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Insurance Industry Looking Hard At Climate Change 156

Posted by Soulskill
from the letting-the-market-decide dept.
A recent paper in Science (abstract) examines the insurance industry's reaction to climate change. The industry rakes in trillions of dollars in revenues every year, and a shifting climate would have the potential to drastically cut into the profits left over after settlements have been paid. Hurricane Sandy alone did about $80 billion worth of damage to New York and New Jersey. With incredible amounts of money at stake, the industry is taking climate projections quite seriously. From the article: "Many insurers are using climate science to better quantify and diversify their exposure, more accurately price and communicate risk, and target adaptation and loss-prevention efforts. They also analyze their extensive databases of historical weather- and climate-related losses, for both large- and small-scale events. But insurance modeling is a distinct discipline. Unlike climate models, insurers’ models extrapolate historical data rather than simulate the climate system, and they require outputs at finer scales and shorter time frames than climate models."
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Insurance Industry Looking Hard At Climate Change

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  • by vikingpower (768921) <exercitussolus.gmail@com> on Tuesday December 25, 2012 @04:25PM (#42389767) Homepage Journal
    ...to be made for programmers ! Let's go and rake in some of that....
  • Who knew... (Score:5, Insightful)

    by Frosty Piss (770223) * on Tuesday December 25, 2012 @04:44PM (#42389885)

    God forbid someone actually get some actual benefit from their insurance...

    • Wait, what? That's how insurance works? I always thought we were just giving them money out of the goodness of our hearts. Charity, if you will.

      • Re:Who knew... (Score:5, Interesting)

        by rtb61 (674572) on Tuesday December 25, 2012 @07:19PM (#42390749) Homepage

        Of course in a most twisted way they could prove useful. Those pollution producing corporations are becoming a bit too much of a profit burden, which would be cheaper, eliminating them or paying out of the damage they are generating. When targeting the cause is order of magnitude cheaper than paying for the damage. Strange things can happen out there in corporate wars lobbyists land. Politically you can already see distinct corporate alignments forming, copyright versus technology, financial versus energy (only certain forms) and, development versus military. How violent will the corporate wars become?

        • by TubeSteak (669689)

          Those pollution producing corporations are becoming a bit too much of a profit burden, which would be cheaper, eliminating them or paying out of the damage they are generating.

          There's another option: raise insurance premiums on everyone and continue making profits.

          We're all going to pay the costs of climate change one way or another, the only question is whether the money spent will be to prevent disasters or to clean up after them.
          So far, we've been content to keep paying megabucks to clean up after disasters, since there is no political will to force through even more expensive solutions.

          • by rtb61 (674572)

            There is a distinct limit upon insurance premiums at which point paying them is pointless. So with excessive risk, insurance cover ceases, so risk must be pushed back into manageable ratios else insurance companies cease to exist. So they must take more and more affirmative action in order to reduce risk and profitably survive. So insurance companies via their lobbyists can create political will in order to reduce risk and do so very profitably.

    • Honestly, I'd rather NEVER have to use my insurance, any of it.
      • Honestly, I'd rather NEVER have to use my insurance, any of it.

        Yes, but when you do need to make a claim - after perhaps years of paying a lot of cash over time - wouldn't it be nice not to have your claim initially rejected out of hand? Wouldn't it be nice *NOT* to have to hire an attorney to get your insurance pay-out?

        • Would you rather your insurance company just hand out cash willy nilly? Such that when you ask they say 'sorry we're broke'.

          Oh wait 'your' emergency is somehow obvious and more important than everybody elses?
          • Re:Who knew... (Score:5, Interesting)

            by Frosty Piss (770223) * on Tuesday December 25, 2012 @10:55PM (#42391789)

            Would you rather your insurance company just hand out cash willy nilly?

            Mo, of course not. But guess what? Insurance companies hire these people call - get this - Insurance Adjusters, who are - get this - "professionals" at evaluating claims.

            But you know what? Most of them only look for reasons *NOT* to pay out on legitimate claims.

            Oh wait 'your' emergency is somehow obvious and more important than everybody elses?

            What an angry ignorant statement.

            My claim is no more or less important than any other legitimate claim. Perhaps you need to look into how insurance companies deny legitimate claims?

            Or perhaps you are one of these assholes that insurance companies hire to bullshit people out of making legitimate claims?

            We're not talking about "entitlements" here, we're talking about paying for a service and not getting it.

