Uneven adaption: Insurance pricing and household climate resilience

The authors investigate how home insurance pricing affects household investment in climate adaptation. Using policy-level data from Florida’s largest homeowners insurance provider, they exploit plausibly exogenous variation in insurance premiums, which alter the value of adaptation discounts since these discounts are calculated as a percentage of premiums. 

Wealthier households and those facing lower adaptation costs respond to higher premiums by increasing adaptation. In contrast, lower-income households and those facing higher adaptation costs reduce adaptation as premiums rise, consistent with tightening financial constraints. Taken together, these results suggest that as climate risks intensify and insurers raise premiums, market-based pricing may catalyze adaptation among some households while discouraging it among others—widening the gap in climate resilience