So Uninsurable You…

“In the wake of increasing property damage from storms and record insurance company bankruptcies, this high rate of claims denials is severely compounding the hardships for Florida homeowners.”

Dr. Martin D. Weiss, founder of Weiss Ratings.

The horror of massive numbers uninsured properties, combined with the explosive litany of insurers denying coverage or severely limiting how much of actual damage rebuilding/repair costs they will actually pay, may soon make even larger segments of American homes simply uninsurable, in fact or in practice. Issues surrounding paying homeowners to rebuild or repair in the most “natural” disaster-prone regions suggest that sometimes rebuilding in these areas is a luxury that we may no longer be able to afford. Use that money to relocate?

Climate change – still subject to masses of people and political leaders who continue to deny, marginalize or simply refuse to accept as a priority – is accelerating faster even than many experts have predicted. Look at what super-drying areas in the west – where much of that forest “tinder” situated in federal lands where the relevant states have no control – or the tipping point rise in water temperatures in the Gulf of Mexico and the nearby Atlantic archipelago region. Alarmingly intense wildfires and hurricanes are the new normal.

Even those paying much higher insurance premiums in vulnerable areas are feeling the sting of overwhelmed insurance carriers. As Aliss Higham, writing for the October 17th Newsweek, points out, addressing the recent insurance carrier aftermath to recent hurricanes: “Property insurers are likely to continue denying property insurance claims in the wake of major natural disasters like Hurricanes Milton and Helene, according to insurance ratings company Weiss Ratings.

“Hurricane Milton barreled through Florida [in early October], killing at least 16 people and leaving millions without power. It came not long after Hurricane Helene, which tore through six states and killed more than 200 people. Now, Martin Weiss, founder of Weiss Ratings, has said a trend of non-payments to claimants is likely to continue—although insurance companies have firmly denied this… ‘Over the long term, we've seen a worsening trend in the denial rates by property insurers. At a minimum, this trend is bound to continue,’ Weiss told Newsweek. ‘With this year's jump in damages, insurers are bound to come under even greater pressure to deny legitimate claims, potentially accelerating the worsening trend.’…

“The comments come after Weiss released a report in June that found nearly half of all damage claims made by Florida homeowners with three of the state's large providers—Castle Key Indemnity, State Farm, and Castle Key Insurance—last year did not result in a payment…. According to Weiss Rating's analysis, Castle Key Indemnity Company rejected 47.1 percent of the claims it finalized in 2023, highest denial rate among insurers in the state. State Farm Florida Insurance Company denied 46.4 percent of closed claims, while Castle Key Insurance Company denied 46 percent of claims in the same period. Insurers have denied that this was the case, saying the data is inaccurate.” What used to be routine coverage and payment frequently requires hiring a lawyer and even filing suit.” As Newsweek continues, the response from the carriers is disheartening:

“A spokesperson for State Farm told Newsweek: ‘The cited data on paid claims in Florida is inaccurate, incomplete, and presented in a way that artificially underrepresented payments to our customers. The information is cherry-picked to drive an inaccurate narrative… ‘As an organization, we take great pride in our customer service and are committed to paying what we owe promptly, courteously and efficiently. Many factors affect claim payouts including the type of loss and the amount of a customer's deductible or hurricane deductible. In some weather events, the cause of damage is flood, which is excluded from the homeowners policy. If an individual does not have a flood policy to cover that damage, the policyholder may file a claim with their insurance company to obtain the necessary paperwork to pursue disaster assistance from the federal government.’”

Some hurricane and wildfire victims, who have filed suit, report that reports filed by on-site claims adjusters have been edited, severe damage re-described in marginal terms, with actual numbers dramatically reduced, resulting in claims being denied or simply edited away. “When asked about [the State Farm response in Florida,] Dr. Weiss told Newsweek: ‘The data that State Farm is refuting was sourced directly from their own annual statutory financial filing with the NAIC (National Association of Insurance Commissioners). If they are disputing the accuracy of their own data, then we would ask why they failed to file accurate data. Additionally, we would be delighted to receive a comprehensive data set covering each claim and the reasons that they were closed without payment if they would like to reach out to us.’…

“Florida homeowners who had filed claims with other insurance companies faced similar difficulties. According to Weiss Ratings, half the 40 insurance companies they analyzed failed to pay on at least 30 percent of claims. Additionally, three smaller insurers—Kin Insurance Network, American Integrity Insurance Company of Florida, and PURE Specialty Exchange—did not make payments on over 40 percent of the claims they closed in 2023, with rates of 44 percent, 43.9 percent, and 40.5 percent, respectively.”

The response is not overwhelmingly different in western areas decimated by wildfires. These pressures have resulted in major carriers literally pulling out of entire state markets or designating special vulnerable areas as “uninsurable.” Where insurance is available in regions where such threats exist, rates have skyrocketed, sometime doubling or trebling, often eclipsing the underlying monthly mortgage costs. More people simply cannot afford to pay those rates, and while residents in these areas argue for national subsidies to achieve affordability, taxpayers in other states seem unwilling to go beyond FEMA, which is seriously underfunded anyway.

Insurance carriers facing huge liability payments are pushing back, hard: “The hurricanes [also] dealt a multibillion-dollar blow to auto insurers, just as they were becoming profitable again and easing up on the pace of premium increases in many states. Now car owners in areas hit by Helene and Milton and other hurricane-prone regions could see prices rise further, analysts said… Josh Esterov, an analyst at CreditSights, said many insurers are focused on rebuilding their profitability. ‘If these recent hurricanes give them ammo to take to regulators to enable higher price increases, they could very much take advantage of that,’ he said.” Wall Street Journal, October 19th. For those climate change deniers and marginalizers, it’s time to pay the piper!

I’m Peter Dekom, and climate change denial and the reluctance to pay for prevention and containment of that horrific force may just be the most expensive mistake in human history.