How Natural Disasters Are Reshaping Insurance and the Labor Market
Wildfires that raged across the Los Angeles area this year provided a stark illustration of the challenges businesses and their employees now face. The impact of these events extends far beyond the immediate aftermath, with rising insurance costs and coverage limitations creating significant financial burdens for companies. This situation is reshaping business landscapes, particularly in areas prone to disasters.
For instance, Evan Spiegel, CEO of Snap, the parent company of Snapchat, reported that 150 of his company’s 2,000 employees were displaced due to the fires. Snap provided support, including accommodations and travel assistance, and made its office available to any workers who needed it. But the long-term effects are more widespread.
Between 2020 and 2022, insurance companies declined to renew 2.8 million homeowners insurance policies in California, according to the state Department of Insurance. Commercial property insurance rates have also seen significant hikes. “Insurance is a cost of doing business, and as insurance costs rise, businesses have to decide whether to make cuts in other areas or to increase prices to maintain profit levels and keep expenses manageable,” said Nick Schacht, chief commercial officer at SHRM.
The Impact on Business
The growing insurance crisis is forcing difficult financial decisions on businesses. State Farm General Insurance Company, which insures 2.8 million properties in California, requested a substantial rate increase. When the request was denied, the company stated it would “seriously consider its options within the California insurance market going forward.”
Insurers are increasingly limiting new policies or withdrawing from areas like California due to the increased frequency of claims and risk exposure. This trend is impacting businesses nationwide. Rising premiums, and heightened risk assessments are presenting significant hurdles for companies operating in or near disaster-prone areas. Rose Ann Garza, CHRO of Texas restaurant group Kerbey Lane Cafe, is one example. Even though the restaurant is located away from the coast, the company has experienced increasing insurance costs since Hurricane Harvey caused catastrophic flooding in Houston in 2017, including a 10% property insurance increase last year. “Ten years ago, we wouldn’t have considered property insurance increases as a big risk to our business,” she said. “But the rising costs now cut into our margins. It’s hard to plan for that and it can be harder to provide adequate compensation for our team members.”
Challenges for Recruitment and Talent Retention
Rising insurance costs are also a concern for job seekers and employees. “Employees want to feel like their employer is stable and secure,” said Schacht. “If an employer is unable to be insured, that’s a difficult problem. After the next crisis, they may not be around anymore. That reality erodes employees’ trust.” This also impacts their ability to afford to live comfortably. According to the Maxwell 2025 Homeowners Insurance Study, 95% of California homeowners have seen their premiums increase over the past two years, and 15% have seen their monthly housing costs rise more than 30%, which is three times the national average.
Daniel Jones, President of Norton Insurance in Florida, noted similar issues. “When insurance rates outpaced inflation and even wage growth, it has made it too expensive for some of our employees to own a home in the same town as our business,” he said. “We also insure many of the coastal businesses and have watched many of them close their doors due to increased insurance premiums.”
Dana Mullins, president of the HR Florida State Council, noted that rising costs also dampen recruitment efforts: “People are not moving to our area as quickly due to the costs of having insurance, leading to a diminished talent pool for recruiting qualified candidates.”
Strategies to Address the Challenges
Employers are developing several strategies to manage workforce issues. To effectively deal with the immediate challenges, it’s important to have disaster plans for employee safety and business continuity. “Also, ensure your overall investment in employee well-being is sufficient,” said Atkinson. “Even if you’re not in an area that is prone to disasters, they’re becoming more common. Make sure you’re investing in mental health support and well-being to be prepared just in case.”
For the long term, employers are using proactive strategies. Some offer relocation assistance and others offer flexibility. Kerbey Lane Cafe, for example, gives employees a food allowance, “We might think everyone wants a gym membership, but we’ve realized that our employees care more about free food,” Garza said. In Florida, “many businesses have transitioned to a more remote or fully remote workforce to maintain the quality of talent in their organizations,” Mullins said. Jones from Norton Insurance also noted that the ability to work remotely has provided a greater pool of potential employees.
Businesses are also expanding relocation support and tapping into broader talent pools. For example, Kerbey Lane Cafe was able to negotiate their increase down to 10% due to a longstanding relationship with the carrier and the ability to point out the company’s proactive risk control measures, Garza said.
Building Workforce Resilience
As risks continue to grow, organizations must take a proactive approach and collaborate across industries to develop innovative solutions. By planning strategically and embracing adaptability, companies can protect their workforce, maintain stability, and ensure they remain strong in an evolving risk landscape.
