At today's Senate Banking Committee hearing, Sen. John Kennedy (R-LA) questioned witnesses about the rise in insurance costs.
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00:00Thank you, Mr. Chairman. I apologize to each of you for missing your test, your opening statements, but I was in another committee. I have four, five minutes, and I would like each of you to give me 30 seconds on why you think premiums have risen, and another 30 seconds each on what you think we should do about it.
00:28Mr. Gordon.
00:30So the primary cost factors for rising homeowners insurance costs, it's primarily the demographic shifts of people moving into more climate riskier areas and building more expensive homes.
00:4440-year record inflation is the next biggest component, and then the building material inflation has outpaced the underlying inflation, and then you add into that climate change and legal system abuse and
00:58regulatory costs, and that's why the natural disaster costs in homeowners insurance are going up.
01:04The best way to offset that is through more mitigation.
01:07I'm sorry, it's through what?
01:09More mitigation and resiliency, improved building codes, wildfire prepared standards, fortified building standards.
01:16When you look at, if you analyze Hurricane Ian, which was the second worst insured loss event in history, if that had hit Florida before all of Florida's building code reforms, it would have been closer to a Hurricane Katrina loss event.
01:33And so you see entire neighborhoods in Florida.
01:35Excuse me for interrupting, but I want to make sure everybody has a chance.
01:39Mr. Epstein.
01:40Sure.
01:41So, yeah, the basic failures that are causing premiums to rise.
01:44So the government has failed at climate resilience, which is the most important thing.
01:47So in the case where it's the government controlled things like the forest in California, they've just totally failed to manage those properly.
01:53Sometimes they inhibit people from managing their own property.
01:56So that's part one is failing at resilience.
01:58Part two is actively encouraging people to take on risk that they wouldn't take in a free market, which happens, you know, encouraging people.
02:04Like all these disaster relief things just end up subsidizing people taking more risk and they create these cascading problems.
02:10So the solutions are simple.
02:11We want to get rid of all the green policies that inhibit resilience and we want a totally free market and insurance so that people aren't encouraged to take on undue risk.
02:20Madam Supervisor.
02:21So the changing climate has led to catastrophic disasters in my county and across California, as you know.
02:33What can be done is a continued investment in infrastructure, hardening homes and community, forest health, and fuel management programs.
02:44Mr. Newman.
02:46Thank you, Senator.
02:47I agree with Mr. Gordon on all of his reasons why property insurance price is increasing.
02:53Of those, risk is the only one a homeowner has any control over.
02:58And so disaster mitigation has to be part of the solution to drive down insurance costs, but not just any disaster mitigation.
03:06Our risk reduction needs to be grounded in science and verified.
03:10It's those two features that provide the bridge from the actions of a homeowner to the insurance industries.
03:17What I can tell you is that when you do that, insurers will pay attention.
03:21All right, let's go in reverse order.
03:35I think each of you mentioned mitigation.
03:39When I hear mitigation, I also hear money.
03:42Who do you think should pay for the mitigation and how should we pay for it?
03:47Mr. Newman.
03:48Senator, we all have an obligation to pay for mitigation.
03:53That falls on individuals, on homeowners and families.
03:56That falls on every level of government and the private sector needs to pitch in as well.
04:03Madam Supervisor.
04:05I agree.
04:06This is all of our responsibility at the local level all the way up to the federal level because we know who has to come in and clean up after a catastrophic event.
04:14So you think local should contribute?
04:16I think everyone has a part to play.
04:18You think local should contribute?
04:20I think, yes.
04:21Okay.
04:22There is a part to play locally.
04:23Mr. Epstein.
04:24I mean, in general, as much as possible, the people taking on the risk.
04:28So as individual as possible.
04:31And, you know, if the government does something very specifically disastrous, then maybe it owes damages.
04:35But, yeah, you want risk to be as individual as possible.
04:38Mr. Gordon.
04:40So the single most cost-effective wildfire safety standard is just simply moving the dry brush and plants five feet away from your home to create a defensible perimeter.
04:50California actually required that in law but never implemented that in regulation.
04:55So there are very cost-effective things that you can do, homeowners can do, communities can do if we guide them in the right direction.
05:02Thank you, Mr. Chairman.
05:04On behalf of the Chairman, Senator Ted.