How Climate Change Impacts Insurance Coverage and Premiums 

Climate change is reshaping many aspects of the world, including the insurance industry. As extreme weather events become more frequent and severe, insurers face unprecedented challenges. At Trilogy Insurance Brokers, Inc., our team can help offer guidance as the climate changes and how policyholders will need to adapt to this new reality.

Why Does the Climate Affect Insurance?

Insurance is fundamentally about managing risk. Climate change increases the frequency and intensity of natural disasters such as hurricanes, wildfires and floods, leading to higher claims. Insurers must adjust their models to account for these increased risks, which often means higher premiums for policyholders. Additionally, the unpredictability of climate-related events makes it harder for insurers to accurately price risk, leading to further adjustments in premiums.

5 Ways Premiums May Be Affected

Individuals, families and businesses may all need to consider how their coverage needs and subsequent rates could change due to climate factors. Specifically, the following types of insurance, among others, may be affected:

1. Homeowners insurance—Homeowners in high-risk areas, such as coastal regions prone to hurricanes or areas susceptible to wildfires, are often seeing significant premium increases. Insurers are also more likely to impose stricter underwriting standards or even withdraw from high-risk markets altogether.
2. Commercial property insurance—Businesses face similar challenges, with properties in vulnerable locations experiencing higher premiums. Companies may also need to invest in additional coverage for business interruption due to climate-related events.
3. Auto insurance—Extreme weather can lead to more accidents and vehicle damage, driving up auto insurance premiums. Flooding, in particular, can pose a significant risk to vehicles.
4. Workers’ compensation insurance—Climate change can affect workers’ health and safety, leading to more claims. For example, extreme heat can increase the risk of heat-related illnesses, impacting workers’ compensation insurance.
5. Health insurance—Climate change can exacerbate health issues, such as respiratory problems from increased air pollution or injuries from extreme weather events. This can lead to higher health insurance premiums as insurers adjust for the increased risk.

Learn More

Contact Trilogy Insurance Brokers, Inc. in Costa Mesa, California, today to learn more about how climate change may affect your coverage and costs.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.