“Early estimations suggest damage could reach $30 billion (Wells Fargo and Goldman Sachs) and that is with many people deeply unsatisfied about the response of insurance companies. GlobalData’s 2024 Emerging Trends Insurance Consumer Survey* found that many American consumers had already felt the impact of severe weather on their annual household insurance renewals.
“One in five (20.5%) consumers from the US had already not been offered a household insurance policy at renewal. Similarly, 19.3% of consumers had been refused a household insurance policy when applying for a new one – this is compared to 13.3% for the global average in the survey (11 countries). It also found that 42.4% consumers had been contacted by their insurer with ways to mitigate the impact of a severe weather event if it was to occur. This shows that insurers are already engaged in this area, though they will need to increase efforts here after what is happening in LA.
“One resolution may involve government initiatives. That could be the US government subsidising premiums in high-risk areas while forcing insurers to continue offering policies. This would mean the government would share the risk with insurers which could allow properties in such areas to remain insurable. This is like FloodRe in the UK, where the government helps insurance companies cover houses in areas at high-risk of flooding. This would reduce the impact on premiums across the US and would also stop a potentially significant property crash in LA if large areas become uninsurable. There are some state-backed policies for those who have been rejected by insurers, but they have a limited budget.
“Although the exact cause of these fires remains uncertain, it is evident that severe weather events are increasingly affecting people's lives globally. This is extremely damaging to insurers both in terms of payouts but often in terms of their reputation too, as they are often seen to be avoiding or delaying payouts in some of these instances. This emphasizes the need for insurers to take an active role in the fight against both climate change but also in identifying imminent weather events and having practices in place to help reduce their impact.”
*GlobalData’s 2024 Emerging Trends Insurance Consumer Survey was conducted across 11 countries and had 11,000 respondents. It was run in Q3 2024
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