            But please, fuck off.

            • we're talking about paying for a service and not getting it.

              No you're complaining that a company charged with paying for tragedy...in an industry that is rife with fraud....denied your claim, that you paid for.

              You're still arguing 'your' situation obviously merits response over others.

              • You're still arguing 'your' situation obviously merits response over others.

                No, I'm arguing that my claim merits a legitimate response like everyone elses.

                What's YOUR problem?

                • You're exact argument was that since you paid premiums your claim should be paid.

                  It doesn't work like that and you know it...assuming you read your policies.
            • Mo, of course not. But guess what? Insurance companies hire these people call - get this - Insurance Adjusters, who are - get this - "professionals" at evaluating claims.

              But you know what? Most of them only look for reasons *NOT* to pay out on legitimate claims.

              Well, either I've been very fortunate (more than once, alas), you're buying into the ambulance-chasing lawyer commercials, or you're getting insurance from a company whose "Lower Price Everyday[TM]" comes from making what you pay on difficult to collect. Because the adjusters I've dealt with have worked with me to get a decent job done even when some of the alternatives would have been cheaper. So they're not all worthless parasites, at least.

            • Re:Who knew... (Score:4, Insightful)

              by mcgrew (92797) * on Wednesday December 26, 2012 @11:02AM (#42394543) Homepage Journal

              We're not talking about "entitlements" here, we're talking about paying for a service and not getting it.

              I don't how the Republicans got "entitlements" to be a dirty word, as if getting an "entitlement" is getting a handout. If I pay for a service, I'm entitled to that service, whether insurance or Social Security.

              It is indeed an entitlement. You paid your money, you are entitled to the payout.

              • by chill (34294)

                People withdraw more from Social Security than they pay in, plus the interest earned. It is designed as a "current payer" system, where people are drawing out not the money they paid in, but the money currently being paid in by today's workers.

                The big problem is this method is sustainable only if you have an ever increasing working population, which we don't. The Baby Boomers paid in more than the Greatest Generation withdrew, but the Gen X group is *smaller* than the Boomers. If Gen Y is smaller still, the

          • Your insurance company should pay out any time you meet the requirements if your policy, however stupid they've made the terms. Insurance is a bit like a casino, sometimes three house pays out sometimes it doesn't and they set the games up so the house always wins, buy they still write the check when you win. Having your insurance company act like a company that the world wouldn't be better off without costs bigger premiums if course and it involves idiots not getting all huffy because they never use their
            • Insurance is a bit like a casino

              Without a doubt insurance is legalized gambling. The OP is just complaining because he bet and lost....

      • Honestly, I'd rather NEVER have to use my insurance, any of it.

        Your insurance company agrees with you whole-heartedly.

        Insurance exists, however, because occasionally people do have to use it, given that the alternatives are mostly even worse.

  • by Anonymous Coward on Tuesday December 25, 2012 @04:48PM (#42389911)

    We've had a bunch of climate related stories on /. lately. My theory is that when IPCC AR5 comes out officially, the jig will be up. The alarmists are having to make hay while they still can.

    For the blessed few who haven't been following the climate wars, IPCC AR5 is the United Nations latest report on global warming. It has several important findings including that shown in Figure 1.4 . The global climate has warmed less than all the IPCC's previous projections. They also conclude that the global temperature will warm about an additional degree in the 21st century. Dry places will get slightly drier. Wet places will get slightly wetter. Extreme weather events will not be more extreme or more frequent. Catastrophic anthropogenic global warming has been cancelled.
    http://wattsupwiththat.com/2012/12/14/the-real-ipcc-ar5-draft-bombshell-plus-a-poll/ [wattsupwiththat.com]

    • by the eric conspiracy (20178) on Tuesday December 25, 2012 @06:10PM (#42390371)

      Nonense. The comparisons that have been done with the original IPCC report vs current data are showing their predictions were suprisingly accurate.

      http://www.livescience.com/25367-first-ipcc-climate-report-accurate.html [livescience.com]

    • by Icculus (33027)
    • Re: (Score:2, Informative)

      by Anonymous Coward

      Oh yeah, the smoking gun. This "leaked" graph is definitly proof that all the alarmists are wrong.

      http://www.fool-me-once.com/2010/09/temperatures-are-below-projections.html

      Deniers have only one goal, lie to fool dumb people into thinking there are serious doubts.

