Fix Home Insurance For Today’s Climate Risks

While home buyers are facing home prices that are at historic highs in most markets along with mortgage rates that are higher than they have been in years, they also have to budget for escalating home insurance premiums to protect the new home investment.

While the insurance costs are becoming part of the new home budget, it doesn’t always mean that it’s the right coverage or that the homeowner forking out the additional dollars will be compensated when a climate threat hits. As mother nature dishes out more frequent and increasingly severe climate events, insurance companies are reacting by raising prices or dropping certain policies all together to sustain its threatened business model.

A Green Builder COGNITION report data showed that younger generations are more worried about climate change impacting the value of their homes, and also report having problems accessing insurance for their homes.

The same report identified a large difference in the different generations’ ability to get insurance – 77% of Gen Zs versus just 16% of Boomers feel that climate events have impacted their ability to get home insurance — due to both the increasing costs and also due to the availability of insurance in a changing marketplace.

Those market changes are based on incoming data that quantifies the increasing risks. CoreLogic analyzed single family homes across the country that are exposed to a combination of hurricane wind, wildfire, inland flood, severe convective storm, and severe winter storm. The data company’s research found that more than 33,000 homes face a triple threat, or year-round extreme risk from three natural disasters.

While not surprising, Miami has the most homes exposed to triple threats. The Miami market is exposed to hurricane winds, floods, and wildfire threats. More surprising are some of the markets with the highest percentage of total homes with triple risk, such as the rural locations of Snyder, Texas, and Ellensburg, Washington.

Real estate listing site Zillow partnered with First Street to provide climate risk data on for-sale property listings across the U.S., so that buyers can understand how the home may be threatened by five key risks—flood, wildfire, wind, heat and air quality. Now, Zillow and Realtor.com browsers can see risk scores, interactive maps and insurance requirements on home listings.

While all these risks are adding up, the insurance industry hasn’t been able to deliver new solutions to provide adequate coverage, instead backing out of certain areas. A shocking number of insurers chose not to stop writing new policies in California and in Florida this year. Plus, flooding is exposing many homeowners to an insurance gap because flood damage isn’t covered under standard homeowners’ policies.

Slow Evolution

Understanding and reacting to the new data sets will be critical to creating solutions for longer term resiliency.

“How do you mitigate it?” asked Will Swan, the director of Energy House Laboratories at the University of Salford. “You have to understand what the business model is. What is the value of investing in resilience, drainage, to an insurance company – if they put their money there, how much does it save them down the line?”

Hurricane wind, wildfire, and inland flood is the most common combination of perils, amplifying the urgency for multi-peril awareness as cities look toward creating resilient communities. And, as storms change in severity, it becomes a never ending chase for accurate information.

“Insurance companies and banks want to know more about what they are insuring to get better at responding to disasters when they happen,” he said. “Risk is about information, and it’s about what you don’t know. The more you know, the more you can manage the risk.”

Jennifer Berthelot-Jelovic is the founder and CEO at design firm A SustainAble Production, and recently worked on a master planned community where building codes called for walls to be built 12 feet above the water line, however, the firm’s model showed that the walls needed to be more than 14 feet.

“The code wasn’t up to date with what was probably going to be happening,” she said. “People will survive, but once there is water damage, it is not survivable. Why do we keep rebuilding where there are hurricanes? It becomes a social issue.”

The firm focuses on making communities disaster ready. In Florida, designs require electrical and infrastructure up high to be resilient.

The new transparencies that sites like Zillow and Realtor.com offer are changing the marketplace as well, impacting property valuations, and therefore impacting agents and brokers.

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Ian Giammanco is the managing director of standards and data analytics and lead research meteorologist at the Insurance Institute for Business and Home Safety (IBHS) and provides insights for FORTIFIED, a beyond-code construction method that builders can use to protect properties.

“We create information that states can use to make better business decisions based off of it,” he said. “The impetus was to follow along to what the Insurance Institute for Highway Safety did with the built environment.”

Roy Wright is the president and CEO at IBHS and adds, “Recognizing that we can’t predict specific weather events next month, much less over the next several decades, IBHS knows that putting proven building science solutions in place now will reduce disaster losses in the future.”

Berthelot-Jelovic has seen a mind shift coming from funding mechanisms.

“You cannot get investors to invest if you are building in a hurricane zone or in a climate disaster area,” she said. “Funding and insurance are key levers.”

She has seen projects in hurricane zones rejected on insurance, but the developers wanted to continue because they were so driven by the location as a lure as a luxury, golf destination.

“They were not deterred by the fact that it was not insurable,” she said of the behavior she is working to correct.

Time For Home Insurance Solutions

The discussion is active and I will continue to cover and also highlight during the next couple months and in a panel session at the 2025 SXSW Conference, scheduled March 7 to 15, in Austin. The session, Building and Protecting Homes in a Changing Climate: Challenges and Strategies, is part of the climate and sustainability track at the conference, and features Giammanco, Swan, and Dr. Skylar Olsen, the chief economist at Zillow.

During the session, we’ll share new Zillow data to look at how climate change is affecting market dynamics. Then, explore the new materials and design options that help keep residents safe. Plus, panelists will discuss building codes that offer standards of protection and risk modeling, in addition to underwriting and home insurance examples that are gaining traction.

In 2025, hopefully the climate risks decrease while the protections, physical and monetary, increase. Time for home insurance to evolve.