BY KEITH LIPPOLDT

klippoldt@gbtribune.com

It has been estimated that at least 12,300 structures have been destroyed in the Los Angeles area fires. The insured costs (those with homeowners/commercial insurance) have reached over $40 billion. The cost to rebuild the region has currently been estimated at $275 billion. And there are still fires burning.

Hurricane Helene, the deadly and destructive hurricane that destroyed the eastern seaboard from Florida to North Carolina last fall, is estimated to have caused more than $40 billion in insured damage, That doesn’t tell the whole story because a significant portion of the losses in NC went uninsured, as many homeowners in the affected areas did not have flood insurance.

Let’s not forget the annual wildfires in Colorado. Not only are structures lost in the mountains, so are the trees and grasses that protect from avalanches and mudslides, another risk for losses.

Closer to my home, hail storms blasted through Pratt, Kansas, in September, 2019, and again in May, 2023. My roof, even though equipped with impact resistant shingles, was totaled after both events. The cost for replacement was near $32,000 total. My insurance provider covered the losses, minus my two deductibles of $1,500, on each event. They also provided me with a ‘Dear John’ letter telling me to search for a new insurance company.

Funny how that works. Actually, it isn’t funny at all.

This isn’t a new problem. This crisis — for both the insurance industry and homeowners alike — have been festering for some time. Just last month, a Senate Budget Committee report warned of the impact natural disasters are having on people’s ability to get homeowners’ insurance.

“Unless the United States and the world rapidly transition to clean energy, climate-related extreme weather events will become both more frequent and more violent, resulting in ever-scarcer insurance and ever-higher premiums,” the report cautioned. “This is predicted to cascade into plunging property values in communities where insurance becomes impossible to find or prohibitively expensive – a collapse in property values with the potential to trigger a full-scale financial crisis similar to what occurred in 2008.”

This isn’t just a Los Angeles or North Carolina problem. This, according to the report, is nation-wide.

In November, 2023, after a series of destructive hurricane and wildfire seasons, the Senate Budget Committee began looking at the non-renewal data of homeowners’ insurance in Florida, Louisiana, California, and Texas, noting that spikes in non-renewal rates are “often an early warning sign of market destabilization,” and that “higher non-renewal rates are also correlated with higher premiums.”

The committee had studied data over a five-year period, they found an increase in devastating catastrophic events. In that same time frame, nearly two million policies had been “non-renewed.” It also stated that future natural disasters will only make it worse. 

According to media outlet Al Jazeera, as of 2022, State Farm was California’s largest insurer. They made a business decision to non-renew 30,000 policies in California, including over 1,600 in July, 2024, in the fire-ravaged Pacific Palisades area, just months before the disaster.

They reported in May 2023, State Farm released a statement that it would stop accepting new applications in California, including business and personal lines of property and casualty insurance. The statement added that this was due to “historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.” The insurance company found it too expensive to cover the properties most likely to be affected by wildfires and stay in business at the same time.

I get it. We can’t blame the insurance companies. It’s not a good business model to pay out more than you bring in. At some point, your black ink will turn red.

I spoke with an independent insurance agent who told me this crisis is affecting all three levels – the insurance company, the insured, and the agent as well.

She explained that the amount of catastrophic claims has begun to affect the providers business practices across the board. They have to have the assets to cover the inordinate amount of claims being processed. If they can’t, they go out of business. It affects the big players as well as the smaller. She went on to explain that agents are affected as well because they are the first line of communication between themselves and the insurance providers. People see higher rates, higher deductibles and, at worse, non-renewal notices and take out their frustrations on them.

The insured, or once-insured, is put in a major bind if non-renewed. Most states require a minimum of 30 days notice of non-renewal. By the time the letter arrives, you are down to about 25. That can put the recipient in panic mode if your house is mortgaged. Mortgage companies appreciate the property they are carrying has coverage in case of disaster. If you fail to keep it covered, they can take it from you. This doesn’t just affect those who live in the high-risk regions, which we do, but the majority of homeowners. If you’re unable to obtain insurance you won’t be able to finance a home. Add to that the increase in premiums and deductibles, rising insurance costs and fewer policies, slowly, but surely, you have a housing crisis.

Patrick Mahomes, Travis Kelce, Andy Reid and Jake from State Farm make insurance look fun. In reality, it isn’t.