Americans face an insurability crisis – a look at how insurance companies set rates and coverage

Thomas Chaves, left, and Vinny Almeida walk through floodwaters from Hurricane Helene in an attempt to reach Chaves' mother's house in the Shore Acres neighborhood Friday, Sept. 27, 2024, in St. Petersburg, Florida.increased an average of 11.3%

But these changes are raising alarm bells. Some industry insiders worry that insurance may be losing its relevance and value – real or perceived – for policyholders as coverage shrinks, premiums rise and exclusions increase.Insurance companies use complex models to estimate the likelihood of current risks based on past events. They aggregate historical data – such as event frequency, scale, losses and contributing factors – to calculate price and coverage.

Reinsurance companies are essentially insurance companies that insure insurance companies. But in recent years, reinsurers have recognized that their risk models are also no longer accurate and have If a rate increase is denied, it could force an insurer to simply withdraw from certain market sectors, cancel existing policies or refuse to write new ones when their “Maps created by economists Agustín Indaco and Francesc Ortega show where individual hazards are highest, based on standardized average annual frequency in each county. Red indicates more risk; purple indicates lower risk.

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