Research

How weather impacted insurance in 2021: And what we predict for 2022

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$145 billion. That’s how much damage weather-related disasters caused in 2021, according to the National Oceanic and Atmospheric Administration. In a single year, there were 20 separate billion-dollar weather and climate change disasters including unprecedented winter storms, wildfires, tornadoes and hurricanes. 

But who is exactly picking up the costs for weather-related events? The direct losses and repairs are picked up by a number of public and private sources including the government (Federal Emergency Management Agency, Small Business Administration, U.S. Department of Housing and Urban Development), nonprofit organizations and private insurance companies. So to sum up, whether through taxes or your insurance premiums, you’re the one paying. 

Without further ado, let’s look at some of the ways weather impacted insurance in 2021 and what we may expect in 2022.

Hurricanes batter the Gulf Coast

The 2021 Atlantic hurricane season was the third-most active on record and produced 21 named storms. The most destructive storm to make landfall in the United States was Hurricane Ida, which struck Louisiana as a Category 4 storm in late August. 

The aftermath and cleanup from the storm were expensive. Louisiana was badly hit, but there were also significant losses in Alabama and Mississippi. The storm temporarily shut down nearly all Gulf Coast oil production. Ultimately, Ida is currently listed as the fourth costliest hurricane in the United States with damages of around $75 billion. Hurricane Ida contributed to the failure of two separate insurance companies in Louisiana due to the sheer amount of claims for property damage in the aftermath of the storm. 

By studying insurance rates in a larger contest, we can start to see how particularly catastrophic weather events may be influencing premiums. The Zebra’s State of Insurance Report studied more than 83 million insurance rates from around the country to look for trends. Here’s what we learned are the states where auto insurance rates increased the most between 2020 and 2021. (Note: this only takes into account auto rates, not home rates which were likely also affected.)

State

2020

2021

% Dif

Louisiana

$2,304.49

$3,265.21

41.70%

Rhode Island

$1,873.05

$2,105.50

12.40%

Wisconsin

$1,079.82

$1,202.19

11.30%

Ohio

$925.65

$1,028.49

11.10%

Vermont

$1,056.44

$1,158.25

9.60%

The biggest increase by a long shot was in Louisiana, where rates increased by 41% on average. The most expensive city for car insurance in the state? New Orleans. This is in spite of legislation that went into effect at the beginning of 2021 designed to curb rising insurance premiums in the states. While Louisiana has a number of factors that lead to increased premiums, the flooding and damage caused by hurricanes is a definite contributor. 

 

Wildfires tore through the West

 wildfire fullsize

Wildfires are often caused by weather patterns including low rainfall, reduced snowpack, drought and extreme heat. In California the 2021 wildfire season started early in January and continued into the summer. In July of 2021, more than three times as many acres had burned compared to the previous year. The Dixie Fire, McFarland Fire and Caldor fire created a crisis in the state destroying hundreds of thousands of acres and thousands of homes and structures. Oregon and Washington experienced increased fire activity as well due to similar heat and drought conditions.

As the number and severity of wildfires continues to increase, insurers are reluctant to renew policies in affected areas. Many also find that their premiums skyrocket as insurance companies struggle to pay immense property loss claims.

Winter storms in the South

winter_roads

Much of the South lacks the infrastructure to deal with serious winter weather because…well, it isn’t often called for. However, 2021 saw an intense winter storm that affected much of the Southwest. This storm in February led to financial losses calculated to be between $80 and $130 billion

Insurance analysts predicted that this winter storm (dubbed Uri) would lead to the largest number of insurance claims in the state, topping Hurricane Harvey as the most devastating natural disaster in Texas.

 

Predictions for 2022

All in all, 2021 was one of our warmest years since records started being kept. And the World Meteorological Organization predicts that 2022 will continue that trend and be overall warm, with the potential for more extreme heat events. This warming will likely lead to more above average fire and hurricane seasons. 

Continued warming events are likely to continue as a result of global climate change, and the rapidly changing climate can paradoxically lead to extreme cold events, like winter storms in places they aren’t usually seen.

What can you do to prepare?

Obviously, what you do to prepare for extreme weather will depend on where you live. If you’re in an area prone to fires, you will want to prepare by using ember-resistant building materials when building or making updates to your home. You may also want to update your air filters to prepare for when air quality deteriorates due to smoke from fires nearby. 

If you’re in an area that is more likely to experience flooding or hurricanes, you may want to invest in infrastructure like storm shutters, impact resistant doors and windows and resilient construction materials. 

Regardless of what type of emergency you’re preparing for, here are some key things you will want to have:

  1. A plan: This includes a likely evacuation route, a meet-up spot if family members are separated and a likely place of refuge. All family members should know the plan.
  2. An emergency supply kit. This should include non-perishable food, bottled water, first aid, etc.
  3. An insurance policy that protects your home, car and personal property from the necessary type of disaster in question. Review your policy carefully to make sure it covers perils you may experience in your area. 

Don’t forget to compare insurance prices to make sure you’re not only getting the specific coverage you need to prepare for weather-related events, but also getting the best rates.

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Susan MeyerSenior Editorial Manager

Susan is a licensed insurance agent and has worked as a writer and editor for over 10 years across a number of industries. She has worked at The Zebra a year. She currently specializes in producing research-focused content for The Zebra's Resource Center on topics related to auto and home insurance, personal finance and smarter living in the 21st century.

Susan's work has been cited by the Insurance Information Institute, State Farm, BuzzfeedCBS, Yahoo, Entrepreneur and Business Insider.