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The home insurance market is crumbling. These owners are paying the price

The home insurance market is crumbling in New Orleans, leaving Alfredo Herrera with few options for coverage — and skyrocketing insurance premiums.

Herrera, 35, works in finance for a local bank. He bought his 900-square-foot home in New Orleans’ Mid-City neighborhood in 2020 for $270,000, and lives there with his partner.

In 2022, he paid $1,600 a year for home insurance. But last July, his insurer canceled his coverage, saying it was leaving Louisiana.

In the past, acquiring or keeping homeowners’ insurance didn’t present much of a problem.

But as climate change increases the frequency and severity of extreme weather, insurers — especially those in areas most impacted by floods and fires — are raising their premiums, or pulling out altogether, impacting the affordability and availability of home and fire insurance.

FluffyPotato ,

My home insurance is 14 euros per month. What the fuck is the US doing?

raef ,

Suffering under more natural disasters than anywhere in Europe.

harsh3466 ,

And profiteering off of it

michaelmrose ,

If the price is inflated someone ought to start an insurance company to cover those folks for less and arbitage themselves into vast riches for all these underserved folks. More likely the prices reflect reality and they should pay them.

Corkyskog ,

I don’t know what’s going on the home owners side, but almost half of that is the highest flood insurance rate possible. (So a super high risk area) the flood rates are managed and get capped out. It’s what enrages anyone around an inland plane. My 1 every 100 year flood coverage for an overflow brook costs 75% the rate of a coastal home that’s likely to end up entirely in the ocean in the next decade.

Fedizen ,

N a t i o n a l i z e

michaelmrose ,

I cannot think of something I want nationalized less than home insurance. Climate change means that some areas are actually much riskier than they were before and the truth is some portion of households are going to become uninsurable and others are going to become expensive. Option 1: The expense of insurance and risk can be priced into the property at time of sale to a buyer willing to bear the cost. Option 2: If we are going to give free money to these people when their house is destroyed with government subsidized insurance to cover disasters it should be on condition of condemning uninsurable properties not rebuilding them multiple times.

Fedizen ,

counterpoint: similar to how nationalizing health insurance has lead states around the world to take safety and health seriously as a cost saving measure, nationalizing home insurance would lead to climate change being taken seriously as a cost saving measure.

Yokozuna , (edited )

My grandmother’s home insurance has gone up close to 1000$ the past two years combined. I’ve been wanting to leave this doomed place for awhile, and I can’t wait to buy a house in the mountains.

nickwitha_k , (edited )

My take on this is that the root cause, like many other significant problems that we are seeing, is clearly wealth inequality. Yes, climate change is a big factor but, if the populace was readily able to afford replacement of homes impacted by natural (and human-augmented) disasters, insurance would have no problem. With how expensive homes have become due to artificially-constrained supplies, insurance companies have become an absolute necessity to mitigate homeownership risks and, when they pay out, and up needing to fork over more cash.

Please don’t misconstrue this as support for the insurance industry. They are just necessary at this time for people to manage risks in areas that cost far more than they should (healthcare, transportation, homes, etc).

june ,

These folks are losing their insurance. But even those of us who live in safe areas with little to no history or indicators of disaster are still seeing rates skyrocket. Mine were raised 30% this year and I have no risk of flooding or wildfire, and very low risk of storm or earthquake damage. Crime in my neighborhood is the lowest in the region (kind of surprising considering it’s very working class mixed with lots of low income housing), and has no history of damage to the property at all. But still, 30% hike with no reason given. My car insurance jumped 25% too.

michaelmrose ,

Start an insurance company.

teamevil ,

There’s a simple solution here…take away these comp abilities to offer car insurance… it’s not as if their profits are non existent.

hamid , (edited )

deleted_by_author

    •
    sweaty ,

    Actually every “goon” in this thread is giving practical advice to a real problem while you are over here preaching nonsense from a soapbox

    Even if you somehow get insurance companies to pay people they don’t even want to insure it’s a temporary solution at best. Also it doesn’t solve the problem of climate change at all so these families are still in harm’s way.

    Instead of getting angry at commenters for no reason and essentially calling for anarchy maybe you should join the “goons”

    3volver ,

    Good, this will get people to start moving away from being under water and from wildfire zones. This is the beginning of the necessary movement, if it has to begin this way, then so be it.

    Cryophilia ,

    It fucking sucks that here in CA, the entire state is losing insurers despite the fact that a huge chunk of the population lives in coastal areas with no danger of wildfires.

    AA5B ,

    Presumably state laws prohibit discrimination, so their only choice is to cover everywhere in the state or nowhere

    Cryophilia ,

    None that I could find.

    I honestly think the insurance companies are taking advantage of this to try to force changes to the California insurance regulation, which is quite strict regarding cost increases to consumers. It’s the only reason I could think of that they would pull out of the entire state and not just the dangerous areas. It’s 2024, the data exists to an excruciating level.

