That is the central finding of “How Are Insurance Markets Adapting to Climate Change? Risk Classification and Pricing in the Market for Homeowners Insurance,” a June 2024 National Bureau of Economic Research working paper (NBER Working Paper No. 32625) by Judson Boomhower of UC San Diego, Meredith Fowlie of UC Berkeley, Jacob Gellman of the University of Alaska Anchorage, and Andrew J. Plantinga of UC Santa Barbara. Using proprietary parcel-level wildfire risk data combined with insurers’ regulatory filings across approximately 100,000 California households, the paper documents what the authors call a “winner’s curse” at the heart of the US wildfire insurance market.
Why some insurers are using imprecise methods for risk analysis – and who gets hurt
