Anorak | Floods, hurricanes and the cost of home insurance

Floods, hurricanes and the cost of home insurance

by | 7th, November 2012

AFTER Hurricane Sandy we’ve had the usual claims that climate change is going to make life more expensive for us all. We also get the same thing being said here in the UK whenever there’s a flood. The idea being that as climate change makes floods and hurricanes and tempests and cyclones and disasters and Aiiiieee!we’reallgonnadie!  more likely then the expense of these things is going to continue to rise.

Rebuilding after them will become ever more expensive, house insurance, hurricane insurance, flood insurance, all will be come more expensive as a result of climate change. As all of those things have been getting more expensive in recent years and it’s all climate change’s fault.

The problem here isn’t that this couldn’t be true: it could be. It’s just that the evidence that’s used to support the thesis isn’t really all that strong. For there’s a confounding factor here as well.

Yes, most certainly, the various forms of insurance have been getting more expensive. Most especially in the last three or four years. But that, at least part of that, comes from the fact that interest rates have been so low. What most people don’t understand about insurance is that the companies themselves very rarely make money by providing insurance. They take in the premiums you and I pay, yup. They pay out on damages, yup, pay the staff that organise all of this, run the offices and so on: and usually to often make a loss doing so. The profit comes from having all those premiums for the time between collecting them

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Posted: 7th, November 2012 | In: Money Comment | Follow the Comments on our RSS feed: RSS 2.0 | TrackBack | Permalink