Global Warming Justifies Higher Premiums?

I’m a bit of contrarian when it comes to conventional wisdom, partly because I like to say the word contrarian, and partly because odds are that a position arrived at by group synthesis is at least a few degrees, perhaps more, from being entirely correct.  By definition, conventional wisdom incorporates emotion, fears, calculations of political advantage and other human frailties in addition to empirical evidence. 

So I have paid attention to stories of late about insurance that is catering to fears of global warming, and I have especially looked for a subtext of whether insurers would use this as an excuse to reorder their actuarial models and/or raise prices.  Well, maybe it shouldn’t, but this story made me laugh aloud, especially the hilarious third paragraph.  All that is missing from this Australian insurance company’s weather forecast is the Nile turning blood red and frogs raining down from the sky.  

Australia is actually a very competitive and unregulated insurance market, by accounts I have read much more so than many states in the U.S., so no one insurer or group of insurers is going to be able to cobble together some anecdotal weather horror stories and start raising prices.  Competition would cut that effort down, because some insurer would realize the actuarial data did not justify it and move to seize market share by undercutting the price, while still making a healthy profit.  Still, that doesn’t mean insurers can’t offer a second set of "green" insurance products that cater to global warming concerns — perhaps with an added mark-up.  Stories like the one I linked to above could be seen as the advertisements for such insurance.  We may be seeing some of that.

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