As you may well have noticed, extreme weather events have become more common over the past few years. From heat waves to droughts, the climate is getting less predictable and far more dramatic. Although everyone is likely to feel the effects of extreme weather, some industries are more vulnerable to the impact of severe weather events than others, and none more so than the insurance industry.
Every time there’s a big storm, extensive flooding, or a serious hurricane, insurance companies have to pay out to any policyholders who have been affected. As a result, the weather is a real consideration for insurers everywhere. With severe events becoming more common, the impact of the weather forecast on our insurance premiums is only going to become more pronounced.
Insurers and extreme weather
According to recent research published in @ScienceDaily:
“Insurers assume the risk to property from extreme weather is static and base their premiums on historical data. However, as extreme weather events are increasing in severity, frequency, and unpredictability, insurers have not adjusted.”
This means that many insurers are unprepared for the potential impact of climate change and ever more extreme weather events.
How bad weather pushes up your premiums
If an insurer believes it’s unlikely they’ll have to pay out on a policy, the premiums for that policy will be fairly low. For example, products like life insurance and critical illness cover are fairly affordable for people who are young and fit as, on balance, insurers know it’s unlikely they’ll have to make a payment. However, as the likelihood of a payout increases, as a person with a life insurance policy ages or becomes ill, insurance premiums go up.
If insurers believe that flooding, hurricanes, hail storms, and other damaging events are likely to occur, premiums will begin to climb. As a result, both individuals and businesses will end up paying more for their home and car insurance policies. For homeowners and businesses that live in high risk areas, premiums are likely to rise even faster. This means that properties that are located in floodplains, next to rivers or close to the sea could soon be very expensive to insure.
How to reduce your insurance premiums
The best way to minimise your insurance premiums – while ensuring you still have the level of cover you need – is to speak to an expert advisor. They’ll be able to talk you through the different options available and make sure that you select the product that’s right for you.
To speak to an expert advisor, or to find out more about the insurance options available, explore our site, or get in touch with a member of our team.
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Written by: Editorial Team