Photo courtesy of Wikimedia Commons.
By Catelyn Fitzgerald ’23
Environmental Editor
The increased flooding caused by climate change creates a hidden financial risk for homeowners that the insurance industry is failing to address. A recent study from the First Street Foundation, a non-profit organization dedicated to quantifying flood risk in the U.S., found the current flood risk to homes to be vastly underestimated by insurance companies. The study identified almost 4.3 million homes with a substantial flood risk, and found if all of these homes were properly insured against this risk through the National Flood Insurance Program, insurance premiums would need to multiply almost five-fold.
Flood risk data on the individual property level had not been collected before the study. Now, homeowners can use the Flood Factor tool created by the FSF to estimate the specific risk to their home. This can be a useful tool for homeowners, as many homes at risk of financial loss due to flooding do not fall in any designated Special Flood Hazard Areas, which are high-risk areas where homes are required to be insured.
Increased flooding is linked to climate change in multiple ways.
First, climate change causes the atmosphere to warm. In the U.S., atmospheric temperatures have increased an average of 1.8 degrees Fahrenheit since 1901. A hotter atmosphere can hold larger quantities of water then released during precipitation events. Climate change also causes an increase in rain temperature, leading to flooding in mountainous areas when warm precipitation causes large amounts of snow to melt faster and earlier in the year than usual.
In addition to increasing the quantity of precipitation and the speed of snow melt, climate change also increases the frequency of severe storms. Rising sea levels and ocean temperatures create intense hurricanes capable of causing more damage, especially in coastal areas.
Underinsurance for climate-related risks is common across the industry.
When insurance companies use past data to calculate risk and set premiums, they fail to take into account the future increase in risk due to climate change. This gap between projection and reality goes far beyond home insurance, as climate change also poses an increasing threat to other insured goods such as crops, vehicles and human health.
Even when insurance rates are reassessed to account for climate change, the more pervasive issue of environmental accountability remains unsolved.
Another option would be corporations and governments taking more responsibility to protect homes and their inhabitants from floods, through both prevention and adaptation efforts, so individual homeowners do not have to pay the price for the actions of larger institutions.
The restoration of wetlands can also help mitigate flood damage. Wetlands have impressive water retention ability, allowing them to absorb large amounts of floodwater and then slowly release it over time, protecting nearby homes from a sudden rush of water. Coastal wetlands can play a particularly important role in protecting communities from increased flooding as the sea level rises.
As the financial consequences of climate change for homeowners emerge, new risk models need to be used to properly protect homes from flood damage. As adjustments are made to new levels of disaster, larger questions of who should pay the price of climate change must be answered to create just solutions to the crisis.