Those catastrophes, insurance industry insiders said, show just how quickly claims costs are escalating in the face of climate change.. That’s a record for a three-year period, according to the American Property Casualty Insurance Association.
That trend is too costly, insurers contend, and necessitates rewriting policies or eliminating coverages in growing geographic areas.Rate increases for homeowners insurance are regulated by state agencies. That can prevent firms from pricing policies that accurately reflect risk, said Daniel Schwarcz, who studies insurance markets at the University of Minnesota Law School.
Under the policy changes many large insurers are reporting to regulators, firms will continue to offer baseline policies to clients in disaster-prone areas, but without protections for damage caused by those disasters. For example, a policy in a region afflicted by hurricanes may exclude coverage for wind or hail damage, or in wildfire country, a policy without fire and smoke protection.
“The fact that insurers have the capacity to limit their exposure or change their exposure over time means at the end of the day their concerns are not fully aligned with the concerns of their policyholders,” Schwarcz said.Representatives from Allstate and Erie declined to comment. Berkshire Hathaway and Nationwide did not respond to requests for comment.