Numbers Don't Lie: Insurance guy Bob Johnson has become a go-to source on the statistical effects of climate change
Among the scientists, policy makers, and natural resource experts speaking at November’s Preparing Minnesota for Climate Change: A Conference on Climate Adaptation, there’s a paper-pushing, tie-wearing insurance guy who’s become one of Minnesota’s most sought after experts on the costs of climate change.
Bob Johnson is the president of the Insurance Federation of Minnesota (IFM), a nonprofit state insurance trade association representing more than 50 insurance companies and other related organizations. Originally founded in 1914 to help insurers and policy holders navigate Minnesota’s worker’s compensation laws, the IFM spends much of its time these days representing insurance companies in the risky world of catastrophic insurance—the kind of insurance that protects homeowners against natural disasters such as floods, tornados, fires, hurricanes, and earthquakes.
Over the past few years, Johnson has increasingly been called upon by policy makers and politicians including Senator John Marty and former Senator Ellen Anderson to testify on Minnesota’s alarming insurance rate hikes due to natural disasters.
Last spring, Johnson served on the climate panel of the Minnesota Environmental Quality Board’s first Minnesota Environmental Congress. Along with University of Minnesota Extension professor, state climatologist Mark Seeley, and Center for Earth, Energy and Democracy executive director Shalini Gupta spoke to the increasing costs to property and infrastructure and the damage to natural environment due to Minnesota’s warming climate.
While hurricanes may get all the headlines, Minnesota’s thunderstorms—storms that produce flash floods and golf-ball sized hail—are responsible for making land-locked Minnesota the 14th most expensive state for homeowners insurance.
“I’m an insurance guy,” says Johnson. “I’m not bringing climate change expertise to the table. I can only I speak to what’s happening in the insurance world—and things are happening very, very differently than in the past.” The significant factor in Minnesota’s increasing insurance rates is hail damage produced by severe thunderstorms. Ten percent of all Minnesota thunderstorms are now classified as “severe,” which means they produce winds of 58 mph or greater and contain ¾ inch size hail.
In 2007 and 2008, Minnesota was one of the top three of all 50 states in the national of the catastrophic or “CAT” losses according to Johnson. “We were ranked higher than any of the hurricane states in damages due to natural disaster losses, primarily from hail,” he says. “Talk to anyone who owns a house—the consumer translation to increasing weather-related damage is showing up in higher property insurance rates.”
Johnson says the dramatic uptick in storm-related property claims is not population related. Nor is it due to changes in building codes: “We’re not consistent throughout the state, but over time we’ve strengthened building codes, so we know it’s not a construction issue,” he says. “If you get golf ball-sized hail, your roof is gone.”
“People can be critical of insurance and it isn’t always perfect,” Johnson says. “But numbers don’t lie—Minnesota insurance claims have resulted in premium increases of 267 percent from 1997 to 2010. The national increase over the same period is 199 percent.”
As a guy whose specialty is historical number crunching, Johnson is reluctant to predict the future. “Insurance companies don’t price a product based on what they think will happen in the future,” says Johnson. “We’re not permitted to guess about the future and we can’t act on speculation.” Predictions, he says, are best left to experts like Mark Seeley (see Summer 2013 Minnegram on Mark Seeley and Minnesota’s super storms).
In the meantime, consumers can reduce their premiums by changing their deductibles. Johnson also thinks that homeowners insurance might someday be more aligned with auto insurance with claims paid on a depreciated basis. “The insurance industry has traditionally sold homeowners policies as replacement coverage,” he says. “That might be something that changes in the future.”