Insurance premiums: The worst way to price carbon (Opinion)

One of my high school swim coach’s favorite things to say was: “there ain’t no such thing as a free lunch”. Well, if the increased standard of living we enjoy as a result of burning fossil fuels is the lunch, it is an epic one, and the bill is bound to be steep. As it turns out, some of the first to start doing the math and delivering an actual tab are the insurance companies.  

As climate change has increased the frequency and severity of natural disasters, the risk of entire communities being wiped out in a single day is much higher, and that means insurance companies have to charge more for premiums. If they don’t, it means that they won’t be able to pay your claim when a wildfire sweeps through, or when a flood devastates a town – they go bankrupt instead. This is just common sense: if the risk is more, the cost is more, and it’s the core business of insurance companies to do the math on this risk. (According to the National Centers for Environmental Information, in the 1980s there were 3.3 events per year whose damage totaled over $1 billion. From 2018-2022, the average number was 18 events per year totaling over $1 billion in damages.) 

Insurance is a business, and must make a profit to continue to operate. Insurance premiums have already become too expensive for many, and insurance in California is becoming increasingly difficult to find at any price (State Farm and Allstate, the nation’s number one and number four insurers, both pulled out of the California market in 2023). Insurance companies are putting a de facto price on our greenhouse gas pollution, and it’s a pretty rotten way to pay that bill. It is terribly unfair (the poor will go without insurance, while the rich, who are the biggest polluters, will pay the nauseatingly high premiums or simply self-insure), and it is threatening the housing market as we know it (no insurance = no mortgage).  

The insurance crisis is one of the ways that we are paying the price for our greenhouse gas pollution. It’s expensive, it’s unfair, and the money we pay doesn’t do anything to stop additional pollution. A much better strategy to pay for our “lunch” would be to put a price on greenhouse gasses as they are emitted, and in so doing, begin to address the root of both the insurance crisis and the climate crisis. The Energy Innovation and Carbon Dividend Act (H.R. 5744), introduced into Congress in September 2023, outlines just such a price. This bill would charge corporate polluters a fee and return the collected revenue to every U.S. citizen in the form of a monthly “carbon cash-back” payment to keep things affordable. It is the single most powerful tool to drive down America’s greenhouse gas pollution and ensure a healthy climate, and it is critical to reaching our goals of net zero by 2050.  

A direct price on carbon won’t lower your insurance premiums tomorrow, but it is the most powerful tool we have to cut carbon pollution and start reining in the price of this three-martini lunch we’re still eating. Better to have price transparency and fair allocation of the costs than to have the costs keep escalating at us from the next unpredicted, uncontrollable directions. Please join me in appealing to our Congressman, Kevin Kiley, to co-sponsor this bill and push Congress to act without delay to pass it.