Climate change will have an effect on insurance
Extreme weather will drive up rates and cost homeowners more
As extreme weather events become increasingly common, insurers will have to recover their costs by raising premiums, or even cancelling insurance entirely for high-risk coverage, said Eric Monkman, of Monkman, Gracie & Johnson Insurance Brokers.
In an event organized by the Peterborough chapter of For Our Grandchildren, Monkman told his audience of about 30 people at Trinity United Church Hall Tuesday evening that insurance claims from extreme weather have climbed dramatically over the last few years and will continue to increase as climate change worsens. In the Peterborough area, this is particularly a problem for people living in floodprone areas, especially in parts of the K9J area code.
The 2004 Peterborough Flood resulted in insurance claims of more than $100 million, which does not include the costs associated with disposal of the associated garbage, disruption of business, days off work and the toll on people’s mental health. The average claim for a flooded home in was $43,000.
As a result, some homes will be limited in the future to a maximum of $25,000 for flood insurance. Monkman’s firm had 400 claims over the single night of the flood. When asked what determines home insurance rates, Monkman said that it was a combination of location, frequency of claims and, in some cases the insured person’s credit score. To explain the latter, he said that a poor score correlates statistically to higher risk.
While credit scores have been used to help set rates in the U.S. for years, it is now an increasingly common tool in Canada, as well. The result is that economically disadvantaged people take a bigger financial hit from extreme weather events than wealthier people.
Damage related to climate change is not just a local phenomenon. The devastating 2016 Fort McMurray fire resulted in $9.9 billion in damages, and damage from extreme weather cost $300 billion globally in 2017. California has lost over 8000 buildings this year alone, with rebuilding costs estimated at $18 billion.
Kate Grierson, an Al Goretrained climate change communicator, also provided a brief update on the global picture of climate change in 2018, including a discussion of the latest IPCC report showing that the world must stay below 1.5 degrees Celsius of warming to avoid the catastrophic effects of climate change.
This will mean having to reduce planet-wide greenhouse gas emissions by about 50 per cent in the next 12 years. The earth has already warmed by 1 C. Grierson pointed out that money spent now to reduce greenhouse gas emissions reaps much larger future benefits in reduced extreme-weather damage.