout settlements, insurance companies globally have been forced to raise their rates to increase the “pool” of claim payout money.
As such, you may have seen a steady increase in your property, auto, and/or commercial insurance rates. Insurers are having to reassess the true threat that climate change may pose. Some companies have increased their rates such that some risk is impossible to insure for clients and, for insurers, some risk is impractical to offer coverage for.
How does climate change impact insurers and insured?
Both the insurance companies and policyholders are inevitably going to be impacted by climate change. There’s a lot on the line for either side.
Insurers will need to understand the risk of climate change more accurately to help individuals and organizations adapt to and mitigate their risk. It’s no longer possible to solely revise policies that have been built on historical data, as the risk that the climate poses now is more different than anything we’ve seen before.
For policyholders, the risk of climate change and the frequent occurrence of wildfires and floods may have resulted in underinsurance. Properties are more expensive to insure and may need re-evaluation to gauge adequate insurance limits. Ideally, it’s best to do a reviewal of your current insurance limits with the help of a broker to ensure you’re covered if something does happen.
How do we combat the climate change impacts on our rates?
We can’t reverse the effects of climate change. If we could, we certainly would. It’s going to take the entire globe to battle climate change, and even with all of us it could be a hard-fought battle. Some climate scientists are saying that we’re past the point of no-return and are no longer able to reverse the impacts of global warming. What does this mean for insurance rates, then? Will they continue to go up until no one can feasibly purchase insurance?
Higher risks = more claims which results in higher premiums. The first and foremost way to combat climate change impacts on rates is to avoid making claims as much as possible. This goes to show how proper risk management can go a long way with protecting our businesses, our homes, and our vehicles. Reinforcing our homes with monitoring systems, storm shutters, reinforced roofing materials can be a great way to reduce the risk of damages. For our cars, parking them inside when the weather gets bad is always a good idea. You can also avoid making claims by practicing safe driving and doing small repairs by yourself without needing to submit a claim.
Shop around with the help of a broker. Excalibur’s reason for getting out of bed in the morning is to become “champions of the people” and we’ll do our very best to use the resources we have and get you the lowest possible rates. Busy people don’t always have time to do the shopping around by themselves nor the knowhow to find insurance coverage fitted to them. Working with a broker to check around for new, lower rates each year is a great way to save on premiums.
You can also choose to raise your deductible. Raising your deductible means you’ll pay more in the event of a loss, but your premiums will also be lower. As an example, collision coverage on your auto insurance is subject to a deductible. By raising that deductible from $500 to $1,000 or higher, you’ll be able to lower your rates.
Ask about eligible discounts. Your broker may be able to help you with this, or you can go directly to your provider and ask about what you may qualify for. Discounts can include loyalty rewards for customers that have held a policy for a few years, bundle discounts for multiple policies or multiple vehicles/properties, defensive driving course discounts, group discounts, and more.
Insurance costs may continue to be impacted with time as climate change risks rise, but this does not mean we have to be complacent with the inflated costs. Work with a broker – the ones here at Excalibur Insurance Group look forward to helping you! – to navigate your budget needs. We don’t know what the future of insurance will look like with climate change risks, but being proactive is the best way forward.