      But their whole case is built on hot air, they say the alarmists made the whole thing up while they themselves have nothing but nonsense. There are a few skeptics, but they never claim what the deniers claim they say.

    • by taz346 (2715665) on Tuesday December 25, 2012 @07:53PM (#42390925)
      We see more stories about global warming on Slashdot lately because more of the predicted effects are becoming reality. That trend will continue because we will continue to do nothing to address it, opting to put our own short-term interests ahead of the costs to future generations. Nothing new there. Just ask Yeats: "The best lack all conviction, while the worst Are full of passionate intensity."
      • by 32771 (906153)

        If you listen to people that take Methane feedback, and the carbon release from Peat and drought damaged forests seriously, then you will occasionally hear that we have to reduce carbon emissions by 80%. Given the large fossil fuel contributions to our energy budget of around 80%, we would have 36% of our energy budget left. The question is how many deaths such a reduction would cause now vs how many deaths global warming would cause in the future.

        There are a number of reasons why people will not do anythin

    • We've had a bunch of climate related stories on /. lately. My theory is that when IPCC AR5 comes out officially, the jig will be up.

      We've had a lot of creationism stories too. My theory is that flame wars drive page hits.

      I haven't tracked it, but I get the impression that they usually get posted on slow news days - weekends and holidays.

    • "The jig is up" was used in their headline on this "leak". Thankfully the Guardian has republished Dana Nuccitelli's excellent piece [guardian.co.uk] on the matter.
  • by PerlPunk (548551) on Tuesday December 25, 2012 @05:01PM (#42389973) Homepage Journal
    Finally, we are about get some science that is not tied to advancing some political cause, political party, or some religious belief for or against Gaia.
  • by SilenceBE (1439827) on Tuesday December 25, 2012 @06:31PM (#42390489)
    Insurance has been raising for a couple of years as there is an increase of natural disasters that are purely related to the weather.

    Regardles of the who and what, but the climate is changing noticable. Normally at these part in this time of year it is freezing but now we are getting temperatures in the range of 15-18 degrees. We also have more floods then in the previous years. It may be warmer, but we also have a lot more rain.
    • Re: (Score:2, Troll)

      by khallow (566160)

      Regardles of the who and what, but the climate is changing noticable.

      Ever hear of confirmation bias? Just because you think you notice something doesn't mean you do.

      Besides we have yet to use the proper methods for determining whether weather is due to climate change. Here's a simple test. Take your suspect weather event and throw it in a pond. If it floats, then it's a witch^H^H^H^H^H climate change induced extreme weather event.

  • there's no such thing as climate. OR change
  • by cirby (2599) on Tuesday December 25, 2012 @06:37PM (#42390503)

    ...using climate change as an excuse to raise rates? A win-win.

    If the scaremongers are right, they cover possible extra expenses... which have not - in any sense - shown up. No extra bad weather, hurricanes, et cetera. Just higher payouts from covering more people.

    If they're wrong, the insurance companies get more money for free, and they get the environmental folks to help them get the rate increases approved from various government entities.

    "We need to raise our rates to allow for extra payouts from climate change."

    "Do we get a refund if you don't have to pay out more?"

    "No. But don't you feel better knowing that we might?"

    • Re: (Score:3, Interesting)

      by DiamondGeezer (872237)
      That has already happened. Munich Re got into bed with environmental groups when hurricanes were predicted to rise in number and intensity as a result of global warming/climate change/zombie apocalypse/whatever its called.

      Result: Huge rises in insurance rates while hurricane numbers and intensity went down.

      Big result: Huge profits for reinsurance companies
      • by Sique (173459)
        If it were so, why didn't the insurers switched from Munich Re to Swiss Re? It's not as if Munich Re was the monopolist. Sometimes conspiracy theories are simply dumb.
  • One doesn't even need to consider climate change to mitigate the Hurrican Sandys. The sea level rise is incontrovertible, and easy to extrapolate. The minimum insurance companies should be doing is accounting for sea level rise, regardless of whether it is tied to climate change, and regardless of whether that climate change is anthropogenic, and regardless of whether interventions to mitigate said climate change would be more costly or less costly than doing nothing.
  • by vlad30 (44644) on Tuesday December 25, 2012 @07:38PM (#42390833)
    Insurance needs fear to sell.

