Property insurance coverage disaster prompts Senate listening to

Washington lawmakers have come collectively to debate the rising insurance coverage disaster spurred by local weather change-induced pure disasters and the exodus of insurers from high-risk states like Florida and California.

The Senate Committee on Banking, Housing and Urban Affairs convened a listening to on Thursday to discover potential options, receiving testimonies from insurance coverage trade specialists and shopper advocacy teams.  

Witnesses on the listening to raised considerations over surging insurance coverage premiums because the US faces a record-setting 12 months for weather-induced property harm.

In a joint assertion, the American Property Casualty Insurance Association (APCIA) and the Reinsurance Association of America (RAA) famous that the final decade of worldwide pure disaster occasions has been the costliest in recorded historical past.

The teams pointed to how the typical annual weather-related disaster losses went from $126 billion between 1990-1999 to $219 billion between 2010-2020.

Amid these escalating losses, insurers have been selecting to restrict their presence in catastrophe-prone states like Florida and California, leaving many householders scrambling for different protection that’s sometimes at greater premiums and with diminished protection.

“We’re hearing more and more — people simply cannot afford to own a home because they can’t get insurance,” mentioned Douglas Heller, director of insurance coverage on the Consumer Federation of America, who testified that householders in high-risk areas are going through premium hikes of round $500 per thirty days.

Jerry Theodorou, coverage director of finance insurance coverage and commerce on the R Street Institute, mentioned the insurance coverage disaster has additionally been fueled by extreme litigation, as is the case in Florida.  

“For years, Florida had the dubious distinction of being home to 79% of the homeowner insurance litigation in the country, despite having only 9% of the country’s homeowner insurance policies,” he mentioned.

Additionally, some Republican senators remarked on state-level regulation and the way it has prevented insurance coverage corporations from shortly adjusting their costs to account for threat.

“When you can’t make a profit, you don’t stay in those states,” mentioned Senator Tim Scott, a rating member of the senate committee. “It’s one of the reasons why you see, rather a State Farm, AIG, the insurance companies that we just named, leaving markets. It’s because rates sufficiency is impossible to get there.”

Theodorou highlighted Proposition 103 as a serious hurdle for insurers in California, equating it to “forbidding a doughnut maker to change the price of its doughnuts, irrespective of flour and sugar costs.”

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