It’s (Hopefully) the Economy, Stupid

Why home insurance may be the unlock we need

It seems like we’re in for real sticker shock everywhere we look these days. In our last issue, we wrote about electric vehicles and how public policy in the US is making them more expensive.

Today, let’s consider another looming and even more unsettling affordability challenge on the horizon: home insurance.

The cost of insuring a home has soared due to recent waves of extreme weather. On average, Americans have seen their premiums rise by about 24% over the past few years—and much more than that in weather-stressed regions. Even more problematic, coverage is simply no longer available in certain areas as insurers pull back, forcing home owners into state-run programs or leaving them exposed altogether.

Here’s a fun quiz.

Q: Which states with the fastest-rising home insurance rates have political leaders who publicly downplay climate change?

A: Most of them.

The disconnect is stark, and one can’t help but wonder how long it can continue. The science here is unambiguous and robust: climate change intensifies storms, wildfires, floods, and other disasters, all of which translate directly into higher insurance claims (not to mention more devastating outcomes like the loss of life, destruction of property, and more). Escalating losses force insurers to raise prices or restrict availability in order to remain solvent.

And, of course, there is every reason to anticipate that extreme weather will only keep getting worse.

But maybe there is a small silver lining here. As famed political strategist James Carville argued back in the 90s, affordability is voters’ primary concern and shapes election outcomes. And in this case, it might just prompt a reckoning among voters that climate is one more issue with real-world consequences that cannot be demagogued away. I’m betting that voters will figure this out.

If you’ve been reading this newsletter over the past five years, you already know what we think voters should do. Pay close attention to what is happening. Push your elected leaders to address challenges in ways that make sense, and/or elect people who will do so.

Affordability challenges—insurance, energy, food, housing, you name it—are always symptoms of deeper issues. You can’t fix prices without addressing root causes: fundamental economic forces like supply and demand, public policy (tariffs, for example), and—crucially—environmental realities like climate change. Addressing these difficult challenges requires both thoughtful science (and fact-following leadership), and carefully developed policy solutions.

If you want home insurance to be both affordable and available, start by electing leaders who recognize the climate crisis and are willing to take the difficult but necessary steps to address it.

The affordability crisis is real, but it can be addressed—just not by soundbite. If more voters shift their focus beyond short-term politics to tackle the fundamentals, we can start getting on with the important work ahead. Let’s be instigators for that change.

Onward,