WASHINGTON — The Senate Budget Committee debated the causes of the insurance crisis plaguing homeowners across the country at a hearing Wednesday. Democrats identified climate change as the main cause of rising premiums, while Republicans pointed to high government spending and inflation.
Home insurance premiums have increased dramatically in recent yearsafter billions of dollars in damages caused many insurance companies to drop coverage. An boost in extreme weather events was a factor in the rising costs.
In his opening remarks, Committee on Budget Chairman Sheldon Whitehouse cited the example of the state-supported insurance company Citizens in Florida.
As Florida faces an increased risk of hurricanes, heat waves and flooding, national insurers have dropped plans in disaster-prone areas or raised prices. Residents are uninsured or unable to afford insurance and are instead turning to Citizens, an insurer of last resort backed by the state. Louisiana and California are facing similar problems.
Average home insurance premiums in the Sunshine State are just over $4,000 per year. According to a March report from Florida TodayThis is well above the national average premium of about $2,700.
With so many citizens using the Citizens plan, the insurer’s claim payouts could exceed its reserves, leading to even higher premiums for policyholders, Whitehouse said.
“Good luck with that,” said Whitehouse, a Democrat from Rhode Island. “Especially if the surcharge is hundreds or even thousands of dollars.”
Not just Florida
Whitehouse also stressed that the crisis is not circumscribed to Florida. He quoted a New York Times Investigation The study found that insurance companies lost money on home insurance in 18 states in 2023.
“The states may surprise you,” Whitehouse said, pointing out how widespread the problem is. “The list includes Illinois, Michigan, Utah, Washington and Iowa.”
The Democratic senators present at Wednesday’s hearing and their witnesses all pointed to climate change as a major reason for high claims and rising insurance premiums, adding that the insurance crisis will only get worse with more extreme weather.
Rade Musulin, an actuary with Finity Consulting who testified on behalf of the Democrats, said Florida is an example of how bad the insurance crisis could become across the country.
“In the coming decades, we must prepare for the possibility of larger or more extreme hurricanes and flooding along the coasts from Texas to New England,” he said. “The experience in Florida is a warning of what we may see in other states in the future.”
Extreme weather events are boost while the Earth’s temperature is rising, according to numerous government and nonprofit sources, including the Intergovernmental Panel on Climate Change (IPCC) Report 2021Major hurricanes will become more constant, flooding will boost, and wildfires will break out more easily due to increasing heat waves.
Senator Jeff Merkley, a Democrat from Oregon, emphasized the importance of climate resilience in solving this insurance crisis.
“It is highly irresponsible of us to simply say we can fix the insurance market and ignore the underlying causes that will only get worse with each passing decade,” Merkley said.
GOP blames spending and inflation
Most Republicans on the committee, however, saw rising government spending and inflation as the main reasons for the boost in insurance prices.
“The majority hopes we will stop discussing our unchecked deficit spending, which has fueled inflation, hit hard-working Americans hard and – as I’m about to say – has something to do with driving up insurance costs,” said Chuck Grassley, an Iowa Republican and the ranking GOP member on the panel.
Grassley pointed to the increasing Cost of workers and materials to rebuild or repair houses and more people To move in disaster-prone areas and other factors that contribute to high insurance premiums.
Senator Ron Johnson, a Republican from Wisconsin, declared that “the premise of this hearing is just completely wrong” before asking Republican witness EJ Antoni, a research fellow at the Heritage Foundation, to what extent inflation and lawlessness were responsible for the insurance premium increases.
“If you just look at government actions and take into account both the failure to respond to criminal activity and inflation and regulatory costs, that explains about 90 percent of the increase in insurance premiums we have seen in recent years,” Antoni said.
Antoni did not elaborate on how he calculated this number.
Senator Mitt Romney of Utah differed from his Republican colleagues and acknowledged that climate change is a reason for rising insurance prices.
But he said that solving both crises would require far more than American action.
“The idea that we can somehow fix the climate and solve the insurance problem is a pipe dream,” Romney said. “It ignores the reality that we can’t fix the climate because it’s a global problem, not an American one.”
Extreme weather conditions are imminent
Summer is approaching, and homeowners across the country are preparing for a season of extreme weather. The National Oceanic and Atmospheric Administration predicts an 85% probability of an above-average hurricane season and heat waves are already on the rise in the West.
Whitehouse said it was more essential than ever for Congress to agree on a solution and urged Republicans to address the issue.
“It all starts with climate risk,” he said. “And a major party that pretends climate risk doesn’t exist is putting our federal budget and millions of Americans across the country at risk.”
