The US insurance industry is in turmoil, with a new climate change study finding the industry is “at a crossroads”.
Insurance industry analysts have forecast a major fall in the insurance market as global demand for affordable health insurance declines, as a result of rising temperatures, rising CO2 emissions and the impact of CO2-driven storms and floods.
The report by the Institute for Health Policy and Research (IHPR) warns that the industry has “taken a huge hit” from climate change and is “now facing the prospect of a major decline in its market share”.
The report, which was commissioned by the US Insurance Institute for Regulatory Affairs, was released ahead of a World Economic Forum meeting in Davos, Switzerland.
The IHPR warned that insurance premiums will fall by between 10 and 40 per cent in the next decade.
Insurance premiums will be lower in Australia than in other major countries, with an average premium of $1,200 in the US, $1.25 in the UK, $2.10 in Germany and $3.50 in Canada, according to the report.
In the US and the UK the average premiums for a policy are $1 and $1 a week respectively, the report found.
The Australian insurance market has fallen from about $100 billion a year to less than $80 billion, and will be the same or lower by 2025, the IH PR report said.
“The US and UK are among the most important markets in the world for the insurance industry and it is a critical area for the US insurance market,” the report said, adding that a major change in the climate would have a dramatic impact on the US market.
The US insurance sector is currently dominated by large insurance companies.
Some of the biggest players in the industry, including AIG, National, Aon and USAA, are also based in the United States.
The US is the world’s largest insurance market, with the biggest insurer, AIG Group, holding nearly 80 per cent of the market.
Its market share in the year to September was down by around 9 per cent compared to the same period last year, according a report by Bloomberg Intelligence.
Insurance is also a critical industry for Canada.
The industry employs nearly 15,000 people and generated $8.5 billion in gross revenue in 2014, according the Insurance Information Institute of Canada.
“It’s an important area of the insurance sector that is in jeopardy,” the IWPR said.
Australia’s insurance market is expected to grow by 2 per cent to 2.3 per cent by 2025 and will continue to decline as global warming increases the risk of extreme weather events and floods, the organisation warned.
This article was produced by the Business of Health newsroom.