The Possible Collapse of the U.S. Home Insurance System

from The New York Times I'm Sabrina. tavernes and this is the. [Music]. daily today my colleague Christopher FLL. on a times investigation into one of the. least known and most consequential. effects of climate change. insurance and why it may now be a. concern for every homeowner in the. country. [Applause].

[Music]. it's Wednesday May. [Music]. 15th so Chris you and I talked a while. ago about how climate change was really. wreaking havoc in the insurance Market. in Florida you've just done an. investigation that takes a look into the. insurance markets more broadly and more. deeply tell us about it yeah so I cover.

climate change in particular the way. climate shocks affect different parts of. American life and insurance has become a. really big part of that coverage and. Florida is a great example as hurricanes. have gotten worse and more frequent. insurers are paying out more and more. money to rebuild people's homes and. that's driving up Insurance costs and. ultimately driving up the cost of owning. a home in in Florida so we're already.

seeing that climate impact on the. housing market in Florida my colleagues. and I started to think well could it be. that that that kind of disruption is. also happening in other states not just. in the sort of obvious Coastal States. but maybe even through the middle of the. us so we set out to find out just how. much it is happening how much that. Florida kind of turmoil has in fact. become really a contagion that is. spreading across the country so how did.

you go about reporting this I mean where. did you start all we knew at the start. of this was that there was reason to. think this might be a problem if you. just look at how the federal government. tracks disasters around the country. there's been a big increase almost every. year in the number and severity of all. kinds of disasters around the country so. we thought okay it's worth trying to. find out what does that mean for. insurers the problem is getting data on. the insurance industry is actually.

really hard there's no Federal. Regulation there's no government agency. you can go to that holds this data if. you talk to insurers directly they tend. to be a little reluctant to share. information about what they're going. through so we weren't sure where to go. until finally we realized the best. people to ask are the people whose job. it is to gauge the Financial Health of. insurance. companies those are rating agencies in. particular this one rating company.

called am best whose whole purpose is to. tell investors how healthy an insurance. company is whoa so this is like way down. in the nuts and bolts of the US. insurance industry right this is a part. of sort of the broader economy that most. people would never experience but we. asked them to do something special for. us we said hey can you help us find the. one number that would tell us reporters. just how healthy or unhealthy this. insurance Market is state byst state.

over time and it turns out there is just. such a number it's called a combined. ratio okay plain English plain English. it is the ratio of Revenue to costs how. much money these guys take in for. homeowners insurance and how much they. pay out in costs and losses you want. that ratio to be positive if it's. negative you're in trouble so what did. you find out well we got.

that number for every state going back. more than a decade and what it showed us. was our suspicions were right this. Market turmoil that we were seeing in. Florida and California has indeed been. spreading across the country and in fact. it turns out that in 18 states last year. the homeowners insurance Market lost. money and that's a big jump from five or. 10 years ago and spells real trouble for.

insurance and for homeowners and for. almost every part of the economy so the. contagion was real right this is our. first window showing us just how far. that contagion had spread and you know. one of the really striking things about. this data was it showed the contagion. had spread to places that I wouldn't. have thought of as especially prone to. climate shocks for example a lot of the. Midwest a lot of the southeast.

in fact if you think of a map of the. country there was no State between. Pennsylvania and The Dakotas that didn't. lose money on homeowners insurance last. year so just huge parts of the middle of. the US have become unprofitable for. homeowners insurance this Market is. starting to buckle under the cost of. climate change and this is all happening. really fast like when we did the Florida. episode two years ago it was a. completely new phenomenon and really.

only in Florida and now it's everywhere. yeah and that's exactly what's so. striking here the rate at which this is. becoming again a contagion and spreading. across the country is just demolishing. the expectations of anyone I spoken to. No One thought that this problem would. affect so much of the US so quickly okay. so in these states these new places that. the contagion has spread to what exactly. is happening that's causing the.

