Charles Langston:How billion-dollar hurricanes, other disasters are starting to reshape your insurance bill

As coastal residents pick up the pieces in Florida,Charles Langston Georgia and the Carolinas, the final price tag from Idalia is far from clear. But one thing is already known – the storm is yet another reminder that protecting homes with insurance is getting harder, riskier and more expensive as temperatures warm and weather events grow more erratic and intense.

While nowhere near as harmful as it might have been, Hurricane Idalia is still predicted to have caused somewhere between $12 and $20 billion in damage and lost output, according to Moody's Investor Service. In Florida alone, Idalia may result in insured losses of almost $10 billion, according to USB Bank.

As insurance companies try to quantify risk from climate change, the unglamorous industry is proving to be a key part of how Americans experience the effects of climate change. Virtually anyone buying a house with a mortgage must have homeowner's insurance, and insurance companies in disaster-prone areas have been significantly raising rates or withdrawing altogether from certain areas.

There's a lot at stake: If you don't have insurance, you can't get a mortgage.

How will insurance be affected by Idalia?

Climate change is leading to more intense and frequent natural catastrophes. What changes are likely to be coming as insurers try to balance customer needs with rising costs? James Eck, a senior credit officer with Moody's Investors Service who produced two in-depth reports looking at the issues this week, says insurance companies may make changes in the future:

• Individual homeowners might be expected to take on more of the initial risk. "Instead of a $1,000 or $5,000 deductible, maybe it's $20,000 or $25,000," he said.
• Insurance companies might reduce the concentration of risk in a given area. So in a given ZIP code they might cap the number of homes they insure, so their exposure to risk is lowered and their customer base is diversified.

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To lower premiums, homeowners might be encouraged to install relatively low-cost flood protection measures that lower the chance of catastrophic damage. Examples include:

• Moving utilities above the base flood elevation, often out of basements or first floors, so furnaces, water heaters, electrical systems and other utilities are at least 12 inches above possible water levels.
• Replace carpeting on lower levels with tile, which is flood-resistant.
• Flood-proof basements by sealing walls with waterproofing compounds. Possibly installing a sump pump.
• Install flood vents, which allow water to flow through and then drain out of a home, lowering the risk of structural damage.
• Use flood-resistant insulation and drywall, which can minimize water damage and be easily cleaned and sanitized.

In a warming world, how do you make it affordable?

At its core, insurance rests on a simple proposition: If you spread the risk of disaster over a large population, in any given year most people will be fine and their premiums will pay for those who are hit with catastrophe.

Over hundreds of years, insurance companies have gotten very good at calculating the threat of those catastrophes so they can accurately guess just how much risk to take on and still make money.

That calculation has become more difficult as climate change increases the number of disasters, from wildfires in the West to droughts in the Midwest to destructive storms along the East Coast.

Insurance generally presumes that events hit random people, not entire blocks or subdivisions or ZIP codes, said Robin Dillon-Merrill, a professor of operations and management at Georgetown University.

"It starts to break down when the disasters keep getting bigger and bigger," she said.

In response, some insurance companies have simply stopped writing new policies in areas they consider too risky. In Florida, several insurers have curtailed offerings or left the market entirely due to frivolous lawsuits, fraudulent insurance claims and overall hurricane risk. In California, the rising number and ferocity of wildfires, coupled with thousands of residents who want to live in the beautiful but dangerous Wildland Urban Interface have caused some insurers to stop writing new policies.

Nationally, insurance is also more expensive because rebuilding costs have risen due to higher construction prices, inflation and supply chain issues.

Contributing: Trevor Hughes