Insurance companies are hiking costs, dropping N.J. homeowners more often due to climate risks
By Steven Rodas | NJ Advance Media for NJ.com
You can look to the rising seas, raging wildfires and the lack of snow.
A harbinger for the changing climate has also arrived for New Jerseyans in the form of something more innocuous but by no means less glaring: home insurance policies.
Or, rather, the lack of them in some cases.
Non-renewals, according to a new report on the largest insurance companies in the country, are happening more in New Jersey and elsewhere across the United States as climate risks are making homes less attractive for insurers to want to cover.
Nearly 2 million home insurance contracts across the nation have not renewed since 2018, in other words customers were dropped, according to a first-of-its-kind report released by the U.S. Senate Budget Committee. The feds tied those non-renewals to the climate crisis, stating their analysis of where trends were pointing was “unequivocal.”
New Jersey ranked 8th by non-renewal rate percent change from 2018 to 2023, representing a notable increase, according to the December report, “Next to Fall: The Climate-Driven Insurance Crisis is Here — And Getting Worse.”
More than 200 U.S. counties saw rates for coverage triple or more, the report showed. Three New Jersey counties were among the Top 100 with the highest non-renewal rate changes from 2018 to 2023: Cape May, Hudson and Atlantic. That list only included counties with more than 10,000 policies.
“There is a message that comes through, which is that insurers are leaving a lot of the riskier markets because they perceive it to be risky. There’s also a sort of a standard pattern of first they raise premiums and then eventually they exit that market,” Clinton Andrews, a Rutgers University professor who focuses on urban planning, told NJ Advance Media on Tuesday.
Overall, New Jersey’s non-renewal percentage was 0.8%, compared to just shy of 3% in Florida, the report indicated.
A stark jump, Hudson County’s premiums went up $1,249 from 2018 to 2023. And, the Senate committee highlighted, higher non-renewal rates were also correlated with higher premiums.
Some, like the American Property Casualty Insurance Association, have criticized the wider non-renewal concerns saying available data has not properly been linked to the climate crisis and any kind of broader attempts to gather said data may adversely impact the very insurance market.
Andrews, the associate dean for research at Rutgers’ Edward J. Bloustein School of Planning and Public Policy, said he recently experienced firsthand being dropped by an insurance company.
Last summer, Andrews’ insurer did not renew his Jersey Shore home despite not being located in a flood plain.
Although he was able to find another option, the professor’s takeaway: the company wanted to get out of the coastal market and living so close to the shore meant threats from high winds and harsher weather that were worrisome enough.
“The three counties that are driving the New Jersey story … all suffered significant damage during Hurricane Sandy and so there might be cause and effect there,” Andrews said. “We have direct fairly recent experience, you know within the last dozen years, of billion dollar damages.”
Andrews said he was puzzled that other Jersey counties, namely Ocean and Monmouth, did not appear on the federal report but that may speak to other factors like the comprehension of the data or the number of homeowners who did not seek mortgages to purchase homes.
The analysis accounted for about 65% of the homeowners’ insurance market nationwide and the Senate Budget Committee gathered data from 23 of the 41 companies it requested information from.
Further study may reveal more counties and cities where insurance policies are not being renewed due to climate risks, the Rutgers expert said.
But the snapshot is salient.
Besides rising sea levels meaning more stretches of New Jersey are prone to flooding, the state also faces climate risks by simply being among the 30 coastal states and anticipating more intense hurricanes fueled by global warming in the future. The Garden State, recently coming off a particularly dry period, is also no stranger to blazes engulfing swaths of our forests near homes in the Pinelands and elsewhere. In 2024, New Jersey experienced more than 1,400 wildfires burning over 11,000 acres.
Additionally, developers have not strayed from building on the Jersey Shore. An NJ Advance Media analysis of construction and tax records from 2012 to 2022, showed rebuilding and new structures in the places hardest hit by Sandy including Beach Haven, Mantoloking, Little Egg Harbor and Point Pleasant.
“We have a lot of people living on barrier islands … that’s what Superstorm Sandy showed us, that barrier islands are particularly vulnerable,” Tim Evans, director of research for non-profit New Jersey Future, a group that promotes smart land use and growth policies, said on the phone.
The Jersey Shore is also “a big draw for the state’s economy,” Evans added.
He posted the question: How do we ensure people can enjoy the shore in future years while not asking for another disaster by continuing to develop there without guardrails?
Evans said besides the climate issues New Jersey has long faced, such as inland and coastal flooding, the home insurance market could face dastardly consequences by not being prepared for an influx of people moving here from areas experiencing extreme weather conditions.
Sooner or later, he said Wednesday, public officials may need to step in to better position properties that home insurers find much too risky to cover.
That’s already happened in Florida.
There, what Andrews described as the “epicenter” of the non-renewal issue, the state had to step in with its own insurance fund because private insurers ultimately stopped taking the gamble.
“They’re doing it because they have no choice,” Andrews said of Florida. “New Jersey isn’t there yet, but it could go in that direction.”
The Senate committee, which focused its report on 2018 to 2023, said while some expected places like Florida, Louisiana, California and Texas are seeing higher premiums and spikes in non-renewals, other regions are facing the phenomenon as well.
“Southern New England, the Carolinas, New Mexico and counties in the Northern Rockies, Oklahoma, and Hawaii all suffer from high non-renewal rates, demonstrating that the full panoply of climate-related effects — hurricanes, wildfires, severe convective storms, hail, extreme precipitation, and sea level rise — are all destabilizing insurance markets,” reads an excerpt from the federal report.
In California, properties in wildfire zones (including some fighting blazes this week) have significantly seen insurance companies turn their back, too.
After reviewing the report, Andrews underscored that while New Jersey is not in the top 10 states for total non-renewals, the state’s pace illustrated a “notably rapid acceleration of the non-renewal problem.”
Without proper steps, some real estate markets in Jersey and across the nation could ultimately be paralyzed, experts said.
“In certain communities, sky-high insurance premiums and unavailable coverage will make it nearly impossible for anyone who cannot buy a house in cash to get a mortgage and buy a home,” reads an excerpt from the federal report’s conclusion. “Property values will eventually fall — just like in 2008 — sending household wealth tumbling.”
To read the full report, click here.