The Consumer Federation of America (CFA) is recommending states carefully examine natural disaster data before approving insurers’ rate increases.

In a new report, Disappearing Weather Catastrophe Risk, the federation argues insurers have moved from being risk-takers to become risk avoiders, and as a result consumers are exposed to higher costs.

“Not only have insurers insulated themselves from their historic share of hurricane risk, they have made no serious effort to write flood risk and terrorism risk which are entirely backed by federal taxpayers,” the report said.

“Although insurers have become adept at shifting the cost of catastrophe losses to others, they still use catastrophic weather events to advocate for measures that would shift risk even more, such as higher rates, or putting more policyholders in pools or created taxpayer-supported entities.”

The CFA found Hurricane Katrina cost $US125 billion ($116.5 billion), but only $US62.2 billion ($58 billion) was paid out by insurers.

In the case of Hurricane Andrew, the total bill was $US26.5 billion ($24.7 billion) with $US17 billion ($15.8 billion) being covered by the insurance industry.

The report found increased excess figures after a major event, such as a hurricane, moved more of the risk to the consumer and government-backed insurance pools.

“It is very clear that much of the cost that used to be paid by private insurers has been shifted to consumers, ranging from a small amount to 100% of what used to be paid,” the report said.

“Many consumers exposed to catastrophe weather risk are also vulnerable to insurer attempts to unjustifiably increase rates or hollow out coverage.”

The federation wants legislators to stop insurers “dumping risks in state insurance pools” and to take action when they unjustifiably refuse cover.

“It is unnecessary for any more dumping to occur since insurers have now twice purged their portfolios of risk, once after Hurricane Andrew and again after Hurricane Katrina,” the report said. 

“States should also look at the high prices being charged to homeowners in their states in light of the fact, in the aftermath of Hurricane Andrew, insurers made major adjustments to pricing, dumped risk, reduced excesses and significantly reduced their hurricane risk exposure. 

“Repeating these adjustments in the wake of 2004/5 storms was really more about gouging than correction.”

The federation has also recommended the US Federal Government look at involving the private sector in the national flood insurance bills that are currently being looked at by legislators.

“Taxpayers deserve to have at least some of this risk removed from them, particularly at this time of economic stress, and a search for ways to cut federal spending,” the report said.