Climate Change Fuels Rising Home Insurance Costs in Rhode Island
PROVIDENCE – Rhode Island’s homeowners are increasingly feeling the financial sting of climate change, as rising premiums and limited insurance options become the new normal. Several insurance companies have either stopped selling home insurance or are canceling policies in the state, a trend largely attributed to market shifts linked to climate-related risks.
Veteran insurance agent Ernie Shaghalian highlighted the severity of the situation: “In the 45 years I’ve been an insurance agent, the homeowners’ market is the worst I’ve seen it.” Shaghalian, who works for Butler & Messier Insurance Agency in Pawtucket, shared his observations before the Legislative Study Commission on Climate Change Impacts and Solutions.
*Increased frequency of extreme rains are a factor in raising costs for homeowners.
Shaghalian’s assessment resonates with the broader challenges facing the insurance industry nationwide. The commission, created by Rep. Terri Cortvriend, is exploring the impact of rising seas, coastal storms, and more frequent extreme rainfall on the Ocean State.
Elizabeth Dwyer, director of the Rhode Island Department of Business Regulation, noted that while Rhode Island is not experiencing the crisis seen in states like California, Louisiana, or Florida, where insurers are withdrawing rapidly, affordability is becoming a significant concern. “We are not there, thank goodness, but we are seeing changes, especially in affordability,” Dwyer said, emphasizing that individual homeowners will likely face premium increases.
The national insurance market is undergoing significant stress. Wildfires in California and recent hurricanes in the South have intensified the focus on these issues, but challenges have accumulated for years as natural disasters, often linked to climate change, have forced insurers into massive payouts. Dwyer stated, “Insurers have been sounding the horn on climate change for many years.”
A report from the Senate Budget Committee underscored the severity of the situation, noting, “The Climate-Driven Insurance Crisis is Here – and Getting Worse.” The report, released in December, analyzed non-renewal rates nationwide, revealing that counties most exposed to climate-related risks, like wildfires, hurricanes, and inland flooding, have the highest rates. Newport County in Rhode Island was identified as having one of the highest non-renewal rates in the nation.
Shaghalian pointed out that more homeowners are turning to the Rhode Island FAIR Plan, an insurer of last resort, since traditional policies are becoming harder to obtain. However, FAIR Plan premiums can be up to 50% higher. “There’s 2,000 more people insured in the FAIR Plan in Rhode Island than there were two years ago,” Shaghalian said.
The ramifications extend beyond immediate costs. Difficulties in securing insurance could impact property values, potentially leading to problems for prospective property owners, mortgage access, and even community tax revenues. Dwyer emphasized the importance of proactive measures: “At the top of the list in a coastal state like Rhode Island, where high winds from hurricanes are probably the biggest threat, is to invest in a better roof.”
She also stressed that standard home insurance typically doesn’t cover flood damage, necessitating separate flood insurance, often obtained through the Federal Emergency Management Agency (FEMA). With only about 3% of Rhode Islanders currently holding flood insurance, Dwyer highlighted the importance of wider coverage, noting, “The tragedy is after a large flood event they have no coverage, and this is their main home.”
Dwyer suggests measures communities can take to reduce premiums and maintain insurers’ presence, but underscored the difficulty in quantifying resilience. Rhode Island’s Department of Business Regulation also plays a key role by reviewing insurance rates and using an independent actuary to assess them. “Insurers are not free to simply charge anything they want,” Dwyer said. “They have to show us the data that this is where the loss is and where the projected risk is coming from.”
In light of the uncertainty surrounding the federal stance on FEMA, due to potential cost-cutting measures, Dwyer cautioned that homeowners can no longer regard insurance as a given. “Unfortunately, the era of ignoring insurance costs is over.”
