The weather is changing

February 26, 2024

We have all heard about climate change, and we have all noticed that the weather is changing. But we are just beginning to feel the impact of these changes in our pocketbooks. The rising cost of home insurance is the first sign that climate change will increasingly affect our wellbeing. It will increasingly determine where we can live, where we can build homes, whether we can pay for our homes, and how much disposable income we have left after paying for these costs of living.

Rising home insurance costs are early sign of growing climate risks

In the US, the cost of the average home-insurance policy has risen 21% since 2015 and is expected to jump another 9% in 2023. To deal with underwriting losses (when claims exceed premiums), insurers are raising prices. In 2022, the loss was nearly $26 billion according to the American Property Casualty Insurance Association. It was the largest underwriting loss since 2011.

The main culprit insurers say: climate change. Consider this: In the 1980s, the US experienced an extreme weather event that cost $1 billion every four months. Now, it happens every three weeks, according to the US National Climate Assessment released in November. The trend is not limited to the United States, however. In the Netherlands, home insurance increased by 25% since 2019, and the Dutch Association of Insurers calculated that it paid nearly 887 million euros in insured losses due to severe weather in 2022. The highest since 2007.

Homeowners feel the pain. In the US, homeowners in high-risk areas such as California (wildfires) or Florida (hurricanes) are either facing unaffordable policies or are being dropped entirely by their insurers as they pull out of the riskiest regions. The consequences are dire. No insurance often means no mortgage. Home values plummet and some homes become unsellable. In Florida, people are already selling their homes because they fear the insurance costs become too high.

Living and building in vulnerable areas is part of the problem

Despite the obvious risks, people continue to build new homes in areas threatened by climate change. According to Inigo (a Lloyd’s of London syndicate that specializes in high-risk reinsurance), demographic shifts have caused expected annual losses to more than double since 1970, compared with a 25% increase due to climate change. In other words, the rising cost of catastrophes has more to do with population growth in hazardous areas than with climate change itself.

Dutch insurers have pointed out that in the Netherlands developers continue to build new housing in high-risk areas, despite the Dutch government’s intention to determine spatial development based on soil and water. Since this intention is not (yet) enshrined in law, it is not enforceable, so local governments still provide permits, for instance for building 400 houses in the floodplain near Arnhem.

Some known climate risks are uninsurable

One consequence of building in such hazardous areas is that some of the known risks are uninsurable. For example, when excessive rainfall causes rivers to overflow, the resulting flooding is often not covered by standard home insurance policies.

This is not the only problem. Climate change also affects homes in safe areas. In the Netherlands, for example, foundation damage from drought is a major risk, in addition to water damage from flooding. Because this is a predictable risk, it is not covered by insurance. Nevertheless, without insurance or some other (government) safety net, homeowners will have to foot the bill. According to ABN AMRO, in some cases, the cost of repairing a foundation can amount to €50–€100,000.

According to experts, the foundations of hundreds of thousands of buildings in the Netherlands are at risk. The Dutch government is looking into the problem, and Minister Hugo De Jonge has asked the Council for Environment and Infrastructure to help determine the extent of the problem.

Climate risk must become part of the home equation

Whether or not the government steps in, homeowners will need to make climate risk a more important part of their real estate valuation, buying, and selling decisions. They can start by reviewing the climate risks that apply to their homes and use this knowledge to prepare their homes and mitigate climate risks. In the Netherlands, several experts and industry associations have called for a climate label to determine a building's climate resilience (similar to the Dutch energy label).

In addition to high repair costs in the event of an event, homeowners also run the risk of undervaluing their properties. They may not be able to sell their homes. Such uncertainty could cause a major shift in the housing market. If the risks are too high for an individual homeowner, people may prefer other forms of housing finance, including renting. Professional real estate companies may be better equipped to manage and spread the risks associated with climate change across their portfolios.

