The Link Between Climate Change and Property Insurance

Feb 16, 2023 | Insurance, Property Damage

For decades, Texas has been at the top of a list that no state wants to be on: the most tornadoes in the country. The number of dangerous tornadoes in Texas has increased significantly since 2012. During 2019, one of the worst years on record, one hundred eighty-four tornadoes caused over $2 billion in property damage.

The uptick in storms and storm-related damage has some direct effects on property insurance rates. Not all of these effects are legal. More on that below.

Insurance company lobbyists are very influential. Therefore, lawmakers often pass laws that allow insurance companies to raise rates or deny claims almost at random. The Houston first-party insurance lawyers at Williams Hart & Boundas, on the other hand, advocate for consumers, in the courthouse and in the statehouse. We build strong judicial claims which ensure that insurance companies follow the rules. We advocate for consumers who faithfully pay premiums and expect their insurance companies to be there when they need them.

Higher Premiums

Property insurance is more expensive in Texas, where the weather is unpredictable, than in Arizona, where the weather is more stable. Insurance companies have a right to charge more money in Texas than they do in Arizona. Their risk is higher, and they need more money to deal with claims.

However, the right to raise rates is not unlimited. Despite the efforts of insurance lobbyists, Texas still has very strong bad faith insurance laws. These laws prohibit rate increases in some situations, such as:

  • Insufficient Data: Climate change is real. The number of tornadoes in Texas is a good example. We mentioned the awful year in 2019. In the two surrounding years, 2018 and 2020, tornado-related property losses were under $17 million. So, if your insurance company tries to raise your rates, it must do better than “climate change.”
  • Unstated Reasons: Insurance companies cannot raise rates without explaining the basis to consumers and complying with certain other legal requirements. However, the company usually doesn’t have to explain the reasons upfront. You may have to do a little digging to determine why your premiums will increase. Our Houston first-party insurance lawyers are good partners in these situations. Chances are, there are other policyholders who are in the same boat, which means we’re already on the case.
  • Uneven Increases: ZIP code boundaries are the industry standard for geographic-related increases or decreases. Neighborhood boundaries are usually illegal. Additionally, the process must be even. If ZIP code 12345 experienced more tornadoes and rates go up, rates in 67890 must go down, if that ZIP code had a quiet year.

Incidentally, property insurance always covers the full insured value of the property. Insurance companies cannot use property depreciation or anything else as an excuse to reduce payments. If your property insurance rates suddenly spike, you typically have a right to seek insurance from another source. Just watch out for some of the red flags that are discussed below.

Shady Practices

Liability insurance is one of the most under-regulated industries in Texas. As a result, many companies take shortcuts that hurt consumers. These shortcuts are even more common as climate change-related losses escalate and companies try to stay competitive in a very competitive market.

Underfunded Companies

Large, nationwide insurance companies should have the funds to pay out their customers. They just aren’t usually willing to pay claims. Smaller insurance companies may struggle after a major weather event to pay out all of their customers. Typically, these companies rely mostly on consumer premiums for their capital and have few investors. When a big storm hits, like a hurricane that affects an entire city, the company might not have enough money to pay all of their claims. Before you sign on the dotted line with a new insurance company, research its capital strength.

Understaffed Companies

Insurance companies increase revenue not only by raising premiums, but also by cutting expenses. As competition mounts, insurance companies have laid off about 6 percent of their adjusters in recent years. During much of the year, when the weather is relatively stable, this staff cut is not a significant factor. Things are different in the wake of a storm.

Sometimes, overworked claims adjusters get overwhelmed, and they take investigative shortcuts. Other times, insurance companies quickly try to quickly hire inexperienced adjusters after a storm. Either way, consumers usually end up paying the price.

Fraudulent Practices

Consumer insurance fraud gets a lot of attention in the media but company insurance fraud usually goes under the radar. Some companies pressure adjusters to subtly alter their reports or outright lie about the facts of the case. Other companies encourage accountants to underestimate losses.

Such practices clearly constitute bad faith. If a first-party insurance lawyer discovers such conduct during an investigation of the claim, treble damages are usually available in court.

If you need help recovering a fair payout from your insurance company after filing a claim, Williams Hart & Boundas is here for you. For a free consultation with an experienced first-party insurance lawyer in Houston, contact Williams Hart & Boundas LLP. We routinely handle these matters throughout Texas.

Disclaimer: This material is provided for informational purposes only. The provision of this material does not create an attorney-client relationship between the firm and the reader and does not constitute legal advice. Legal advice must be tailored to the specific circumstances of each case, and the contents of this newsletter are not a substitute for legal counsel. Do not take action in reliance on the contents of this material without seeking the advice of counsel.

The information contained in this blog may or may not reflect the most current legal developments. Accordingly, information in this blog is not promised or guaranteed to be correct or complete, and should not be relied upon as such. Readers should conduct their own appropriate legal research.


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