Rising home insurance premiums weigh on retirees
“Building materials themselves lend them to more catastrophic losses,” said Jared Carillo, foundation account manager at SmithBrothers, a Connecticut insurance brokerage firm. Materials used in construction today include more synthetic materials that burn faster and hotter, such as particle board, spray foam and wire insulation, he said.
Open floor plans are another culprit, Mr. Carillo said: “A fire that starts in the kitchen is going to generate more losses on the first floor.”
Some of the weather changes monitored by the insurance industry, such as the northward drift of “Hurricane Alley”, are gradual changes. Others – like the droughts that exacerbated massive wildfires across the western United States – reached an inflection point much faster. Mr Rauch said that in the 1980s, the average annual insured losses in the United States from wildfires ranged from $1 billion to $3 billion.
“That was the expectation for the future,” he said.
That changed in the blink of an eye. “In 2017, for the first time, insured losses were around $16 billion,” Rauch said. “It was a huge leap, and 2018 was basically the same.” After a subdued western fire season in 2019, 2020 brought another round of jaw-dropping losses, around $11 billion.
It’s proof that even the most nimble businesses can be surprised by how quickly conditions can change. In the past four to five years alone, Rauch said, wildfires have brought significant change. “The casualty situation was totally different from previous decades,” he said.
Insurance and real estate professionals say it’s especially problematic for people who put down roots decades ago hoping to grow old in those homes and neighborhoods, only to find that the ground beneath their feet changed.
“I have people who retired here,” said Patrick Brownfield, personal risk adviser for insurance broker Hub International in Jackson, Wyo. “They’ve had astronomical increases in their insurance over the last couple of years,” he said, adding that leaves those homeowners with few options. “It’s going to cost them $20,000 a year on their fixed income, and now they can’t afford the insurance because all their equity is in their house,” Brownfield said.