We’ve all heard about “global warming” and the climate risks that come with it, but what does that have to do with insurance? A lot! Insurance companies and those who purchase insurance are trying to mitigate risk as much as possible, and as risks increase, so do the costs that go with managing those increased risks. Read on to learn more about how climate change may affect the cost of insurance.
Higher Risks = More Claims = Higher Premiums
The first thing to note is that as more insurance claims start to come in overall, the more cost and risk the insurance companies have, so they are inclined to increase premiums to everyone as they start to notice that risk is increasing from the increase of claims. Those who submit claims will definitely see premiums increase, but an overall increase of claims will also increase insurance premiums for everyone else. Below are the main risks affecting the increase of insurance premiums for us here on the west coast.
The Risk of Wild Fires is Increasing
Being on the west coast of Canada here in BC, we are used to having wild fires every time our hot summers come around, and wildfires in BC are here to stay. We’ve also been getting used to having more and more wild fires every year. This means that as the risk of wild fires increases, so do the claims coming in, and then insurance premiums start to increase too. As insurance companies start to notice that this risk is affecting everyone, they start to increase premiums for everyone.
The Risk of Earthquakes is Increasing
Did you hear about the earthquakes we had in the PNW recently? There was multiple earthquakes recorded just off of BC’s coast recently, and there was an earthquake in California recently too. With global warming and climate change comes the increase of earthquakes, and as we now know, the more risk in our environment, the higher insurance premiums will be to cover those risks.
The Risk of Floods is Increasing
Another main risk associated with climate change (besides wildfires and earthquakes) is floods. Global warming will increase the amount of heavy rains we see, as well as storms and hurricanes that can also flood cities. There was even a recent flood warning issued for BC’s Chilcotin River. With the risk of floods increasing, insurance costs will increase to adjust for this.
Construction Costs Are Still Increasing Too
To add onto the rising insurance costs due to rising risks, the cost of construction is also increasing. This also has an impact on insurance costs because if the cost to re-build a home is increasing, then the insurance premiums will need to be adjusted to make up for the increases in construction costs associated with rebuilding a home as well.
Preparing For Higher Climate Risks & Higher Insurance Costs
A recent article by BC Business & The Informer talks about the impact that increases in climate change risks are having on insurance costs, citing how;
“Canada’s largest real estate insurance broker, Chicago-based HUB International, circulated recently to its Metro Vancouver strata corporation clients, warning that [they] should budget for a 25% increase in insurance costs for 2019.”
It also goes on to state that “the HUB memo blames bigger increases on catastrophic losses from weather related incidents.”
Now, we don’t know exactly how much risk is in our future, but we know the risks are growing, and therefore insurance companies are protecting everyone (themselves, but clients also) by planning to increase insurance premiums.
As a consumer, the best way to protect yourself from all of this is to
(a) stay as informed as possible,
(b) protect your home from the 3 main climate risks noted above as much as possible, and
(c) budget accordingly for increases in insurance costs (and emergency claims) in the future.
Be Proactive, NOT Complacent
The last thing we’d like to note is that although you can expect insurance costs to rise over time if climate change risks are rising, this does NOT mean that you should be complacent with your insurance provider’s prices. Instead, be proactive and shop around every year for the best possible insurance coverage at the best possible price. Or, work with a broker who will do that for you (and not just say that they will, but actually prove that they do).
Contact Us Today to Speak w/ Our Brokers!
If you have any questions about this, please contact us here at Harbord today to speak to one of our professional representatives who will be happy to answer questions you may have about the major risks facing your assets due to climate change, possible price adjustments to look out for, and more. We’d be happy to provide you with an updated quote for FREE as well!