There’s no secret that Texas has a housing affordability crisis. Too few houses built after the pandemic, high land costs and mortgage rates and burgeoning population are among key factors.
Less evident is the increasing difficulty of homeowners to obtain affordable insurance. And that’s the reason for Texas policymakers to think proactively about the repercussions of extreme weather and outdated building and land-use policies on affordability and insurability.
Insurance is all about anticipating risks, and Texas’ staggering population growth and weather patterns have added new levels of risk. Decades ago, hail would land in an empty field. Now hail will hit a $500,000 house and $45,000 car, and an insurer will have financial exposure.
This year, Texas encountered 16 weather or climate disaster events with losses of more than $1 billion, the highest yearly count since 1980. As a result, Texas Department of Insurance statistics show that homeowner premiums rose 10.8% in 2022, the highest percentage increase since 12.9% in 2012
To reduce their financial exposure this year, some carriers no longer accept new homeowners insurance business in North Texas, are choosing not to renew existing policies or are linking homeowners insurance with bundled auto policies, according to a recent Dallas Morning News story. Other companies are increasing deductibles or changing coverage terms, potentially leaving unsuspecting homeowners on the wrong side of a claim.
Even with increased weather risks in the hurricane-prone Texas Gulf and other weather risks elsewhere in the state, Texas is a better risk market than California and Florida, where insurers are bailing out. Still, Texas ranks eighth in the U.S. for overall climate vulnerability, according to Environmental Defense Fund and Texas A&M University research. And that’s during this year when hurricanes didn’t queue up on the Texas Coast as they often do.
This should be a wake-up call that more frequent severe weather patterns are in the state’s future and could make some regions uninsurable or prohibitively expensive. Unfortunately, Texas’ disaster planning focuses on preparedness and recovery when it also needs to develop comprehensive plans to adjust building and land-use practices to offset the economic impact of bad weather on homeowners and insurers.
Texas policymakers would be well-served to encourage greater public-private sector collaboration to make homes more resilient to climate and weather patterns, and improve drainage systems and other infrastructure to mitigate flooding and other insurance risks. The one thing that they should not do is to cap prices or otherwise subsidize risks, which would artificially understate actual insurance risks and possibly ignite an insolvency crisis in the event of a major catastrophe.
We can’t change the weather, but we can do more to mitigate its impact on our lives.
The Dallas Morning News
