How Natural Disasters are Upending Insurance and Transforming the Labor Market
Wildfires, hurricanes, and other natural disasters are increasing in both frequency and severity. This trend is significantly impacting the insurance industry and, in turn, reshaping the labor market. Businesses across the country are facing rising insurance costs, coverage limitations, and workforce challenges as a result.
Earlier this year, wildfires raged in the Los Angeles area, causing widespread disruption. For example, Evan Spiegel, CEO of Snap, reported that 150 members of his company’s 2,000-person team were displaced due to the fires. Snap provided accommodations, travel, and other support for its employees while making its office available to those needing a place to work. These immediate relief efforts are crucial, but the long-term financial implications of natural disasters extend far beyond them.
The Insurance Crisis and Its Impact
Businesses are now struggling with skyrocketing property insurance costs and increasingly restrictive coverage. In California alone, between 2020 and 2022, insurance companies declined to renew 2.8 million homeowners insurance policies, according to the state Department of Insurance. Commercial property insurance rates have also surged, sometimes doubling, tripling, or even increasing up to 400%, according to The Orange County Register.
Nick Schacht, chief commercial officer at SHRM, noted that “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.” Moreover, nearly half (45%) of Chief Human Resources Officers (CHROs) reported that the rising operating costs were a significant challenge for their organizations in 2024, according to a recent SHRM report.
James Atkinson, vice president of thought leadership at SHRM, added, “Rising insurance costs may have an outsized impact, compared to other types of operations costs, when it comes to recruitment, retention, and other workforce issues.”
Business Decisions and Workforce Challenges
The insurance crisis is forcing businesses to make difficult financial decisions. State Farm, a major insurer in California, recently requested a rate increase, which was subsequently denied. The company indicated it “must seriously consider its options within the California insurance market going forward.”
Increasingly, insurance companies are limiting new policies or withdrawing from disaster-prone areas altogether. For example, Texas-based restaurant group Kerbey Lane Cafe has seen its property insurance costs rise, including a 10% increase last year, according to CHRO Rose Ann Garza. She stated that there are significant consequences, including smaller profit margins and difficulties compensating team members adequately.
Recruitment, Retention, and Employee Concerns
Rising insurance costs are not only a concern for employers; they are also a significant factor for job seekers and current employees. Schacht points out that “Employees want to feel like their employer is stable and secure.” The affordability of housing in disaster-affected areas is also becoming a major issue. 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 by over 30%. Moreover, 57% of homeowners nationwide noted they may consider or would strongly consider selling their homes or moving if rates continue to rise.
Daniel Jones, president of Norton Insurance, observed that, “As home 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.” Dana Mullins, president of the HR Florida State Council (a SHRM affiliate), added that the lack of a state income tax was always a big draw for relocating candidates to Florida, and now the rising insurance costs may outweigh the benefits.
Strategies for Addressing Challenges
Many businesses are devising strategies to manage the workforce issues caused by natural disasters. These strategies must consider both immediate and long-term challenges.
Atkinson suggests that, “When calamity hits, employers need to overcome short-term, immediate challenges, and they also need to develop long-term strategies.” He also suggests that businesses, “ensure your overall investment in employee well-being is sufficient.”
Schacht noted that businesses can find temporary solutions, such as remote work, and they, “may find partner organizations that can cover some of the work their own employees would normally do.”
For long-term solutions, employers are employing proactive strategies to attract and retain talent. Some are offering relocation assistance or housing stipends, and others are focusing on employee satisfaction. Kerbey Lane Cafe, for example, has prioritized employee perks, such as free food, that resonate with its workforce.
In terms of talent, Mullins said, “As people decide to leave our state, employers are looking for ways to retain top performers by converting their role to a remote position.” Similarly, Norton Insurance has embraced remote work, helping to retain employees who could no longer afford to live in the local area.
Jones noted, “We are happy that our capabilities to work from home have reached a point where we can hire the best candidate instead of the most convenient candidate.”
Strategic workforce planning is vital. Garza highlighted the importance of collaboration with the finance team, and working to control insurance costs, while also making informed decisions about workforce needs. Finally, Atkinson mentioned, “Make sure you’re expanding your talent pool and avoid limiting yourself geographically or from nontraditional sources.”
Building Workforce Resilience
As insurance costs surge and disaster risks grow, businesses must adapt their workforce strategies to remain competitive. Collaboration across industries will be essential to developing innovative insurance solutions and investing in resilience. By planning strategically and embracing adaptability, companies can protect their workforce, maintain stability, and ensure they remain strong in an evolving risk landscape.
