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Insurers know: The sky is falling and the water is rising

Wed Jun 18th, 2014 on     Insurance Claims,    

One of the things critics of the insurance industry sometimes overlook is that most insurance companies are businesses, not charitable organizations. That means insurers have to answer to shareholders, and shareholders want their investments to grow. Insurance companies provide a valuable service, even a social good, but they are just as subject to pressure to make a profit as the corner drugstore or Exxon Mobile Corp.

Still, there are times when insurance companies fight the good fight, even if only out of self-interest. The most recent and perhaps most unusual example of this is a class action lawsuit filed by insurance companies and others against municipal governments in the Chicago area. The subject matter is one that Florida is most familiar with: climate change.

Southeast Florida is taking climate change seriously at the local level. Officials understand that sea levels are rising — a full 8 inches in the last 100 years — and pose an increasing risk to the state’s flat landscape. Municipalities and counties now must think creatively to reduce the risk to property and human lives.

Miami Beach, for example, is installing underground pumps in an effort to stave off “sunny-day floods,” the rising waters that encroach on the western side of the city during fall and spring high tides. Miami-Dade County is reinforcing natural barriers to hold back more frequent storm surges.

Northern states may not be experiencing the same rate of change, and, as a result, they are putting off any efforts to meet the challenge. The plaintiff insurance companies in this lawsuit may be after money damages, but they may, too, be hoping that cities like Chicago wake up and smell the — well, smell the overflowing sewers.

We’ll explain more in our next post.

Sources: 

Nature World News, “Lawsuit Warns Politicians That Climate Change Can Cost Them,” Brian Stallard, May 23, 2014

Insurance Journal, “Viewpoint: U.S. Can Learn from Florida Climate Change Response,” Bloomberg, May 27, 2014

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