Climate change vs. inflation
Members of the U.S. Senate Budget Committee last week debated the root cause of the property insurance crisis affecting homeowners nationwide, with a wide range of culprits depending on who you ask. The Democrats were quick to associate the rising premium cost with climate change, whereas Republicans focused more on reckless government spending and inflation through the course of the meeting.
Senator Sheldon Whitehouse (D-RI)
Regardless of the clear split in policy ideas – one thing is clear: Florida in particular is feeling the heat. In his opening statement, Committee Chairman Sheldon Whitehouse (D-RI) declared “Florida homeowners pay on average over $6,000 for insurance, the highest in the country and more than three times the national average, $1,700. Florida’s average premium doubled between 2020 and 2023,” adding that insured losses are only growing and this hurricane season is expected to be bad. (That average premium figure does not jive with Triple-I and the Florida Insurance Commissioner, who both put the figure at nearly $3,600. See our previous newsletter story.)
As he has in the past, Whitehouse targeted Citizens Property Insurance, Florida’s insurer of last resort that now has the most policyholders in the market, due to past private insurance company insolvencies. “It looks like an insurance market that is swirling the drain,” Whitehouse said. Nor is the problem exclusive to Florida, he said, citing a New York Times investigation that found insurance companies lost money on homeowners policies in 18 states last year, including Illinois, Michigan, Utah, Washington, and Iowa.
Rade Musulin, Actuary for Finity Consulting
Rade Musulin, formerly of Farmers Insurance in Florida and now an actuary for Finity Consulting testified on behalf of the Democrats, saying Florida’s insurance crisis could spread to other states. “In the coming decades, we must prepare for the possibility of more extensive or more extreme hurricanes, and coastal flooding from Texas to New England,” he said. “Florida’s experience is a warning on what we may see in the future in other states.”
Most committee Republicans, however, cited government-fueled inflation as the main cause for increased homeowners premiums. Senator Chuck Grassley (R-IA) said it’s reflected in the increased costs of materials and labor in repairing and rebuilding homes. Another factor: more people moving to disaster-prone areas.
Dr. EJ Antoni, research fellow at the Heritage Foundation
“The premise of this hearing is just completely off,” said Senator Ron Johnson (R-WI). He asked Dr. EJ Antoni, a research fellow at the Heritage Foundation who appeared for the Republicans, just how much inflation and lawlessness, such as rioting, were responsible for higher insurance costs. “If you just talk about government action and include both a failure to respond to criminal activity, and inflation and regulatory costs, that explains 90%, approximately, of the increase that we’ve seen in insurance premiums over the last several years,” Antoni said.
Whitehouse chided the Republican position. “It all begins with climate risk,” he said. “A major party pretending that climate risk isn’t real imperils our federal budget and millions of Americans all across our country.” While acknowledging climate change as a factor, Senator Mitt Romney (R-Utah) said “The idea that somehow we’re going to fix the climate and solve the insurance problem is pie in the sky. It’s avoiding the reality that we can’t fix the climate because it’s a global issue, not an American issue.”
LMA Newsletter of 6-10-24
