As climate-fueled disasters escalate, insurers are getting richer while leaving Americans in the lurch. Citing climate- related losses, many insurance companies are exorbitantly inflating rates, refusing to renew policies, and delaying, denying, or underpaying claims.
The latest of many examples is Los Angeles, where wildfires devoured over 40,000 acres and left thousands unhoused and unemployed.
Many families were dropped by their insurers or struggled to find affordable options before the fires. Some turned to the state’s coverage plan, which costs more and covers less. But despite years of profitability from dumping the riskiest policies onto the overburdened state plan, insurers are already demanding rate hikes to squeeze more profit from consumers.
It’s a story Americans in other parts of the country know all too well.
After Hurricanes Laura and Ida devastated Louisiana in 2020 and 2021, claims languished for months or years. Families were often forced to sue to receive insurance compensation.
Following Hurricane Ian in 2022, Floridians’ payouts were drastically reduced from what insurers initially promised. Six months later, tens of thousands of claims were still open. And two years later, 25 percent had been closed without payment.
In Hawaii, insurance companies held up the 2023 Lahaina wildfire settlement for a year and a half before providing compensation.
These issues aren’t exclusive to coastal or wildfire-prone states. Homeowners in Iowa, for example, struggled for two years to resolve insurance claims following a destructive 2020 derecho.
Delays and underpayments can result in significant financial hardship and emotional strain. Families face out-of-pocket expenses for temporary housing, repairs, and secondary damage (like mold growth). These can increase debt and lower credit scores, ultimately making mortgage and other routine obligations more difficult or even impossible to meet.
Raising premiums likewise exacerbates burdens on both homeowners and renters and increases mortgage delinquency rates. These impacts are worse for Black, Latin American, Native American, and lower-income households of all races, as exposed recently in hard-hit Black neighborhoods around Los Angeles.
The insurance industry isn’t just stiffing homeowners with claim denials and rate hikes. It’s also financing the driving force behind these disasters themselves.
By continuing to underwrite and invest billions of dollars in fossil fuel projects — knowing full well that growing climate risks are making homes uninsurable — insurers actively contribute to the disasters they later refuse to cover.
Insurers market themselves as “good neighbors” or assure homeowners they’re “in good hands.” But they accumulate wealth and pay dividends to shareholders with money generated by the premiums paid by working people — who don’t get a refund when there aren’t disasters.
This is a feature, not a bug. The system is working as designed by and for the industry.
Our elected officials let this crisis fester by failing to hold insurers accountable. The industry’s model of profiting in good times and walking away in bad cannot stand. Insurance should be a safeguard for families, not a gamble where the house always wins.
At a minimum, this means: enforcing and assisting homeowners in fair, fast claims handling; stopping extreme premium hikes, especially after disasters; and preventing companies from holding states hostage or fleeing the market following a disaster.
It also means phasing out and blocking the expansion of investments in fossil fuels; requiring investments in (and premium discounts for) climate mitigation to protect our housing stock, especially affordable housing (which includes affordable insurance).
Finally, it means exploring a national disaster insurance backstop to stabilize coverage — and rejecting attempts to force working people to bail out insurers.
Policymakers have a choice: continue prioritizing corporate profits over people — or finally stand up for homeowners who have played by the rules, paid their premiums, and somehow still ended up holding the bag.
Kelsey Condon is Policy Counsel for Climate Finance at Americans for Financial Reform Education Fund, where they work to address systemic climate-related financial risk in the banking and insurance sectors. This op-ed was distributed by OtherWords.org.