    It used to be rational fear e.g. you might have a car accident that turns out to be expensive to repair and pay for damages. However here is a fear that is irrational Climate change the climate always changes, day to day , year to year, century to century. And the difficulty will be was the damages caused by climate change or were you in a flood zone anyway. and fearful governments afraid of being sued are complicit in this. A recent example I have is a local council declaring a flood zone in an area that would only flood if sea levels rose 2-3 metres insurance companies without question simply rose all premiums in the area $3000 -$7000 if you wanted flood insurance. It did have an effect as people in this area were generally concerned about climate change now many I spoke to have seen the money maker it really is

    • You know, that whole solvency thing is pretty important. I think you're thinking of the gun industry.

      Also, Sandy's storm surge, plus the Spring Tide, and the 1 foot of mean SLR since 1900, added up to that 2-3 metres. And also bear in mind: ice sheets are all melting far faster than expected; and also because of ocean currents and other effects, that "mean Sea Level Rise" can very dramatically depending on where you are. In a capitalist society, high flood insurance premiums are the appropriate signal

    • by Xyrus (755017) on Wednesday December 26, 2012 @01:17AM (#42392349) Journal

      Insurance needs fear to sell.

      No it doesn't. People buy insurance because MOST don't have enough funds to cover things like car crashes, unexpected serious illnesses, etc. . These things happen and the LOGICAL response is to be prepared for them. At worst, that could be considered cautious.

      However here is a fear that is irrational Climate change the climate always changes, day to day , year to year, century to century.

      Weather != Climate. Climate changes TYPICALLY happen over 100's to 1000's of years, sometimes even longer. And the impacts of those changes on the life forms existing on the planet depend on how string and how fast those changes happen.

      The changes, as indicated by all the research, observations, and data we have show that the climate is changing, and rapidly (decadal scale). There is no irrational fear here. The science says A is going to happen, evidence shows A is happening, and that there are consequences for A happening. Groups that are interested about these consequences and what their effects will be such as the DoD, DoE, insurance companies, agribusiness, etc. are incorporating the science into future plans to prepare for it.

      And the difficulty will be was the damages caused by climate change or were you in a flood zone anyway.

      What your describing is called attribution, an it's pretty easy to filter out such basic cases. Attribution of weather event to climate change is more difficult, but that's another matter. As water levels rise, flood zones will increase (at least in coastal areas). Storm surges will become more dangerous and travel further inland.

      That's just an example, but these are things city planners and others need to be aware of when making long range plans. Otherwise, when those 1 in a thousand year events start becoming one every ten years there's going to be a heavy bill to pay.

      and fearful governments afraid of being sued are complicit in this. A recent example I have is a local council declaring a flood zone in an area that would only flood if sea levels rose 2-3 metres insurance companies without question simply rose all premiums in the area $3000 -$7000 if you wanted flood insurance.

      You don't seem to understand coastal flood zones very well. Storm surges, even those not driven by hurricanes, can easily exceed 2 or 3 meters. Even coastal winds can drive waves that size depending on where you live. And if such events have been shown to be happening more frequently in your area due to a combination of increasing extreme events, ocean rise, coastal erosion, etc. then it only make sense.

      It did have an effect as people in this area were generally concerned about climate change now many I spoke to have seen the money maker it really is

      You're going to need more than emotional appeal to win an argument. You have to get some real hard data and show WHY you think the increase is unnecessary. How often does the area flood? How much value does the area have? What is the projected increase in flooding events as sea levels rise? What is the projected increase of conditions that would lead to probable flooding? Insurance companies use a lot of information to estimate risks and determine premiums. If you don't have a solid provable case you basically just whining that your premiums had to go up to cover the increasing risk due to a changing climate.

      This shouldn't be a surprise to you, as scientist have been saying these types of things would likely happen 30 years ago.

  • by Anonymous Coward on Tuesday December 25, 2012 @10:24PM (#42391659)

    The main problem is not climate change, but rather poor judgement of what to build where. A beachhouse used to be within minutes of the beach, now it is directly on the beach and the building is a lot more expensive. This means the risk of damage is not only greater than it used to be, it is also more expensive when it happens.

    Another problem is draining. Swampland is drained and houses are built there. However nature intended such places to be swamps and they tend to reappear when exposed to heavy rain.

    Land is claimed from rivers, making them narrower, which prevents heavy flow. When rain makes heavy flow needed, waterlevel raises instead and causes floods, often just before the block, which means the owners of the flooded houses wasn't the one to make the mistake. This was the main problem with the flooding in Germany and Czech Republic in the 90's as well as the major Mississippi flooding.

