From Iowa's pioneering flood-monitoring network to North Carolina's comprehensive resilience blueprint, states are demonstrating what's possible when local leaders take ownership of their climate futures.
A recent analysis of the private market from Insurance for Good found that premium discounts for home hardening vary immensely, and often aren’t tied to the actual potential impact on losses.
The California FAIR plan is proposing a huge rate hike, alongside incentives to reduce wildfire risk. The success of the effort hinges on cultivating a robust, affordable industry around fire-resilient construction.
A recent analysis of the private market from Insurance for Good found that premium discounts for home hardening vary immensely, and often aren’t tied to the actual potential impact on losses.
Across the country, the geography of risk is redrawing itself. In 2022, California's escalating insurability crisis, driven by climate-fueled wildfires, prompted the state to mandate that carriers offer premium discounts for home hardening. The logic is simple: incentivize resilience, mitigate future damage. However, the regulation leaves the specific discount amounts to each carrier's discretion—and a recent analysis of the private market from Insurance for Good finds that those discounts vary immensely, and often aren’t tied to the actual potential impact on losses.
The study reveals a wildly inconsistent pricing landscape: A homeowner who installs a Class A roof or lives in a Firewise community may receive a premium reduction ranging from a fraction of a percent to over 40% of their wildfire-risk policy. According to Carolyn Kousky and Xuesong You of Insurance for Good, this inconsistency “suggests insurer confidence in the evidence base around the effectiveness of different measures may vary considerably.” In other words, prices aren’t consistently reflecting risk; these firms aren’t accurately measuring the loss-reduction value of home hardening efforts. This gap forces proactive homeowners to actively shop for insurers if they want to be sure their investments are properly valued.
At the same time, many major carriers have been pulling coverage from high-risk neighborhoods, pushing policyholders onto the California FAIR Plan, which recently proposed a 35.8% rate increase. The FAIR Plan currently offers up to 24.5% in home-hardening discounts—roughly ten points higher than the private-market average. Their discount structure could become a test case for whether stronger, simpler incentives can motivate widespread adoption of fire-safe construction.
The inconsistencies in support for home hardening are the growing pains of a market learning to price resilience in real time. Insurance for Good’s analysis suggests a few ways to stabilize the system. For one, they find that some insurers are willing to write more policies for homes in high-risk areas if they are certified to the IBHS’s Wildfire Prepared Home Plus standard. Third-party verification and science-backed building requirements could help insurers price risk accurately and return to markets they’ve abandoned.
The market remains messy, but it’s starting to reward resilience in practice. If reforms such as the Sustainable Insurance Strategy (which allows insurers to use wildfire catastrophe models and reinsurance costs in rate-setting) succeed in drawing more insurers back to the state, Insurance for Good suggests that market competition should iron out discount inconsistencies. The result would be a self-reinforcing cycle where safer homes earn lower premiums, ushering in broader coverage and setting resilience as the new standard.
Read the full Insurance for Good report here.
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158% more Americans are projected to face high flood risk by 2050, compared to a baseline period of 1980–2010. The New York metropolitan area and cities along the Mississippi River are projected to see especially heightened risk.
Source: LSEG Physical Risk Report.
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The Epicenter helps decision makers understand climate risks and discover viable resilience solutions. The Epicenter is an affiliated publication of The Resiliency Company, a 501(c)3 nonprofit dedicated to inspiring and empowering humanity to adapt to the accelerating challenges of the next 100+ years.
The California FAIR plan is proposing a huge rate hike, alongside incentives to reduce wildfire risk. The success of the effort hinges on cultivating a robust, affordable industry around fire-resilient construction.
An adaptation-minded property insurance system means safer, healthier, more resilient communities and economies that can both prepare for and recover from climate disasters in an affordable, sustainable, equitable way.
3% of U.S. GDP is spent every year on preparing for and repairing from disasters.
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