The state’s largest insurer, State Farm, recently imposed big rate hikes on their California customers — an average of 17% on homeowners — to help make up for the company’s losses from the devastating Los Angeles wildfires in January.
State Farm also hiked insurance rates by an average of 15% on renters and condominium owners and 38% on apartment owners. And the insurance giant is requesting another 11% average rate increase on all residential property owners in the state.
State Farm is not alone. Other insurance companies are asking California to allow them to levy rate hikes on their customers in the wake of the Los Angeles wildfires. And the threat of more climate disasters is prompting many insurance companies to refuse to renew policies or abandon communities — and even the state — completely.
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Instead of turning their backs on California or further raising prices on residents who can’t afford it, insurance companies should turn their sights on the true culprits of climate change: oil and gas companies.
It’s time for insurers to demand that Big Oil and Gas pay their fair share for the massive climate-related economic damage they’ve caused. And it’s time to spare overburdened property owners from more unaffordable rate hikes.
Insurers should follow the lead of states — including California — that have sued Big Oil and Gas to hold them accountable for billions in climate losses. In legal proceedings, states have rightly noted that oil and gas companies have known for decades that fossil fuels were wrecking the planet yet continued to add fuel to the fire.
Big Oil’s big deception has exacted a staggering toll. According to a recent study published in Nature, greenhouse gas emissions from 111 fossil fuel companies caused the world an estimated $28 trillion in climate damage from 1991 to 2020.
According to that study, oil giant Chevron has caused $1.98 trillion in economic losses, while ExxonMobil is responsible for $1.91 trillion, and BP, $1.45 trillion.
And while inflicting these massive losses, the oil and gas industry has been pocketing huge profits, more than $1 trillion in the past decade alone.
Insurers should take the oil and gas industry to court to tap into those record profits and offset climate costs. According to a report published late last year, climate change has led to insurance losses totaling about $600 billion over the last two decades, and climate-related disasters now account for nearly 40% of the industry’s total losses.
Yet to date, insurers have given Big Oil and Gas a free pass while requiring property owners to pay for nearly all insurance losses in the form of rate hikes. And now, insurers want to add a surcharge to all California home owners to make up for their losses from the Los Angeles catastrophe.
These repeated rate hikes are deepening California’s affordability crisis. Overall, home insurance rates in California are expected to skyrocket by 21% this year, the second-largest increase in the nation. And that’s on top of a 25% hike from 2021-24.
A nearly 50% rate increase in four years is unsustainable and unfair, especially considering that Big Oil and Gas have yet to pay a penny.
So why haven’t insurers tried to hold oil and gas companies accountable? It’s likely because insurance companies are heavily invested in fossil fuels, and oil and gas facilities are some of their biggest investments. But there is an easy solution to that conflict of interest: Insurers should divest from fossil fuels.
California property owners and taxpayers simply can’t afford to shoulder the burden alone of increasingly costly climate disasters. Enough is enough.
State Sen. Jerry McNerney represents San Joaquin County and Alameda County’s Tri-Valley. U.S. Rep. John Garamendi represents parts of Solano, Alameda and Contra Costa counties. He previously served as California insurance commissioner.