The Security Shortage As temperatures around the world climb as a result of climate change, so do the premiums of our homeowners insurance policies.
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WORDS and by ADEN MEISEL ART by HANNA MASRI and ADEN MEISEL
he Thomas Fire destroyed over 1000 buildings, burned over 281,000 acres of property, and inflicted over $2.2 billion worth of damage. Following this event, California Insurance Commissioner Ricardo Lara deemed many of these destructive wildfires “climate change-intensified.” Such destructive natural disasters have provoked many negative ramifications—one of the most significant and conflictual of which is the statewide rise in prices of homeowners insurance policies. According to Kathy Orton’s article in the Washington Post, California experienced nearly a 10% increase in average homeowners insurance premiums—3% higher than the current rate of inflation. But this isn’t abnormal. “Insurance companies transfer risk,” local insurance broker Dan Baxter said. “Raising the monthly or yearly premiums of people who live in high-risk areas is how insurance companies ensure that their liability balances their revenue.” This isn’t the only way insurance companies make money. “To further ensure that their funds can cover any incidents that may occur
with their clients, insurance corporations make money in two ways: collecting premiums and reinvesting that revenue in other financial assets that grow over time,” Baxter said. During the Montecito debris flows of 2018, the community of Montecito suffered from the many impacts of this phenomenon. According to Economic Consultant Robert Niehaus’ Preliminary Impact Assessment of the Montecito Mudslides, residential property repairs would cost up to a total of $204 million. Though it is evident that this natural disaster had many other county and region-wide effects, the sheer destruction it brought to the Montecito community was severe. “I was blown away by the devastation,” said member of the debris flow response team Ann Burgard. “The destruction was far beyond what anyone could have expected.” Local attorney Jonathan Blinderman, who had to relocate his family following the aftermath of the debris flows said, “Lots of my colleagues have been dropped
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from coverage following this event. Though California law prohibits insurers from dropping clients 12 months after a claim is finalized, those who were able to keep their policies after that period of time experienced a substantial increase in their premiums.” Additionally, unique to this particular event, it has
been confirmed that the mudflows were actually a result of the Thomas Fire that swept through the Santa Ynez Mountains. “If there hadn’t been a fire, even without the amount of rain that we got, there would not have been debris flows,” Blinderman said. According to Blinderman, in many states, if an insurance claim is attributed to two different causes, thefourthestate.net