    RubberElectrons ,
    @RubberElectrons@lemmy.world avatar

    I’ve concluded this as well.

    michaelmrose ,

    Insurance is a slush fund which earns interest in between taking in premiums and paying out claims. If you mandate that they lose money the whole game pretty obviously collapses and the losses are unlimited.

    Cryophilia ,

    Any industry that is mandatory for some vital facet of life cannot be left to the whims of the market. It should be highly regulated, and preferably state run.

    Price controls are needed to prevent the naked greedy price fixing we see in many other industries.

    michaelmrose ,

    Price controls can cause all capital to exit the market. If the state picks up the tab and sets an unreasonably low rate the state may eventually go bankrupt and crease to be able to borrow

    Cryophilia ,

    Depends. Monopolies with price controls work well for some industries, like utilities. I do agree that everything should be done to encourage a private market with competition, within reason, but regulation needs to be strong.

    insight06 ,

    I would have thought California EQ was the peril scaring them all away. Very expensive to reinsure - most commercial property catasrophy models (RMS & AIR are the big ones) peg it as the second most risky North American peril after Florida Hurricane.

    Cryophilia ,

    Then those models are fucking shit. San Francisco and Los Angeles are in no danger from wildfire.

    insight06 ,

    EQ is earthquake. According to USGS, California faces a ~75% chance of a major earthquake in the next 100 years.

    Have a quick google of “California quake risk” for a slew of in-depth (and somewhat scary) articles and research papers.

    Cryophilia ,

    Home insurance already doesn’t cover earthquakes though. That’s a separate insurance product, and companies could just stop offering it.

    LustyArgonianMana ,
    @LustyArgonianMana@lemmy.world avatar

    We need sanctuary cities to be built to anticipate massive human climate migration.

    Johnvanjim ,

    Megacity One here we come!

    fireweed ,

    Hot take: all severe/extreme-risk flood zone properties should be immediately rezoned to disallow residential use. Current residents would be able to stay where they are, however any flood zone property put up for sale should be sold for either recreational or agricultural use, otherwise acquired by the government to be restored to a riparian ecosystem. Better to take the financial hit of property value decrease now and start dismantling high-risk development than realize the loss suddenly after the next big flood washes the entire neighborhood away. Additionally, creating more dedicated wetlands may even mitigate how far-reaching that next flood is and help protect properties that would have otherwise gotten inundated.

    ShepherdPie ,

    I think a major problem with this approach is that many of the people that’ll be displaced are poor and devaluing their land before kicking them out is only going to make that worse. I also think rebuilding homes in areas where it’s going to get demolished again by another storm in 5 years is yet another terrible approach.

    Perhaps it’s best to let them get an insurance payout for their home and then gently nudge them into taking that cash and moving somewhere else.

    fireweed ,

    That’s why I included the option to sell to the government (kind of like a voluntary eminent domain program).

    piecat ,

    They did that in a few towns that were made unlivable from toxic waste or other disasters. Love canal, times beach, Centralia

    Yokozuna ,

    Insurance does not want to pay and will find any way not too. My grandparents house flooded in Katrina along with mine and the rest of my family’s and 90% of the rest of the parish and my grandparents never saw a red cent from the insurance they faithfully paid because of some technicality on the way that the house flooded.

    A lot of people have already moved north across the lake and into Mississippi but people are getting complacent and building million dollar homes on multiple lots that have been abandoned since Katrina.

    michaelmrose ,

    How do you plan to arrange that insurance payout. You sure can’t on the open market. Why should uncle sam buy them for more than they are in fact worth when the majority of them were built poorly situated. The flood plain didn’t materialize thereafter it just got more problematic.

    tal ,
    @tal@lemmy.today avatar

    Hot take: all severe/extreme-risk flood zone properties should be immediately rezoned to disallow residential use.

    I mean, you can make houses flood-resistant. It costs more, but it’s not new technology.

    en.wikipedia.org/wiki/Stilt_house

    As the costs of hurricane damage increase, more and more houses along the Gulf Coast are being built as or converted to stilt houses.[15]

    AA5B ,

    That doesn’t really work, if you might lose the beach under your stilts. It’s probably still better to manage getting people out of an area that needs it, rather than paying g for another temporary solution

    Yokozuna ,

    Just YouTube some news pieces about climate change and Grand Isle, those turds literally have said they aren’t going anywhere till the last piece of land is underwater. Literal hubris of man.

    AA5B ,

    I guess no one wants to leave their home, but it’s crazy to stay there, and it’s well past the point where they shouldn’t have a choice

    Yokozuna ,

    I mean, if idiots want to live there and own the property, that’s on them. But those are the same people who vote red and I 100% believe that when push comes to shove and they lose everything (again) they’ll be looking for government assistance.

