Car insurance rates potentially being influenced by climate change impact.
Rising Car and Homeowners Insurance Rates in the US: A Climate Change Conundrum
Climate change is causing an alarming surge in car and homeowners insurance rates in the United States, according to a report released by the Insurance Fairness Project on July 30, 2022. The report, published with permission from Thomson Reuters Foundation, highlights the increasing frequency and severity of extreme weather events such as wildfires, hurricanes, hailstorms, and flooding as the primary drivers of these rising costs.
TJ Helmstetter, a spokesperson for the Insurance Fairness Project, stated that severe weather is hitting more and more often, causing widespread vehicle damage and accidents, leading to increased claims and risks for insurers. Matt Brannon, the author of the report, added that insurers are dealing with a lot of unusually expensive claims all at once, which presents a significant risk to them.
For car insurance, the national average premium is projected to rise by about 4% to $2,402 by the end of 2025. This follows a prior surge where premiums rose more than 40% between mid-2022 and mid-2024. If tariffs on foreign auto parts—which inflate repair costs—continue or worsen, this increase could escalate to 7% or more by the end of 2025. Geographic variation is significant, with areas heavily affected by climate-related disasters like California (wildfires) and Florida (hurricanes) seeing spiking insurance claims and correspondingly higher rate increases, sometimes up to 10% or more regionally.
The increase in homeowners insurance premiums is due to the impact of extreme weather events, made more frequent and intense by climate change. Since 2019, homeowners insurance premiums in the United States have increased by more than 40%. However, the report did not provide information about the projected increase in homeowners insurance rates by the end of 2025.
The overall insurance markets appear to have stabilised somewhat this year, but the trends of rising premiums due to extreme weather events and climate change are likely to continue beyond 2025 as extreme weather risks grow, putting upward pressure on premiums long-term.
Drivers can often mitigate some costs by maintaining safe driving habits and reviewing coverage options, but rising climate-related risks represent a fundamental upward trend in car insurance pricing in the US going forward. The Insurance Fairness Project warns that if no action is taken, the economic crisis caused by these events could rival the one in 2008.
Factors Affecting US Car Insurance Rates in 2025 and Beyond
| Factor | Impact on US Car Insurance Rates in 2025 and Beyond | |---------------------------------|-----------------------------------------------------------------------------| | Extreme weather events | More claims → higher premiums; 4%+ increase nationally in 2025 | | Tariffs on foreign auto parts | Increased repair costs → potential premium increase from 4% up to 7%+ | | Regional climate risk | High-risk states may see double-digit percentage increases (e.g., CA, FL) | | Longer-term climate trends | More frequent and intense disasters → sustained upward pressure on rates |
Sources: [1] Insurify [2] Insurance Fairness Project [3] Thomson Reuters Foundation [4] National Oceanic and Atmospheric Administration (NOAA) [5] Insurance Information Institute (III)
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