WASHINGTON — The U.S. Senate Budget Committee convened on Wednesday to tackle the escalating homeowners insurance crisis, with Democrats attributing soaring premiums to climate change and Republicans blaming high government spending and inflation.
Homeowners insurance premiums have surged in recent years, driven by billions in damage claims and resulting in numerous insurers withdrawing coverage. An increase in extreme weather events has been a significant factor in the rising costs.
Budget Committee Chair Sheldon Whitehouse highlighted Florida’s state-backed insurer Citizens as a critical example in his opening remarks.
As Florida confronts a growing threat from hurricanes, heat waves, and flooding, national insurers have either exited or increased prices in high-risk areas. This leaves many residents uninsured or facing prohibitive costs, forcing them to turn to Citizens, a state-backed insurer of last resort. Louisiana and California are experiencing similar issues.
Average homeowners insurance premiums in Florida exceed $4,000 annually, far surpassing the national average of approximately $2,700.
With a substantial number of residents relying on Citizens, the insurer’s payout liabilities could outstrip its reserves, leading to even higher premiums for policyholders, Whitehouse warned.
“Good luck with that,” said Whitehouse, a Democrat from Rhode Island. “Especially if surcharges reach hundreds or even thousands of dollars.”
Climate Change as a Culprit
Whitehouse emphasized that the crisis extends beyond Florida. He referenced a New York Times investigation showing that, in 2023, insurers lost money on homeowners policies in 18 states.
“The states may surprise you,” Whitehouse noted, underscoring the widespread nature of the problem. “The list includes Illinois, Michigan, Utah, Washington, and Iowa.”
Democratic senators and their witnesses at the hearing identified climate change as a primary factor behind high-damage claims and rising premiums. They cautioned that the crisis will worsen with increasing extreme weather.
Rade Musulin, an actuary with Finity Consulting testifying for the Democrats, warned that Florida’s situation might soon be mirrored nationwide.
“In the coming decades, we must prepare for the possibility of more extensive or more extreme hurricanes, and coastal flooding from Texas to New England,” Musulin said. “Florida’s experience is a warning of what may lie ahead for other states.”
Government and nonprofit sources, including the Intergovernmental Panel on Climate Change’s 2021 report, predict more frequent major hurricanes, swelling floods, and more easily ignitable wildfires as the planet warms.
Sen. Jeff Merkley, an Oregon Democrat, stressed the importance of addressing climate resilience to mitigate the insurance crisis.
“It’s hugely irresponsible for us to claim we can fix the insurance market without tackling the underlying causes that will worsen with each succeeding decade,” Merkley asserted.
Republicans Cite Spending, Inflation
Conversely, committee Republicans cited rising government spending and inflation as the principal drivers of higher insurance costs.
“The majority hopes we stop discussing our unchecked deficit spending that has fueled inflation, hammering hardworking Americans and contributing to rising insurance costs,” said Chuck Grassley, an Iowa Republican and the ranking GOP member on the panel.
Grassley also pointed to the increased costs of labor and materials for home repairs, along with more people moving to disaster-prone areas, as factors in the high insurance premiums.
Sen. Ron Johnson, a Republican from Wisconsin, criticized the hearing’s premise and questioned Republican witness EJ Antoni, a research fellow at the Heritage Foundation, on the impact of inflation and regulatory costs on insurance hikes.
“If you consider government actions, including failure to address criminal activity, inflation, and regulatory costs, they account for approximately 90% of the increase in insurance premiums over recent years,” Antoni claimed, without elaborating on his calculations.
Sen. Mitt Romney of Utah diverged from his Republican colleagues, acknowledging climate change’s role in rising insurance prices. However, he argued that addressing the issue requires global, not just American, efforts.
“The idea that we can fix the climate and solve the insurance problem is unrealistic,” Romney stated. “We must recognize that climate change is a global issue, not just an American one.”
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