The biggest news in the insurance industry this year has more to do with climate change than anything else. Extreme weather, be it heat and fires or storms and flooding, are taking a toll on insurers. In turn their customers are seeing coverage become more expensive, if they can find it at all. Things are getting dire in states like Florida, California, Colorado, Louisiana and even Iowa as many key insurance companies are pulling out of the market.

Property

There are no easy solutions to the insurance crisis in the states most impacted. The Federal Government can only make suggestions, but can’t step in and require any policy changes. The states regulate the insurance industry within their borders. The rules are intended to keep insurance affordable, so as costs go up with each climate fueled disaster, insurers can’t raise rates enough to cover the cost, and inflation just exacerbates the problem. If you can’t get insurance, you can’t get/keep a mortgage. People may have no choice but to move. (WaPo, NPR)

The NYT offers some suggestions for dealing with this situation, including reviewing your own policy limits to see if they need to be adjusted for inflation. If you are trying to buy/move to an area, where the disaster risk is higher, they advise that you put an insurance contingency in your offer so that you can get out of a contract if you can’t find insurance. Of course, you should examine the flood and fire risk of anywhere you plan to move.

About flood insurance, FEMA manages the National Flood Insurance Program which insures property in flood-prone areas (that private companies won’t provide.) They revised their pricing this year, and many states and local governments are suing them over the increases. In areas like Florida and Louisiana, rates went up 100% or more. (NPR)                        

The pressure of higher losses and related costs moves upstream to the reinsurance market. Reinsurance is insurance for insurance companies and reinsurers are global companies. Insurance and reinsurance companies have seen multiple years in a row of losses. Higher reinsurance rates are often cited as the reason insurance companies pull out of markets. (NYT)

Florida

Florida has seen home insurance prices soar and several carriers have either gone out of business or have decided to leave the state (Farmers and AAA). Climate change triggers weather-related disasters, inflation makes home repairs more expensive. and with fewer carriers, there is less competition. However, there is also, a fraud scheme going on that drives costs up significantly. Following a 2017 Supreme Court case that ruled in favor of the plaintiff opened the door to this scheme. Roofing contractors approach a homeowner after a storm and offer to repair the damage if they are willing to sign over the insurance proceeds. They then proceed to do more work than is necessary. If the insurance company doesn’t pay the full amount charged by the contractor, the contractor sues. news.FIU.edu, USAToday, CBS

California

Both State Farm and Allstate will no longer issue new homeowner policies in California. The last resort for homeowners there will be the state’s FAIR plan which provides basic coverage in areas with high fire-risk (much like FEMA’s National Flood Insurance is the only option for flood-prone areas.) (ABC News) (LA Times)

Louisiana

Louisiana lost many insurers following hurricanes in 2020 and 2021, leaving many people in that state moving to get insurance from Lousiana’s state plan as a last resort. That plan charges 10% above the market rate and is about to go up by over 60%. In an effort to help constituents fight the high cost of this insurance, the Legislature passed bills to fund and manage a relief effort.

Medical

A record 16.3 million people signed up for healthcare through the Affordable Care Act marketplace for 2023. The numbers are up by one million from last year, and enrollment has increased 50% during Biden’s administration. The two key reasons for the increased uptake is the fact that more are eligible for subsidized premiums, and funding was restored for a program that helps potential enrollees navigate through the enrollment process. (NPR)

The Kaiser Family Foundation conducted a detailed survey about consumers and their health care. Key findings are listed below, but it is worth looking through the actual article and graphs to catch some of the finer points.

• Most insured adults give their health insurance positive ratings, though people in poorer health tend to give lower ratings.(81%)
• Despite rating their insurance positively, most insured adults report experiencing problems using their health coverage; people in poorer health are more likely to report problems. (58%)
• Nearly half of insured adults who had insurance problems were unable to satisfactorily resolve them, with some reporting serious consequences.
• Among those with the greatest mental health needs, many adults across insurance types find their coverage lacking and report forgoing needed care.
• Affordability of premiums and out-of-pocket costs are a concern, particularly for those with private health coverage, and for some, contributed to not getting care.
• Insured adults overwhelmingly support public policies to make insurance simpler to understand and to help them avoid or resolve insurance problems.

