In 2023, there were 28 billion-dollar climate and weather disasters in the U.S. Climate change means this number is likely to stay high. Insurance companies cannot keep up with the impact of multiple climate crises, leaving many households facing substantial increases or turning to state-run insurance plans. 

On June 13th, 2024 The Center for Disaster Philanthropy hosted Insurance and Mother Nature: How does losing insurance options affect disaster philanthropy? to share information with donors about the current property insurance crisis and provide strategies for meeting this challenge. CDP’s director of the Midwest Early Recovery Fund, Cari Cullen, moderated the discussion with Amy Bach, Co-founder and Executive Director of United Policyholders, and Dr. Carolyn Kousky, Associate Vice President for Economics and Policy, Environmental Defense Fund, and Author. Below are a few highlights of the discussion. 

Property Insurance: The Current Reality

Property insurance has long been a part of the safety net for households post-disaster, but in many places, insurers can’t offer policies at a price that homeowners can afford or are willing to pay. 

There are several major trends leading to the current reality; the biggest driver of these trends is the growing risk of weather and climate-related disasters. These trends include bankruptcies of insurance companies; escalating prices of insurance, labor, and materials; insurers pulling out of the market; and migration of risk from the private sector to the public sector. The drivers and the trends lead to increased costs and decreased accessibility. 

As property insurance is becoming less affordable or accessible, organizations working with households on recovery, are seeing an increase in uninsured and underinsured clients. There is increased reliance on public and private disaster aid to meet unmet needs. Preparedness conversations have shifted from helping households understand needs and review policies to ensure full coverage to choosing the bare minimum and what is most essential for survival. 

As the cycle continues, fewer households will have adequate coverage and as disaster-caused damages increase, so will the gap for unmet needs.

“It is increasingly clear that we [need] to figure out a way to better balance who is going to bear the cost of these increased risks.” Amy Bach

Why the Insurance Gap Matters

Households with insurance tend to recover better and faster than those without insurance. They rebuild faster and have fewer financial burdens and unmet needs after a disaster. Lack of insurance widens income inequalities and more insurance in communities equals positive spillovers into local economies, meaning a community as a whole has quicker, economic recovery potential. 

However, households face many barriers to securing adequate insurance and inequitable outcomes. Without a framework that understands and works towards solutions that address limitations in coverage, financial literacy, emergency and non-property needs and historical, systemic discrimination and racism, insurance will continue to be a solution that is inaccessible for many. 

Inclusive Insurance, which provides appropriate and affordable coverage to those who are underserved or unserved, is affordable, accessible, transparent, people-centered and just. 

Paths Forward

“In my opinion, the only way to really stabilize this markets in the longer term is really transformative investments in risk reduction …. a patchwork, with different solutions for different places and different populations coupled with the really hard work of risk reduction and climate justice.” – Dr. Carolyn Kousky

While there are no silver-bullet solutions or easy answers to the current challenges, there are some signs of positive movement, including changes in state and federal policies and other emerging models being tested such as parametric insurance, community insurance, and micro and mutual models in the global space.

Just as the crisis and impact are multi-dimensional, the path forward is multi-dimensional, requiring funders and society to step outside the traditional silos and take a multi-sector, multi-layered approach. It also requires a coupling of research and expertise with lived experience and community, people-centered design, grounded in equity and justice. 

There are groups and individuals rolling up their sleeves to get to work. The panelists highlighted the work of an inclusive insurance pilot and a wildfire risk reduction program among others. 

Advice for Funders

Key takeaways for grantmakers to help address the insurance crisis in ther communities include:

  • Fund risk-reduction and resilient housing. Work with multi-sector groups to support risk reduction at the household and community levels.  Some areas in risk reduction may include workforce development, resilient/fortified buildings, mitigation, relocation and land-use conversations. 
  • Serve as a connector: Bring together new potential partners. Include the insurance companies in the conversation. Help facilitate discussions to see what kinds of plans and initiatives might work in your community.
  • Help to pilot and test new ideas (or old ones to adapt to current realities). This includes policy, research and advocacy considerations. Funders can play a critical role in moving ideas from concept to reality, giving room for leading practices to be tried and tested. 
  • Fund organizations to provide assistance in understanding, accessing and navigating insurance and legal needs in all phases of disaster. There are current, chronic and emerging needs for equitable disaster recovery resources; we must take a both-and approach. Addressing those unmet needs today and considering how we can work together to adapt and reduce risks for tomorrow. 

Watch the full webinar and access the resources: Insurance and Mother Nature: How does losing insurance options affect disaster philanthropy?