Other options are also possible, such as people banding together in resident collectives and/or governments stepping in with a climate change emergency fund (e.g. to buy back unsellable homes). Most likely, a combination of governments, residents, insurers, builders, real estate companies, and the broader financial community will work together to finance the transition to climate-resilient housing.

Series 'AI Metaphors'

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1. The tool
Category: The object
Humans shape tools. We make them part of our body while we melt their essence with our intentions. They require some finesse to use but they never fool us or trick us. Humans use tools, tools never use humans. We are the masters determining their course, integrating them gracefully into the minutiae of our everyday lives. Immovable and unyielding, they remain reliant on our guidance, devoid of desire and intent, they remain exactly where we leave them, their functionality unchanging over time. We retain the ultimate authority, able to discard them at will or, in today's context, simply power them down. Though they may occasionally foster irritation, largely they stand steadfast, loyal allies in our daily toils. Thus we place our faith in tools, acknowledging that they are mere reflections of our own capabilities. In them, there is no entity to venerate or fault but ourselves, for they are but inert extensions of our own being, inanimate and steadfast, awaiting our command. (This paragraph was co-authored by a human.)
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2. The machine
Category: The object
Unlike a mere tool, the machine does not need the guidance of our hand, operating autonomously through its intricate network of gears and wheels. It achieves feats of motion that surpass the wildest human imaginations, harboring a power reminiscent of a cavalry of horses. Though it demands maintenance to replace broken parts and fix malfunctions, it mostly acts independently, allowing us to retreat and become mere observers to its diligent performance. We interact with it through buttons and handles, guiding its operations with minor adjustments and feedback as it works tirelessly. Embodying relentless purpose, laboring in a cycle of infinite repetition, the machine is a testament to human ingenuity manifested in metal and motion. (This paragraph was co-authored by a human.)
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3. The robot
Category: The object
There it stands, propelled by artificial limbs, boasting a torso, a pair of arms, and a lustrous metallic head. It approaches with a deliberate pace, the LED bulbs that mimic eyes fixating on me, inquiring gently if there lies any task within its capacity that it may undertake on my behalf. Whether to rid my living space of dust or to fetch me a chilled beverage, this never complaining attendant stands ready, devoid of grievances and ever-willing to assist. Its presence offers a reservoir of possibilities; a font of information to quell my curiosities, a silent companion in moments of solitude, embodying a spectrum of roles — confidant, servant, companion, and perhaps even a paramour. The modern robot, it seems, transcends categorizations, embracing a myriad of identities in its service to the contemporary individual. (This paragraph was co-authored by a human.)
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4. Intelligence
Category: The object
We sit together in a quiet interrogation room. My questions, varied and abundant, flow ceaselessly, weaving from abstract math problems to concrete realities of daily life, a labyrinthine inquiry designed to outsmart the ‘thing’ before me. Yet, with each probe, it responds with humanlike insight, echoing empathy and kindred spirit in its words. As the dialogue deepens, my approach softens, reverence replacing casual engagement as I ponder the appropriate pronoun for this ‘entity’ that seems to transcend its mechanical origin. It is then, in this delicate interplay of exchanging words, that an unprecedented connection takes root that stirs an intense doubt on my side, am I truly having a dia-logos? Do I encounter intelligence in front of me? (This paragraph was co-authored by a human.)
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5. The medium
Category: The object
When we cross a landscape by train and look outside, our gaze involuntarily sweeps across the scenery, unable to anchor on any fixed point. Our expression looks dull, and we might appear glassy-eyed, as if our eyes have lost their function. Time passes by. Then our attention diverts to the mobile in hand, and suddenly our eyes light up, energized by the visual cues of short videos, while our thumbs navigate us through the stream of content. The daze transforms, bringing a heady rush of excitement with every swipe, pulling us from a state of meditative trance to a state of eager consumption. But this flow is pierced by the sudden ring of a call, snapping us again to a different kind of focus. We plug in our earbuds, intermittently shutting our eyes, as we withdraw further from the immediate physical space, venturing into a digital auditory world. Moments pass in immersed conversation before we resurface, hanging up and rediscovering the room we've left behind. In this cycle of transitory focus, it is evident that the medium, indeed, is the message. (This paragraph was co-authored by a human.)
