Insurance providers lead climate change's 'managed retreat'

By Mark Gongloff / Bloomberg Opinion

After decades of packing into areas that are increasingly disaster-prone as the planet heats up, Americans will sooner or later be forced to retreat. Insurance companies are already leading the way. We should heed the message they’re sending, that insuring and inhabiting vulnerable parts of the country will just keep getting more expensive.

Allstate last week told the San Francisco Chronicle it had stopped writing new home policies in California after years of taking wildfire losses, citing an inability to raise premiums enough to cover costs. The news came just days after State Farm, California’s largest insurer, announced a similar decision. Though there are still many insurers working in California, Allstate and State Farm lead a growing list of big competitors heading for the exits.

The advocacy group Consumer Watchdog demanded that state Insurance Commissioner Ricardo Lara drag State Farm back into the market, claiming he has the authority under California’s Proposition 103, a 1988 measure that forces companies to get state approval for rate increases. The consumer group’s founder also happens to be the author of the proposition, which was designed to keep rates low.

But strong-arming insurers to resume writing homeowners policies won’t address the core problems of climate risk and artificially depressed insurance rates. Despite the constant menace of earthquakes and the high and growing threat of wildfires and floods, California has one of the lowest home-insurance rates in the country, as a percentage of median household income; less than Georgia and West Virginia, according to Bankrate data.

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