CLIMATE CHALLENGESClimate-Fueled Extreme Weather Is Hiking Up Car Insurance Rates
As climate change accelerates, hurricanes, wildfires and hail storms pound the U.S. with growing vigor—and the insurance market is struggling to foot the bill of the damages they leave behind for customers. Home insurers have raised premiums after extreme weather events. Now car insurers in the U.S. are doing the same thing.
As climate change accelerates, hurricanes, wildfires and hail storms pound the U.S. with growing vigor—and the insurance market is struggling to foot the bill of the damages they leave behind for customers.
In 2023 alone, extreme weather cost the U.S. more than $92 billion. And it’s not just home insurance providers that are hiking rates.
Now, car insurance quotes are reflecting trends seen across the home insurance market as climate change becomes an increasingly prevalent — and costly — factor.
This could spell trouble for car owners, experts say. Vehicles are a key means of escape during a climate-driven disaster, but they can also fall victim to floods and fires just as homes do.
Primary and Secondary Perils
When Hurricane Helene whipped through the southern U.S. in early October, cars floated down streets like boats as flood waters submerged entire neighborhoods. Other vehicles were pulverized by felled trees or flying debris.
Most car insurance plans cover flooding and these external damages to help people recoup some of their losses. The Palm Beach Post reports that since Hurricanes Helene and Milton, Floridians have filed more than 90,000 auto insurance claims.
The bad news is that increasing hurricane intensity is pushing insurance companies to raise rates to account for future payouts. And it’s not just megastorms that have the auto insurance market on edge, according to Andrew Hoffman, a professor of sustainable enterprise at the University of Michigan.
“We can talk about the big storms like Helene and Milton, but it’s actually the secondary perils that are causing more payouts. And that’s heavy rain storms [and] flash flooding that comes with that,” Hoffman told me. Other such perils can include hailstorms, droughts, and wildfires — all fueled by climate change.
“It’s actually secondary perils that are really having a dominant influence on driving up insurance costs,” he added.
An August report found that the average U.S. auto insurance policy could spike by 22 percent by the end of this year. That’s due to a number of factors, including inflation, extreme weather, and more cases of severe accidents or dangerous driving. The report finds that rates in California, Missouri, and Minnesota could go up by as much as 50 percent, and that “damage from severe storms and wildfires contributes to rising rates in the states.”