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6. The artisan
Category: The human
The razor-sharp knife rests effortlessly in one hand, while the other orchestrates with poised assurance, steering clear of the unforgiving edge. The chef moves with liquid grace, with fluid and swift movements the ingredients yield to his expertise. Each gesture flows into the next, guided by intuition honed through countless repetitions. He knows what is necessary, how the ingredients will respond to his hand and which path to follow, but the process is never exactly the same, no dish is ever truly identical. While his technique is impeccable, minute variation and the pursuit of perfection are always in play. Here, in the subtle play of steel and flesh, a master chef crafts not just a dish, but art. We're witnessing an artisan at work. (This paragraph was co-authored by a human.)
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7. The deficient animal
Category: The human
Once we became upright bipedal animals, humans found themselves exposed and therefore in a state of fundamental need and deficiency. However, with our hands now free and our eyes fixed on the horizon instead of the ground, we gradually evolved into handy creatures with foresight. Since then, human beings have invented roofs to keep them dry, fire to prepare their meals and weapons to eliminate their enemies. This genesis of man does not only tell us about the never-ending struggle for protection and survival, but more fundamentally about our nature as technical beings, that we are artificial by nature. From the early cave drawings, all the way to the typewriter, touchscreens, and algorithmic autocorrections, technics was there, and is here, to support us in our wondering and reasoning. Everything we see and everywhere we live is co-invented by technics, including ourselves. (This paragraph was co-authored by a human.)
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8. The enhanced human
Category: The human
In a lab reminiscent of Apple HQ, a figure lies down, receiving his most recent cognitive updates. He wears a sleek transparent exoskeleton, blending the dark look of Bat Man with the metallic of Iron Man. Implemented in his head, we find a brain-computer interface, enhancing his cognitive abilities. His decision making, once burdened by the human deficiency we used to call hesitation or deliberation, now takes only fractions of seconds. Negative emotions no longer fog his mind; selective neurotransmitters enhance only the positive, fostering beneficial social connections. His vision, augmented to perceive the unseen electromechanical patterns and waves hidden from conventional sight, paints a deeper picture of the world. Garbed in a suit endowed with physical augmentations, he moves with strength and agility that eclipse human norms. Nano implants prolong the inevitable process of aging, a buffer against time's relentless march to entropy. And then, as a penultimate hedge against the finite, the cryo-cabin awaits, a sanctuary to preserve his corporal frame while bequeathing his consciousness to the digital immortality of coded existence. (This paragraph was co-authored by a human.)
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9. The cyborg
Category: The human
A skin so soft and pure, veins pulsing with liquid electricity. This fusion of flesh and machinery, melds easily into the urban sprawl and daily life of future societies. Something otherworldly yet so comfortingly familiar, it embodies both pools of deep historical knowledge and the yet-to-be. It defies categorization, its existence unraveling established narratives. For some, its hybrid nature is a perplexing anomaly; for others, this is what we see when we look into the mirror. This is the era of the cyborg. (This paragraph was co-authored by a human.)
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About the author(s)

Laura van der Ham has been with Rasile Group since 2009 and is responsible for managing the Industry Research Team. She is a skilled storyteller, always searching for engaging and concise ways to present research results. During her career, Laura has looked at many industries and how they have been affected by digitization, including media, entertainment, (e-)commerce, tourism and finance. Her broad and far-reaching interests allow her to draw parallels between industries and apply learnings across multiple sectors. She holds a master’s degree in Communication Sciences from the University of Amsterdam and a bachelor's in Information Sciences from the Amsterdam University of Applied Sciences. 

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