AI has come to the insurance industry to speed up processing of claims. And the lawsuits followed. Cigna is being sued in California over the AI declining 300,000 pre-approved claims over a two-month period, taking about 1.2 seconds for each rejection. Eighty percent were reversed. This has come up in California first because there is a particular law on the books in their heath insurance law that sets standards for review, and the question is if AI meets those standards or if only human review meets the standards. Stay tuned.(Axios)

New rules have been proposed by the Biden administration to make it easier to get mental health coverage. (NPR)

Will the pharmacy benefit manager model finally break? (These are the people that determine which drugs are covered by your insurance.) Will drug costs finally start coming down? Blue Shield of California dropped their relationship with CVS Caremark and will “shop around” for drugs from Amazon and Mark Cuban’s lower cost drug companies. (CNBC)

Illinois will join roughly twelve other states in offering a state version of the Healthcare marketplace, as the governor signed legislation into law this week.

Illinois residents currently access the Affordable Care Act (ACA) Marketplace using the federal platform which the state pays a fee to use. This legislation (HB 579) will transition Illinois to a state platform, redirecting that fee to Illinois to fund the new SBM. The full state-based marketplace goes live for plan year 2026, and consumers will start enrolling via the Illinois platform during the ACA Marketplace Open Enrollment Period beginning November 1, 2025.

(Illinois.gov)

Auto Insurance

There are two big stories in the auto insurance world these days. The first is that auto insurance is getting more expensive. Nerdwallet explains what factors drive the 17+% jump last year.

• Cars are more complicated (think cameras and sensors) and are therefore more expensive to fix.
• Supply shortages caused car prices to go up, particularly for used cars.
• Even climate change has impacted auto insurance rates, as cars are impacted by floods and fires too.
• Reinsurance (insurance for insurers) has gotten more expensive.
• The ‘post-pandemic’ era has seen rising number of accidents.

To keep your rate as low as possible, Nerdwallet suggest bundling your policies and taking every discount you can find!

If you are interested in checking out average insurance rates by state (in dollars and as a percent of average income), check out this bankrate.com article. It might be a good resource if students are researching the cost of car ownership.                      

The other big story is that State Farm and Progressive have stopped insuring certain Kia and Hyundai models that are easy to steal, and the trend has been enhanced by TikTok videos showing how to hotwire these cars.

 A number of Kia and Hyundai vehicles were sold in recent years without an engine immobilizer, a key security feature standard in most cars that prevents the engine from starting without the key.

Seventeen states’ attorneys general have called for the Federal government to force the companies to recall the models and address the issue. (Yahoo Finance)

Pet Insurance

We all love our pets, and we know/teach that they can be expensive to own. If you/your students want to consider purchasing pet insurance to minimize some of the risk in terms of health care costs, here is a guide. Just as with other types of insurance, there are many flavors of pet insurance. One suggestion is that if you are buying a plan you should consider one that includes wellness care too. (CNBC)

About the Author

Beth Tallman

Beth Tallman entered the working world armed with an MBA in finance and thoroughly enjoyed her first career working in manufacturing and telecommunications, including a stint overseas. She took advantage of an involuntary separation to try teaching high school math, something she had always dreamed of doing. When fate stepped in once again, Beth jumped on the opportunity to combine her passion for numbers, money, and education to develop curriculum and teach personal finance at Oberlin College. Beth now spends her time writing on personal finance and financial education, conducts student workshops, and develops finance curricula and educational content. She is also the Treasurer of Ohio Jump$tart Coalition for Personal Financial Literacy.