Many scientists are convinced that global warming is for real and we should take immediate action to deal with it, or it's just going to get progressively worse. It appears that they have a good point. Natural disasters across the world are getting more frequent and powerful. Southern Nevada is very familiar with a prolonged drought currently affecting our water supply. How about Katrina's recent assault on New Orleans? And the list goes on. More wildfires out West, strong blizzards in the Midwest. Besides the science community, the insurance industry has also taken notice of the looming threat.
As these devastating natural events have been damaging and outright destroying residential real estate, in their wake insurance claims filed by affected homeowners have been hitting new highs. The first reaction from the insurance side to that has been to hike the premiums they charge customers, an entirely anticipated move. Especially Florida and the Gulf states, the more vulnerable regions, have seen steep rate increases, but they are also going up all along the eastern seaboard, and elsewhere.
As things seem to be getting worse, some insurance firms have stopped writing policies altogether and pulled out, claiming that natural disasters have about doubled over the last five years and the culprit is clearly global warming. The level of risk has reached a point where they can't operate any more.
So, to fill the void, states are forced to step in and provide insurance coverage. It's debatable if you want to go that route. What it means is that the homeowner is paying out taxes with one hand and receiving insurance claim payments from the state with the other. At least Florida, Texas, Louisiana and Massachusetts are doing that now.
What can all this lead to? Living in certain high-risk regions becomes too expensive because the hazard insurance is too high? The coverage will always be available by some entity, but at what cost does it go beyond what people are willing to pay. That'll make you think. Banks won't lend mortgage money unless the property is covered by an insurance, so that'll complicate the issue. If homeowners aren't able to sell and buyers aren't able to insure and buy, how is that going to shape a particular real estate market vulnerable to natural upheavals?
Photo by greenmannowar.
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Provided by:
Esko Kiuru
Mortgage, real estate and apartment industry analyst
www.BluefoxToday.com - syndicated mortgage, housing and property management blog
eskokiuru@gmail.com
My cell: 702-499-1006
Esku:
Seems like the consumer is again caught in he middle. I am of a mindset that questions global warming. This earth has had cycles before of rains and storms and droughts. And I wonder that man has given himself so much power that we actually think we are capable of destroying he earth?
Vanessa,
The goal is to make everyone aware of what is likely to happen.
Esko~
THANKS for sharing this post. The time and energy and thought yo put into it is much appreciated. As I read the BLOGS here and outside of Active Rain, I feel happy to know that you are opening a conversation that is so important for real estate professionals and their clients to consider.
janeAnne,
This insurance issue is going to have a larger impact on real estate in the coming years.
Terry,
Thanks for the inside information on Florida on this insurance issue.
ESKO - Timely post - good points you make. We pay a dear price for "insurance." I am very intriged by the amish who obtain loans but don't have to pay insurance because they don't believe in it and if their barn burns down their community helps them rebuild it.
Wasn't that the original purpose of insurance? Nowadays they sponsor many NASCAR races, have big beautiful buildings and many, many expensive billboard and advertising on tv, newspapers and magazines. It really ticks me off to see my premiums going there. Then they say "Oops! over budget! Raise premiums! Low credit score? = RISK! = upcharge! Hit the pockets of those that can least afford it. Durn their statistics...as Rosan RosannaDanna said....It just ain't right.
It's an injustice and insurance reform is definetly needed!
Mary,
The problem is affecting large sections of the country already and is slowly spreading.
Mary, I am with you. Insurance companies take your money in a heartbeat, and then do what ever they can to weasel out of the claim when it happens. It doesn't matter if it is health insurance, homeowners or any other type. They are in business to make as much money as they can, and that is what they do. Perhaps the insurance industry needs to be run by a non-profit!
It is going to have a large impact on home affordability.
Joanne - Interesting concept and I found this link to NonProfit Health Care. I am not against profit and the insurance companies need to keep their portfolios strong to be able to pay claims. What I have an issue with is what you said - they make it so difficult to get paid on a claim and charge excessive premiums.
The waste also bothers me - I get irritated when I receive a 10 page glossy magazine from my health insurance company. I have a good idea of what that costs to produce and mail. I take a quick glance at it and throw it in the trash. I also see several billboards in the area for hospital. I know these billboards cost $3 - 5000/month. Why does a hospital need to advertise on a billboard? If I'm sick it's pretty likely I'm going to use the hospital my doctor works with anyway. This type of wastefullness irritates me, especially when they deny a claim that would cost less than a one month billboard advertisement.
Mary and Joanne,
Hazard insurance is becoming a more complex issue because destructive natural disasters are becoming more frequent. As I pointed out in the post, more of the insurance burden will fall on the states, or even the federal government.
Bill,
Insurance regulations should be readjusted, no question.
Esko, I am not a believer in Global Warming, I am a believer that all things are cyclical. I have to laugh wheb they say we almost broke the record for the high temperature today which was broken in 1948 or some date way back in time.
I also hate insurance companies as they are milking the system just as the oil companies are too.
My 2 cents. LOL