    Addition1291 ,

    Insurance rates are the true Canary of Collapse. If the money men have calculated that certain areas are going to quickly become unlivable, then people should listen.

    Of course it’s not trivial to just pack up your life and move but it’s about to become super necessary, unfortunately.

    this_1_is_mine ,

    Yeah but just picking up your life and leaving isn’t always a possibility simply because you have so much investment already where you’re at. I mean how the hell do you get any of the money that you have invested in the home… it’s uninsurable who do you sell it to.?

    Addition1291 ,

    You’re completely right. Many people are about to get totally financially ruined at a minimum. There’s going to be a lot of climate refugees from these areas who’ve lost everything.

    PriorityMotif ,
    @PriorityMotif@lemmy.world avatar

    Eventually someone is left holding the bag on any house really. Unless the property increases in value past the value of the house, then it can be torn down and a new house built while keeping the price comparable to other nearby homes.

    this_1_is_mine ,

    Yes but in this context it about the scope of the situation. You are not talking about just one person left holding the bag. We are talking about entire towns soon maybe states. At what point do we actually step in as a country . you have huge swaths of people that are not going to be capable of financially moving on because they have sunk all of their everything into that ground and you’re telling them they have to basically abandon it. That will not go well.

    PriorityMotif ,
    @PriorityMotif@lemmy.world avatar

    I can’t really say what will happen. Neither can anybody really. Maybe the government should step in, maybe they shouldn’t. Corporations should be paying it, but obviously, that’s not happening either. People have abandoned everything and moved before. People headed here from the 1600’s and never stopped, in the 1800’s they headed west. Owning property holds a certain amount of risk that people need to accept.

    stringere ,

    What if those towns just refused to pay mortgages on homes that can’t be insured?

    Are the banks going to send armed squads to evict a whole town?

    this_1_is_mine ,

    The answer is always yes. Petty bullshit knows no bounds.

    michaelmrose ,

    Do you just not know how this works? The authorities will be doing evictions and yes they will take everything. There is literally a company trying to essentially sell a town right now.

    michaelmrose ,

    All the poor fuckers who don’t have a house aren’t going to have the government find them one and hand them to it. Replacing 5% of the single family homes would cost about 2T given that houses aren’t worth the same, the unit replacement cost on rich kids houses is going to 2-3x the cost of an average house AND the fancy real estate’s propensity to be situated near water in what will be future flood plains the majority of that money will go to those who already have the most advantages.

    Conversely if those people aren’t absolute morons those properties are absolutely saleable at this point irrespective of it being expensive to purchase insurance. If your property is bound for the bottom in 20 years sell it now while people aren’t too cognizant of this issue before your fortunes go down with the ship.

    Yokozuna ,

    Property is selling very high in the parish I’m from adjacent to orleans parish. People have forgotten about Katrina and have faith in the levee system. Property is also selling high in New orleans as well unless it’s a dog shit area.

    michaelmrose ,

    Herrera shopped around for a new plan, but he struggled to find a policy. Louisiana Citizens, the insurer of last resort for property owners in the state, was out of the question. It would have cost more than $7,000 annually. Herrera eventually found a policy with a small company in the state that charged him $4,930 annually — a 208% increase from what he paid in 2022.

    There were at least 2 options $5000–$7000. Sell to someone at a discount with the understanding that buyer is willing and able to bear at least $5000 in annual insurance costs. Do this before its actually uninsurable.

    Wiz ,

    It would be like selling crypto. The “greater fool” theory of seeking things. It’s ok to have an asset. But you don’t want to be the one holding it when the market tanks.

    paraphrand , (edited )

    I feel like the right half of neoliberals love insurance. Such a great component of capitalism.

    So this should be their signal to start buying into climate change. Right?

    tsonfeir ,
    @tsonfeir@lemm.ee avatar

    You can’t live in an area where your house is destroyed every other year and expect someone to pay for it.

    RBWells ,

    Oh come on. No place is like that. I live in Florida, in the gulf coast, in a house from the 1940s. The house I moved from is 100 years old this year and still fine. Home insurance has been running a scam here for years, taking money and running. Of course the risk is higher but flood insurance is like 800 a year, house insurance exclusive of flood wants like 10x that, and they are cherry picking houses and leaving those they think are risky to be insured by the state insurance collective.

    If I had all the money I’d sent to insurers over the years only to have them drop all the policies and disappear I could self insure at a higher amount that might actually pay to rebuild the house.

    With any insurance, it’s like gambling, the house always wins.

    tsonfeir ,
    @tsonfeir@lemm.ee avatar

    Yet.

    RBWells ,

    Right, but a 1/100 year event is not “every other year”.

    tsonfeir ,
    @tsonfeir@lemm.ee avatar

    You must not live in a hurricane area.

    EmpathicVagrant ,

    Can’t have a sub-market if a majority of multiple generations are forced out of the market it feeds off of.

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