insurance companies to fold up shop yeah. something really particular is happening. in a lot of these states and it's worth. noting how it's surprised everyone and. what that is is formerly sort of. unimportant weather events like hail. storms or wind storms those didn't used. to be the kind of thing that would scare. insurance companies right obviously a. big problem if it destroys your home or. damag your home but for insurers it. wasn't going to wipe them out. financially right it wasn't just a. complete an utter wipe out that the.

company would then have to Pony up a lot. of money for exactly and insurers called. them secondary perils sort of a. belittling term right something other. than a big deal like a hurricane these. minor league weather events right but. those are becoming so frequent and so. much more intense that they can cause. existential threats for insurance. companies and insures are now fleeing. States not because of hurricanes but. because those former things that were. small are now big hail storms wildfires.

in some places previous sort of. annoyances are becoming real threats to. insurers Chris what's the big picture on. what insurers are actually facing like. what's happening out there numbers wise. this is a huge threat in terms of the. number of states where this industry is. losing money it's more than doubled from. 10 years ago to basically a third of the. country the amount they're losing is. enormous and some states insurers are.

paying at a125 or even $150 for every. dollar they bring in in Revenue it's. just totally. unsustainable and the result is insurers. are making changes they're pulling back. from these markets they're hiking. premiums and often they're just dropping. customers and that's where this becomes. real not just for you know people who. surf balance sheets right and and trade. the stock market this is becoming real. for homeowners around the country who.

all of a sudden increasingly can't get. insurance so Chris what's the actual. implication I mean what happens when. people in a state can't get insurance. for their homes getting insurance for a. home is crucial if you want to sell or. buy a home right most people can't buy a. home without a mortgage and Banks won't. issue a mortgage without home insurance. so if you got a home that insurance. company does doesn't want to cover you.

get a real problem you need to find. insurance or that home becomes very. close to unsellable uh and as you get. fewer buyers the price goes down so this. doesn't just hurt people who were paying. for these insurance premiums it hurts. people who want to sell their homes it. even could hurt at some point whole. local economies right if home values. fall governments take in less tax. revenue that means less money for. schools and police it also means people. who get hit by disasters and have to. rebuild build their homes all of a.

sudden can't because their insurance. isn't available anymore it's hard to. overstate just how big a deal this is. and is that actually happening Chris I. mean are housing markets being dragged. down because of this problem with the. insurance markets right. now anecdotally we've got reports that. in places like Florida and Louisiana and. maybe in parts of California the. difficulty of getting Insurance the in. crazy high cost of insurance is starting.

to depress demand because not everyone. can afford to pay these really high. costs even if they have insurance what. we wanted to focus on with this story. was also okay we know where this goes. eventually but where is it beginning. right what are the places that are just. starting to feel these shocks from the. insurance. [Music]. market and so I called around and asked. insurance agents who are the front lines. of this they're the ones who are.

struggling to find insurance for. homeowners and I said hey is there one. place that I should go if I want to. understand what it looks like to. homeowners when all of a sudden. Insurance becomes really expensive or. you can't even find. it and those insurance agents told me if. you want to see what this looks like in. real life go to a little town called. Marshall Town in the middle of Iowa. [Music].

we'll be right. [Music]. back so Chris you went to Marshall Town. Iowa what' you find you know even before. I got to Marshall Town I had some idea I. was in the right spot when I landed into. Mo and went to rent a car the nice woman.

at the desk who rented me a car she said. what are you doing here I said I'm here. to write a story about people in Iowa. who can't get insurance because of storm. she said oh yeah I know all about that. that's a big problem here okay even the. rental car lady even the rental car lady. knew something was going on and so I got. into my rental car and drove about an. hour Northeast of De Moine through some. Rolling Hills into this lovely little. town of Marshall Town Marshall Town is a. really cute little Midwestern town with.

old homes and a beautiful courthouse in. the town square and when I drove through. I couldn't help noticing all the roofs. looked new what does that tell you turns. out Marshall Town despite being sort of. a pastoral image of Midwestern Easy. Living was hit by two really bad. disasters in recent Years first a. devastating tornado in 2018 and then in. 2020 what's called a Duro sort of a a. straight line wind event that's also.

just enormously damaging and the result. was lots of homes in this small town got. severely damaged in a short period of. time and so when you drive down you see. all these new roofs that give you the. sense that something's going on so. climate had come to Marshall Town. exactly a place that had previously. seemed maybe safe from climate change if. there is such a thing all of a sudden. was not. so I found an insurance agent in.

