Climate change has rewritten the rules for homeowners, leaving many struggling with increasingly risky properties and limited options, a US webinar exploring insurance failures and the need for improved responses has heard. 

Community Housing Improvement Program CEO Seana O’Shaughnessy said people questioning property owners’ decisions to rebuild in Paradise, a northern California town destroyed in fires, often fail to consider the factors involved. 

“Frequently, it felt like our interrogators had already made up their mind, and often it felt like there was a subtext that anyone who chooses to rebuild is either stupid or naive,” she said. 

“The truth is, the decision to rebuild is extremely complicated and climate change has changed the rules. Areas of the state that used to be safe may not be reliably safe any more and, unfortunately, there aren’t great affordable options or places for people to go.” 

Ms O’Shaughnessy said the town has been rebuilt with stronger protections, but despite people taking recommended steps, insurers have “basically redlined around the entire town”. 

University of Queensland School of Business professor Paula Jarzabkowski said risk price signals were not straightforward in areas facing rising natural catastrophe threats.  

“People have been in a house for a period of time, they’ve taken out a mortgage, they’ve done so prudently, and then the risk profile of the area around them, the risk profile of the weather, has changed the price that they will get charged,” she said. 

“For those people, this price signal came too long into the property ownership journey, and it came in a way that they had no choice to change the underlying conditions.” 

Professor Jarzabkowski said there is a “very weak link” between individual mitigation action and reduced premiums, and it may make sense for people to stay in an area despite the risks. 

“They often don’t have any choice about where else they might go that would be affordable and would give them a reasonable standard of living, so the choice they make to stay may actually be the best choice they could make under the circumstances.” 

Professor Jarzabkowski – who has co-authored a book, Disaster Insurance Reimagined: Protection in a Time of Increasing Risk – said an international review showed examples of successful private and public collaborations, such as diversifying risks through multiple perils. 

“The models that seem to work best, from my perspective, are where you have the private sector still actively offering the insurance policies and having some skin in the game for a threshold of the risk, and then you can either have a reinsurance or an insurance pool taking a percentage of that disaster,” she said. 

Delft University of Technology assistant professor Zac Taylor said addressing risk, whether through insurance, mitigation or other measures, was viewed in a fragmented way, while “overly simplistic tropes” were often employed in discussing state and market roles. 

“There is a deeper conversation to be had here about how we organise our society and how we try to organise our markets, how we try to guide our markets, around broader sets of goals,” he said. 

London School of Economics and Political Science associate professor Rebecca Elliott noted the insurance “social compact”, and that the early involvement of trade unions and friendly societies reflected that those organisations were premised on solidarity and mutual aid.  

Dr Elliott said insurance makes individual customers responsible on some level, while their ability, on their own, to reduce risk is constrained. 

“No matter what you do, you’re not actually going to change the course of the wildfire, and when these risks are intensifying rapidly as the impacts of climate change are growing more severe, even people who made all the right choices might find themselves in a situation where their exposure seems to grow year on year,” she said. 

Webinar organiser the Climate and Community Project is a policy think tank looking at “the current and future home insurance crisis” and policy changes that could make housing safer and more affordable for all.