Wrong, NYT, Rising Insurance Costs Do NOT Prove There’s a Climate Catastrophe

The New York Times (NYT) posted an op-ed titled “Your Homeowners’ Insurance Bill Is the Canary in the Climate Coal Mine,” claiming that rising insurance costs are proof that climate change is a growing danger, and that all insured should not have to pay for those who choose to live in riskier areas like the Florida coast or southwestern deserts. Although it would be sound policy to not have all insured persons, or as is more often the case, taxpayers, cover the cost of premiums and losses for homeowners and businesses who choose to live in areas prone to natural disasters, there is no evidence climate change is making extreme weather events worse.

Writing on the increasing costs of insurance and attributing potential home value loss to climate change, Benjamin Keys writes, “[a]fter recent years of paying out claims for about 20 disasters a year with damages of over $1 billion, a sixfold increase from the 1980s, insurers are getting serious about new pricing models that incorporate the costs of a warming climate.”

Keys uses Phoenix, Arizona as an example, citing the idea that climate scientists claim it is forecasted “to endure 132 days each year with temperatures of over 100 degrees.” Keys describes the low water levels in Lake Mead, and goes on to point out the obvious, that “living in Phoenix requires energy-intensive amenities like air conditioning,” then suggests that air conditioning use itself contributes to the problem of global warming. Finally, he mentions that despite all these threats, home prices in Phoenix have risen 53 percent.

It is true that water use is a difficult issue in the Southwest, but it is a natural problem that one faces trying to build communities, including golf courses and other water-intensive features, in the middle of a desert region that is naturally arid with consistently low water levels, historically. Climate Realism covered the issue with Lake Mead, here, and its low levels are only partially due to low rainfall. The bulk of the blame can be placed on increasing water demand that cannot be met by the region amid natural periods of drought.

More to the point, what does that have to do with insurance? Insurers don’t offer “urban drought insurance,” “water shortage insurance” or “high air conditioning cost insurance,” for homeowners, so why figure the “cost of a warming climate,” into home insurance rates in Phoenix? Sounds like a made-up reason to increase regional insurance rates.

Forecasts based on faulty computer models that run too hot, as explained by Climate Realism many times, do not provide compelling reasons for raising insurance rates in the Phoenix area. There are mitigation strategies for handling a growing population in the desert, trying to limit air conditioner use is not one of them.

Florida, where home costs are also rising, is also discussed in the article. Keys claims that the primary threats there are sea level rise and associated flooding. It is true that sea levels are rising, albeit more slowly than commonly asserted. Rising seas, erosion and water incursion, in part from coastal wetlands destruction, land compaction and subsidence, have created a situation putting some beachfront homes, in Florida and along the coast, at risk of being flooded with some regularity or even swept away.

This is not a new phenomenon. Sea level rise has always been a concern for coastal communities, and as more buildings are built right up on the beaches, like in Miami, the more risk there is for them to be damaged by hurricanes or king tides.

Nor, as explored in Climate Realism, here, and here, for example, have hurricanes become more numerous or more powerful.

One critical issue ignored in Keys’ NYT article is that, although it’s true that the costs of natural disasters are rising, it’s largely due to population and development growth itself in the geographic areas discussed. This also accounts for the rising home prices. As pointed out by H. Sterling Burnett in a Climate Realism post, “Sorry, Big Insurance Corporations, Climate Change Is Not Causing Record Disasters,” real property values are also increasing. Demand is rising faster than housing stock is being built or becoming available. This means any threat from climate change is being discounted by the growing number of home buyers.

Burnett wrote that “inflation, as well as the annually rising quality and value of technology and property amenities will make a disaster in 2020 much costlier in reported dollar losses than in 2010, 2000, 1990, or other prior years.”

Keys complains that those who choose to live in “riskier” areas are being subsidized by everyone else, and he’s not totally wrong on this point. The government creates a moral hazard by subsidizing flood and hurricane insurance, making it easier for people to afford to live in places that they otherwise might have second-guessed. Its easier for people to build homes and businesses in locations naturally prone to hurricanes and floods when taxpayers are covering much of the insurance premium costs and the coasts related to disaster recovery.

The truth is every part of the United States, and the world, face weather threats of one type of another, with some locations being more prone to some types of natural disasters than others. There is a cost-benefit analysis that everyone needs to make when deciding where to live and how much insurance coverage to purchase, including the author of the NYT piece, who writes from snowstorm-prone Pennsylvania. Blaming climate change may be a convenient excuse for insurers to justify higher insurance premiums, but there is little evidence, in fact—and none at all provided in the NYT story—that climate change is making weather worse or instances of extreme weather more frequent, in Arizona, Florida, or anywhere else.

Linnea Lueken
Linnea Luekenhttps://www.heartland.org/about-us/who-we-are/linnea-lueken
Linnea Lueken is a Research Fellow with the Arthur B. Robinson Center on Climate and Environmental Policy. While she was an intern with The Heartland Institute in 2018, she co-authored a Heartland Institute Policy Brief "Debunking Four Persistent Myths About Hydraulic Fracturing."

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  1. Climate change causes or contributes to everything bad and to nothing good. Simple! (sarc off)

    If the market value of a property increases, the cost of insuring it against loss increases, fully justifying proportionally increased insurance premiums.

    If the total market value of properties in a risk prone area increases, the cost of a disastrous weather event increases, fully explaining proportionately increased disaster losses.

    Anything beyond that relies on attribution modelling, which is “not ready for prime time”.

  2. The National Flood Insurance Program is one of the dumbest and most cruel boondoggles of all time, and there is no good way to fix it. If NFIP started charging actuarially sound rates, or went away altogether, most property owners in flood-prone areas wouldn’t be able to afford insurance. And they wouldn’t be able to sell because no prospective buyer would want to pay the true cost of insurance either. Their property values would plummet. They would be stuck. So NFIP limps along, hemorrhaging billions.
    If property owners had had to bear the full cost of their risk all along, many structures – and perhaps entire “coastal communities” – never would have been built in the first place. Problem solved. When your agent quotes you an annual flood premium of $200,000 for your planned $500,000 home, the market is trying to tell you something: “It’s too risky to build here.”


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