Is the U.S. Becoming Uninsurable?
As catastrophic weather events become more frequent and intense, the insurance industry in the United States is facing unprecedented challenges. Rising costs, driven by climate change-related disasters, are leading to higher premiums, limited coverage, and, in some cases, insurers withdrawing from high-risk areas. This shift raises concerns about the future affordability and availability of insurance for homeowners and businesses across the country.
Southern California’s recent wildfires, for example, have resulted in an estimated $250 billion in economic damage, a figure that doesn’t fully account for the personal losses suffered by those whose homes and businesses were destroyed. According to analytics firm CoreLogic, the Palisades and Eaton fires alone could result in up to $45 billion in insurance payouts. This highlights the increasing financial strain on insurance companies and the potential for a ripple effect on policyholders.
The National Oceanic and Atmospheric Administration (NOAA) reported a record 28 separate billion-dollar climate and weather disasters in the U.S. during 2023. By September 2023, damages had already reached $57.6 billion for that year. Climate change is widely considered the primary driver of these events, which include severe storms, floods, droughts, and wildfires.
Insurance companies are responding to these increased costs by raising rates. The Bipartisan Policy Center has reported consistent increases in property insurance rates since the end of 2017. Car insurance is also affected. Increases in premiums have been notable in several states. Between 2013 and 2023, Colorado saw a 52% increase in auto insurance premiums due to blizzards, tornadoes, and hailstorms. Florida experienced an 88% jump in car insurance rates during the same period, largely attributed to hurricanes.
Some insurers are now withdrawing from high-risk areas altogether to protect profit margins. Insurance companies like Allstate and State Farm have stopped selling new property and casualty policies in California because of the costs of wildfires. Many insurers have also left Louisiana and Florida because of rising hurricane risks. These actions have left homeowners with fewer options and higher costs.
As of February 2025, the average annual home insurance rate is $2,258, a slight decrease over the previous year. However, costs can vary significantly depending on the home’s size, age, and location. States such as Nebraska, Florida, and Oklahoma have the highest rates in the nation according to CheapInsurance.com.
In 2023, severe weather, including droughts, storms, and floods, caused significant damage across the country. Hurricane Idalia caused $3.5 billion in damages, while tornadoes and high winds during early 2024 led to $1.8 billion in damages across the East Coast. The year ended with back-to-back catastrophic hurricanes, Helene and Milton, estimated to have caused $300 billion in damages and killed 250 people in Florida and other southeastern states.
The growing frequency and intensity of severe weather has contracted the insurance market, especially in areas hit by these disasters. In Florida and California, some major insurers have ceased providing services altogether.
Florida has responded by implementing the Hurricane Catastrophe Fund and Citizens Property Insurance Corporation, both of which subsidize home insurance. California, on the other hand, has rate regulations that limit insurer evaluations to the past 20 years. These approaches, however, have flaws: Florida’s subsidy funds are quickly depleting, and many companies are unwilling to operate in California. This results in a precarious situation for many homeowners.
Addressing the crisis requires a multi-faceted approach beyond insurance. States need to examine how they prepare for, and recover from, natural disasters. As storms grow and insurance options dwindle, such changes become ever more important.
Transparent negotiations between insurers and clients are another potential solution. In areas like Oregon, efforts are underway to support insurers in working with residents on mitigation strategies and increasing coverage. The aim is to help prevent future damage, and to foster a more stable insurance environment.
