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Insurance industry refuses policies to those most in need as climate change unfolds

Originally published: Liberation News on June 16, 2023 by Jesse Carpentier (more by Liberation News)  | (Posted Jun 23, 2023)

State Farm recently announced that it is halting new insurance policies for homeowners in the state of California, where the agency is currently the top insurance provider, due to rising “catastrophe exposure” coupled with inflating construction costs. In 2022, Allstate quietly discontinued new homeowner policies in California and that same year several other insurance companies canceled thousands of policies in Florida and Louisiana, citing similar concerns. It is inevitable that other companies will follow their lead, as catastrophic disasters are no longer random or unusual in these regions. In places like California, Florida, and Louisiana, devastating climate-related events are at least an annual occurrence, and are increasing in magnitude.

Over the last 5 years, California has seen an annual average of over 2,500 wildfires with over 7.2 million acres burned since 2020, driven by increasingly drier conditions. Burned area is five times greater than it was in 1971 and could increase by as much as 50% by 2050 according to a recent study. But California is not just known for its wildfires. As the swings between dry and wet weather become more dramatic, the state is seeing more hurricane-like storms that cause catastrophic flooding, landslides and destructive winds.

The Southeast is also no stranger to extreme storms. The region has suffered at least one destructive hurricane every year since 2018, costing an estimated $310 billion in damages, and climate models predict these storms will continue to intensify.

Whether it is a wildfire, hurricane, or some other extreme weather event, it is far too likely that a home in these regions will need significant repairs or to be entirely rebuilt at least once, and likely at the same time as many others affected by the same event. The question is not “if” but “when” this will happen, and that simply does not pencil out for the insurance business.

As climate change continues to exacerbate risk, insurance companies will continue maneuvering to protect their financial viability and millions of people will be left without insurance when they need it the most. This should not be surprising, as an insurance agency’s primary objective is to increase their profit margin, not to act as a safety net. Despite record underwriting losses in 2022, State Farm still made $588 million in profit and Allstate made $13 billion. Homeowners insurance, like all types of insurance, is a corrupt and parasitic industry that charges people enormous amounts of money in exchange for a false sense of security. Insurance agencies have already been setting astronomical premiums in these higher-risk areas, creating a significant financial burden for low-income residents.

Dwindling insurance options and rising premiums most severely hurt low-income homeowners and tenants in properties that are uninsured or underinsured. Landlords will continue to increase rent to cover higher insurance costs or may not be able to obtain any insurance at all, which will most likely force tenants to move. Most mortgage lenders require home insurance, so if a landlord is still paying off a mortgage and cannot obtain insurance, they will be forced to sell the property. Even if a landlord is not paying off a mortgage and continues renting out their uninsured property, tenants would be put in a terrible position if their home was damaged or destroyed, as the landlord may not be willing or able to pay out-of-pocket for repairs/reconstruction, or even temporary housing. Landlords are ultimately profit-seeking individuals or companies who usually do not hesitate to let their tenants live in unacceptable conditions or leave them out to dry when unfortunate circumstances befall them.

Federal government does little to support tenants and low-income homeowners

The federal government also provides very little support to tenants and low-income homeowners affected by disasters. In a report issued by the Federal Emergency Management Agency National Advisory Council in 2020, one of the most significant findings was that FEMA’s aid programs “provide an additional boost to wealthy homeowners and others with less need” while low-income households, disproportionately people of color, become worse off following a disaster. Based on data from 2014-18, the report found that the poorest renters were 23% less likely than higher-income renters to receive housing support and the poorest homeowners received about half as much as higher-income households to rebuild their homes.

Furthermore, FEMA’s National Flood Insurance Program exists to augment homeowners policies (which typically do not cover flood damage), but at a cost that mostly only wealthier homeowners are able to afford. Many have tried to expose these disparities far before this report was published, but no significant improvements have been made. The report makes several recommendations for more equitable outcomes, but it remains to be seen whether the Biden administration will give them more than an empty nod. As it stands, FEMA does not provide adequate support for those who need it the most.

One way or another, many people will be forced to move away from their homes, live in unsafe housing, or become homeless. Housing is already extremely precarious for working people in California, where the cost of living is among the highest in the country. It is also the most populous state, home to almost 40 million people. Hundreds of thousands already have left the state in the last couple years, primarily due to the cost of living, and certainly more will follow as conditions worsen. Where will all of these people go, and will they continue to experience precarity in their new homes? What will happen to those who stay?

Under capitalism, the answers are bleak because this system does not assure safety and wellbeing for anyone other than the further enrichment of the ruling class owners and investors.The very nature of capitalism, which requires ever increasing profits, cannot truly meet the needs of the population even in normal times, and much less so with climate disasters increasing, If a company is no longer profitable, they will lose their investors and go bankrupt or be bought by another company that will change policies to make it profitable, which is why these insurance providers are refusing policies despite the immense hardships it will create.

Capitalism not only lacks a clear plan to reduce the greenhouse gas emissions driving climate change, it also falls very short on investing in resilient infrastructure that would help communities withstand climate-related hazards, or assisted relocation from areas that will become uninhabitable regardless. Under a business-as-usual scenario, more and more people will be forced to live in dangerous conditions. A socialist program, on the other hand, would prioritize climate change mitigation and build sustainable, resilient communities.

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