    There is a pretty good example of this on the street where I live. Houses were built on all free plots in the 1950s, except one. This one vacant plot didn't have any house on it until the late 1980s. Turns out that whenever it rains heavily, a lake fills up, sends all the water over the top of the hill, down to the road and then it travels on roads all the way to the ocean. The problem is that whenever the water goes downhill it goes through this new house and no amount of dams and ditches appears to work. It has been flooded twice in the last 10 years alone and none of the other houses have ever been flooded. One has to wonder why this plot was left unused in the first place.

    Another fine example is a train repair shop built recently in a moist plot with a stream nearby. The politicians forced the engineers to make the building lower than the engineers recommended because otherwise the roof would be too tall compared to the trees and that wouldn't look nice. Now it has to use a pump to keep dry and they will have water on the floor if the pump stops and they fail to restart it within a certain amount of hours. I bet it completely fails the flood resistance demands set by the same politicians.

    Such poorly protected (and often expensive) buildings is a major concern for insurance companies. It's a far greater issue than climate change. However it might be a whole lot easier to get everybody to pay more if it's stated that it's due to climate change than if it goes to "poorly located houses".

    Another interesting note about this is one "proof" of climate change is the increasing amount of money paid by insurance companies. Those numbers can't be used to proof worse weather because you can't isolate the costs for climate change and the costs caused for the reasons I mentioned here.

    • by makomk (752139)

      That's a relatively old problem, though. Certainly housebuilders have been building homes on flood plains here in the UK for at least a decade, probably longer. I saw a really hilarious incident a while ago when they insisted that their new homes weren't at risk of flooding and the building site flooded spectacularly part-way through building them - and the company kept on insisting there was no problem!

      • by RockDoctor (15477)
        People have been laughing and pointing fingers at the idiots who buy into such developments for a lot more than a decade. Since I started to study geology (late 1970s) I've been vocally and publicly berating the idiots in the local council who permit such developments, and then the idiots who buy into them. It hasn't had any effect apart from to give me some belly laughs, and a few people a sick-in-the-belly feeling of fear, uncertainty and doubt at the geologist laughing at them. Doesn't make me terribly p
  • ... is to deny insurance to people with pre-existing climate issues. :)

  • The insurance industry is a necessary evil just like government. The only way they stay in business is to make a profit. If you are paying too much either change providers or stop being such a high risk.

    Until Obamacare came along insurance was not mandatory.

    • by geekoid (135745)

      Auto insurance isn't mandatory? Home owners insurance isn't mandatory?
      you really underscored you ignorance and stupidity just to make an incorrect dig at Obama.
      You should take a good look at yourself and decide if you want to wallow in ignorance, or light the candle of knowledge.

      "If Tyranny and Oppression come to this land it will be in the guise of fighting a foreign enemy."
      wrong. Hitler attack Germany first by making an internal enemy.

  • Hurricane Sandy.... (Score:5, Informative)

    by Ferretman (224859) <ferretmanNO@SPAMgameai.com> on Wednesday December 26, 2012 @01:18AM (#42392353) Homepage
    ....had nothing to do with "climate change" or "global warming" or whatever the AGW supporters are calling it this week. Even the climatologists said as much:

    http://newswatch.nationalgeographic.com/2012/12/07/csu-researchers-say-sandy-wasnt-influenced-by-global-warming/ [nationalgeographic.com]

    Ferret
  • Putting businesses 8' (and LESS) above sea level in a 100 year storm zone, means you are going to get clobbered on average every 100 years (and have good odds of getting hit in a 3 generation period).

    Insurance companies have got to assume any low lying areas next to the ocean will be flooded.

  • Have been taking climate change data and model predictions into account for years. Quite accurately, and quite successfully.
    This alone should have convinced the non educated cynic..but it involves math, and math is hard so we will just deny anyways.

    • by plopez (54068)

      Math is hard, but you think they could read an executive summary that basically says, "the wonks say things are going to get worse".

  • So we can limit the liability on insurance companies when you try to sue them to get the insurance money they said they would pay in the event of a disaster. We need to realign the legal system and remove regulatory burdens to allow free market solutions to flourish. Then they will be incentive to monitize maximal corporate governance personnels' performance revenues.

    BTW, if you didn't catch it, that was sarcasm.

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