How the climate change crisis is impacting your insurance
Climate change has caused an increase in instances of severe weather, impacting all areas of life. From our homes, our employment, to our health, there is no exact way to measure the true ramifications. However, we do have an inkling as to what might be affected. Our insurance is one of those things.
There are a few ways that climate change may prove an issue for the insurance industry. For one, there may be a rise in costly claims for property damage as a result of major weather events. Two, insurers are now liable for investing dollars into pools for future claim coverage and retirements.
Here’s how climate change could be impacting your insurance –
Home, tenant, and condo
We have already seen the ramifications of climate change in our home insurance rates. All across Canada, they have been rising steadily due to the frequency of extreme weather events, including fires, floods, and massive hailstones. There is evidence to suggest that Canada may even be warming up faster than many other countries in the world. This may lead to more wildfires, smog, droughts, and other events that could cause damage to infrastructure, businesses – and our homes.
While tenants and condo unit owners do not need to cover their property’s physical structure, they may still be at risk with this change. Floods and fires can still destroy our valuables or cause irreversible damage. According to the Insurance Bureau of Canada, between 2009 and 2020 insurance companies in the country spent roughly an average of $2 billion per year on losses due to natural disasters.
Separate climate change insurance isn’t an option to add to your home insurance, which may mean the increased risk will be reflected in property insurance and tenant/condo rates.
The car insurance industry has always been tricky, especially with so many external factors impacting our rates. It can be frustrating to see our prices go up, even if we’ve done the best we can and haven’t made any claims in the last three or more years or received any tickets. Part of this is due to insurance fraud and the rising replacement cost of higher-tech vehicles, but some of this may be contributed to climate change and a higher frequency of weather events making for a larger number of comprehensive car insurance claims.
Rainfall is increasing and so are temperatures – which is a bad combination for flood season Extreme weather is just as hazardous to our infrastructure and homes as it is to our cars and may result to rather expensive car repairs. To mitigate this risk, drivers may want to review their coverage and consider both the type of severe weather they may face in their geographical area as well as the total value of their car. Additional coverage may be dropped if there isn’t a lot of difference between how much the driver pays for coverage as well as for the deductible and the total cash value of the vehicle.
The future is unclear, and there is no way to tell for certain what ramifications the climate crisis may have on life insurance in the years to come. However, there may be longer term impacts to do with population growth and food insecurity, which could translate to a negative influence on diet. This could be expected to alter mortality rates. On the contrary, the dire circumstances may force individuals in the opposite direction. Plant-based diets have been proven to have less impact on the environment and, in their whole-foods form, are lower in calories. This may consequently lead to lower rates of heart disease, diabetes, and other serious conditions.
For insurers, identifying the risks that may come with the development of climate change is essential. Beyond what is currently deemed a liability, many insurers will be in the process of considering how climate change may bring about future liabilities, which could affect the cost of longer-term life policies.
In order to mitigate the changes that climate change may cause to our insurance, we can take preventative measures to ensuring we have the lowest rates possible. Measures may include:
- Bundling multiple insurance policies through a single provider
- Implementing approved alarm systems/security systems
- Being claims-free for 3+ years
- Opting for public transport over driving where possible – or biking/walking to keep up with our cardiovascular health
- Raising our deductible
- Fixing small damages on our own
- Shopping around for more affordable options here and there
- Discussing with your broker or insurance specialist for advice
It can be frustrating to see your rates go up even if you think you haven’t made any chances. It isn’t a bad idea to do your own research, compare rates from multiple insurers, and discuss with your broker if you ever have any concerns.