U.S insurance rates are already rising because of the impacts of global warming -- and consumers should prepare for even higher rates -- as flooding, wildfires, and other extreme weather events become more common, a new study says.
It's an important issue for insurers, who have already suffered billions of dollars in losses due to increases in serious weather events that fit the pattern of global warming. Severe weather is on the rise, the report says, costing insurers $92 billion in the 1990s and $23 billion in 2004 hurricane losses alone.
In some cases, insurers have pulled out of high risk markets completely, shifting the burden to taxpayers.
The report, "Climate Change and Insurance: An Agenda for Action in the United States," was released by insurer Allianz Group and conservation group World Wildlife Fund.
While U.S. insurance companies have been good at looking at the historical risk from natural catastrophes, the report says they have been slow to adopt the latest scientific findings in their computer models that project future risk and in turn, set rates.
"U.S. companies have a very sophisticated set of tools, but they look backwards," said Hans Verolme, director of the World Wildlife Fund Global Climate Change Program. "What they do not yet do is take in to account some of the knowledge that has been acquired in the scientific community."
As that new knowledge is taken into account, consumers will increasingly see the focus on global warming reflected in their insurance bills.
"As a general consequence of global warming, insurance prices will go up," said Clement Booth, a board member of Allianz. "There's no question about that."
Insurance rates are especially likely to rise -- and insurance harder to get -- in areas along the coast or where flooding or forest fires may increase.
"We need to do a better job of making people understand that there is a risk in living on the coast, living on a tidal river, living on a flood plain," said Allesandro Iuppa, president of the National Association of Insurance Commissioners.
The good news, Verolme says, is that some insurance rates may go down.
"For example, if you buy a hybrid, you can get cheaper auto insurance," he said. "Or if you buy an energy efficient 'green' house. The insurance sector will be much more carefully sending signals to consumers as to the behavior that they would like to see in their clients."
The report notes, for example, that Traveler's Auto Insurance now offers a 10 percent discount to owners of hybrid-electric cars.
Scientists have long predicted in peer reviewed studies that human-caused warming of the atmosphere would lead to more extreme weather, from increased downpours and flooding, to drought and more intense hurricanes. The warming is caused, scientists agree, by the burning of fossil fuels that release greenhouse gasses like carbon dioxide into the atmosphere.
Iuppa, who also serves as the insurance superintendent for the state of Maine, says state insurance regulators want to protect consumers by making sure that insurance companies are paying attention to the risks of global warming.
"We're looking at it from a financial perspective. When you buy an insurance policy, it's a promise to be paid in the future," he said. "And we want to be sure those companies are in a position to do that."