Just like health insurance companies at the end of 2024, property insurers may be getting a lot of unwanted attention in the aftermath of the California wildfires.
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When Brian Thompson, the CEO of UnitedHealthcare, was gunned down last month and many Americans either celebrated alleged shooter Luigi Mangione or voiced their anger over the company’s business practices, the health insurance industry found itself in an unwelcome spotlight.
Depending on what happens in the aftermath of the devastating wildfires that are causing billions of dollars in damage in California, it may be the turn of home insurers.
And, once again, Americans could end up realizing that these companies are not now — and have not been for a couple of generations at least — their friends. They are businesses hoping to maximize their profits at the expense of their customers. That’s the bottom line… and the bottom line for them is good.
That is in part because the industry, perhaps more than any other in the US, is very much aware of the current and future impact of climate change.
After all, when you are in the business of assessing risk, you can’t afford to disregard the biggest problem out there.
Therefore, while Republicans and their voters are still denying that climate change is a reality, the balance sheets of insurance companies have been telling a different story for years. They say that the US is hit with an increasing number of more severe natural disasters because the planet is warming and weather patterns are changing.
And, because insurers are in the business of making money, they have been hiking prices and trying to get out of high-risk markets altogether.
Back in 2023, WhoWhatWhy reported on the increasing difficulties that homeowners face in obtaining insurance in states often hit by natural disasters. These include California and Florida, which means that the more than 60 million Americans in those two states will either not be able to get home insurance there or that this insurance will cost much more.
They are not alone.
As we noted last week, nature is on the march to teach humanity a lesson that will be both painful and expensive. And it won’t matter how people vote or whether they believe climate change is real.
Wildfires, hurricanes, and floods are not only becoming more deadly, they are also getting more destructive and, therefore, their price tag keeps going up.
Somebody ends up having to foot that bill.
In the case of private residences or cars, that’s either the home/vehicle owners themselves, insurance companies, or taxpayers.
The insurance companies would prefer if it were not them, and that they could keep making tidy profits.
As the health insurance industry can surely confirm, that works great when nobody is watching. However, when a spotlight is shone on business practices that are perceived to be ruthless or unethical, then Americans start paying attention.
And that is what could happen in the aftermath of the California wildfires. For example, property insurers could reject claims or try to nickel-and-dime their policyholders.
That’s the kind of thing you can get away with in individual cases when there is no scrutiny. And it’s also a lot easier when the claimants lack the resources to pursue appeals, legal action, and PR campaigns. However, that is not the case here.
Of course, another option would be to just bite the bullet, pay the claims, write off the losses, and eventually pass them on to other customers.
Neither is likely appealing to the CEOs of these companies.
In the past, our money would have been on them choosing the former. However, at a time when Americans seem to be fed up with profiteering and extreme capitalism, insurers may just play nice and pay up.
After all, they are in the business of evaluating potential dangers… including to themselves.
In his Navigating the Insanity columns, Klaus Marre provides the kind of hard-hitting, thought-provoking, and often humorous analysis you won’t find anywhere else.