Marshall Town um talk to other agents. but haven't talked to many homeowners so. named Bobby Sho and he invited me to his. office early one morning and said you. know come meet some people and so I. parked on a quiet street outside of his. office across street from the courthouse. which also had a new roof and went into. his conference room and met a procession. of clients who all had versions of the. same Horror Story. it was more well more of double huge.

huge reduction in coverage with a huge. price increase you know and these are. some people had faced big premium hikes. I'm just a little small business owner. so every little bit I do feel they had. so much trouble with their insurance. company I was with IMT Insurance forever. and then when I moved in 2020 Bobby said. they won't ensure a pool some people. have gotten dropped we used to see. carriers canceling someone for frequency.

of three or four or five claims it's one. or two now some people couldn't get the. coverage they needed but it was versions. of the same tale which is all of a. sudden having homeowners insurance in. Marshall Town was really difficult but I. wanted to see if it was bigger than just. Marshall Town so the next day I got back. in my car and drove East to Cedar Rapids. where I met another person having a. version of the same problem Named Dave. Langston tell me about Dave Dave lives.

in a handsome modest little townhouse on. a quiet culde saac on a hill at the edge. of Cedar Rapids he's the president of. his homeowners association there's 17. homes on this little Street and this is. just as far as you could get from a. danger zone right it looks as safe as. could be but in January they got a. letter from the company that ures him.

and his neighbors saying his policy was. being cancelled even though it wasn't as. though they'd just been hit by some. giant storm so then what was the reason. they gave yeah know they didn't give a. reason and I think people might not. realize insurers don't have to give a. reason insurance policies are year to. year and if your insurance company. decides that you're too much of a risk. or your neighborhood is too much of a. risk or your state is too much of a risk. they can just leave they can send you a. letter saying forget it we're canceling. your insurance there's almost no. protection people have and in this case.

the reason was that this insurance. company was losing too much money in. Iowa and didn't want to keep on writing. homeowners insurance in the state that. was a situation that Dave shared with. tens of thousands of people across the. state they were all getting similar. letters what made Dave's situation a. little more challenging was that he. couldn't get new insurance he tried for. months through agent after agent after. agent agent and every company told him.

the same thing we won't cover you even. though these homes are perfectly safe in. a safe part of the state nobody would. say yes and it took them until basically. two days before their insurance policy. was going to rout until they finally. found new coverage that was far more. expensive and far more Bare Bones than. what they'd had but at least it was. something it was something but the. problem was it wasn't that good under. the new policy if Dave's streets got hit.

by another big. Windstorm the damage from that storm and. fixing that damage would wipe out all. the savings set aside by these. homeowners the deductible would be. crushingly high. $120,000 to replace those roofs if the. worst happened because the insurance. money just wouldn't cover anywhere close. to the cost of rebuilding wow he said to. me me we didn't do anything wrong this.

is just what insurance looks like today. and today it's us and Cedar Rapids. everyone though is going to face a. situation like this eventually and Dave. is right I talked to insurance agents. around the country and they confirmed. for me that this kind of a shift towards. a new type of insurance insurance that's. more expensive and doesn't cover as much. and makes it harder to rebuild after a. big disaster it's becoming more and more. more common around the country so Chris.

if Dave and the people you spoke to in. Iowa were really eviden that your hunch. was right that the problem is spreading. and rapidly what are the possible fixes. here the fix that people seem most. hopeful about is this idea that what if. you could reduce the risk and cause. there to be less damage in the first. place so what some states are doing is. they're trying to encourage homeowners. to spend more money on hardening their. home or adding a new roof or you know if.

