Unexplainable
Is insurance doomed?
Oct 9, 2024
Umair Irfan, a Vox correspondent, joins Joe Scuba, an insurance executive from New Orleans, and Carolyn Kuski from the Environmental Defense Fund, to explore the crisis in the insurance industry amid climate change. They discuss soaring premiums and the emotional toll on homeowners as properties become uninsurable. The conversation highlights the outdated risk models used by insurers, the dire need for policy reforms, and the potential for the insurance sector to invest in sustainable practices, offering a glimmer of hope amid the storm.
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Quick takeaways
- The insurance industry is facing a crisis of insurability due to rising premiums and reduced coverage options driven by climate change.
- Innovative practices and collaborative risk management involving homeowners and local governments are crucial for creating resilient insurance models in a changing climate.
Deep dives
The Impact of Hurricane Andrew on Insurance Models
Hurricane Andrew in 1992 served as a pivotal moment for the insurance industry, challenging existing risk assessment models. Karen Clark developed catastrophe models predicting that a strong hurricane could lead to $60 billion in losses, significantly higher than industry expectations. As Andrew tore through Florida, the actual losses exceeded $15 billion, highlighting the inadequacy of prior loss estimates. This event forced insurers to rethink their approaches to risk, especially regarding climate events, marking the beginning of a newfound respect for climate-related catastrophes.
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