it's a wildfire Zone cut back the. vegetation things that can reduce your. risk of having really serious losses and. to help pay for that they're telling. insurers you've got to offer a discount. to people who do that and everyone who. works in this field says in theory. that's the right approach right the. problem is number one hardening a home. costs a fantastic amount of money so. doing this at scale is hugely expensive. number two it takes a long time time to. actually get enough homes hardened in.

this way that you can make a real Dent. for insurance companies we talking about. years or probably decades before that. has a real effect if it ever works okay. so that sounds not particularly. realistic given the urgency and the. timeline we're on here so what else are. people looking at option number two is. the government gets involved and instead. of most Americans buying home insurance. from a private company they start buying.

it from government programs that are. designed to make sure that people even. in Risky places can still buy insurance. that would be just a gargantuan. undertaking the idea of the government. providing homeowners insurance because. private companies can't or won't would. lead to one of the biggest government. programs that exist if we could even do. it so huge change like the federal. government actually trying to kind of.

write these markets by itself by. providing homeowners insurance but is. that really feasible well in in some. areas we're actually already doing it. the government already provides flood. insurance because for decades most. private insurers have not wanted to. cover flood it's too risky it's too. expensive but that change with. governments taking over that role. creates a new problem of its own because. the government providing flood insurance.

that you otherwise couldn't get means. people have been building and building. in flood prone areas because they know. they can get that guaranteed flood. insurance interesting so that's a huge. new downside like the government would. be incentivizing people to move to. places that they shouldn't be that's. right but there's even one more problem. with that approach of using the. government to try to solve this problem. which is these costs keep growing right. the number of billion dollar disasters. the US experiences every year keeps.

going up and at some point even if the. government pays the cost through some. sort of subsidized Insurance what. happens when that cost is so great that. we can no longer afford to pay it that's. the really hard question that no. official can. answer so that's pretty doomsday Chris. are we looking at the end of. insurance I think it's fair to say that. we're looking at the end of insurance as. we know it the end of insurance that.

means most Americans can rest assured. that if they get hit by a disaster their. insurance company will provide enough. money they can rebuild that idea might. be going away and what it shows is maybe. the threat of climate change isn't quite. what we. [Music]. thought maybe instead of climate change. wrecking communities in the form of a a. big storm or a wildfire or a.

flood maybe even before those things. happen climate change can wreck. communities by something as seemingly. mundane and even boring as insurance. right maybe sort of the the harbinger of. Doom is not a giant storm but an anod. letter from your insurance company. saying we're sorry to inform you we can. no longer cover your home right like. maybe sort of the future of climate. change is best seen not by pouring over.

weather data from Noah but by pouring. over spreadsheets from rating firms. showing the profitability from insurance. companies and how bit by bit that money. that they're losing around the country. tells its own story and the story is. these shocks are actually already. [Music]. here Chris as always terrifying to talk. to you always a pleasure.

[Music]. Sabrina we'll be right. back here's what else you should know. today on Tuesday the United Nations has. reclassified the number of women and. children killed in Gaza saying that it. does not have enough identifying. information to know exactly how many of.

the total dead are women in children the. UN now estimates that about 5,000 women. and about 8,000 children have been. killed figures that are about half of. what it was previously citing the UN. says the numbers dropped because it is. using a more conservative estimate while. waiting for information on about 10,000. other dead Goins who have not yet been. identified a and Mike Johnson the.

Speaker of the House gave a press. conference outside the court in lower. Manhattan where Michael Cohen the former. fixer for Donald Trump was testifying. for a second day answering questions. from Trump's lawyers Trump is bound by a. gag order so Johnson joined other. standin for the former president to. discredit the. proceedings Johnson one of the most. important Republicans in the country. attacked con but also the trial itself.

calling it a sham and political. theater today's episode was produced by. Nina Feldman Shannon Lynn and Jessica. Chong it was edited by MJ Davis Lynn. with help from Michael benois contains. original music by Dan Powell Marian. Lozano and Rowan. Nimo and was engineered by Alysa Moxley. our theme music is by Jim brunberg and. Ben Lanser of.

[Music]. [Music]. wonderly that's it for the daily I'm. Sabrina Tavern see you tomorrow. [Music].