Catastrophes have become regular in the news and many watching from home are anxious as they rise in frequency and severity. In the aftermath of the Eaton Fire, which battered Altadena, California in January 2025, the story of the Pazmino family emerged as a grim reminder of how underestimating risk can lead to devastating loss.
Annamarie Pazmino’s words cut deep as she described how the memories of their life could be felt in each corner of their home, now reduced to dust. Like many in the area, the family was underinsured given the level of risk in their region. “I’ve learned with insurance that we didn’t ask any of the right questions,” Annamarie said. Her husband, Kevin, now struggles with anxiety and uncertainty, asking: Will we ever be able to own a home again? (Lazar, 2025).
The Pazmino experience is becoming increasingly common: scorching wildfires in California, record-breaking floods in the Midwest, and intensifying storms churning along the Gulf Coast. As these events grow in frequency and severity, consumer behavior is beginning to shift in notable ways.
One of the most striking patterns is the surge in policy purchases after a catastrophe, even in areas long considered high-risk. According to a 2023 study published in the Journal of Risk and Insurance, homeowners in disaster-prone regions such as coastal Florida, Northern California, and parts of Louisiana reported a 34% increase in new or expanded insurance policies following a major climate event (Smith & Renwick, 2023).
In January 2025, the U.S. Department of Treasury’s Federal Insurance Office reported that homeowners in disaster-impacted high-risk ZIP codes experienced premium increases of up to 82% with non-renewal rates reaching 80% due to those rising costs (Federal Insurance Office). This suggests that consumers are actively searching for new coverage in response.
This surge in what researchers call “post-trauma purchasing” reveals something deeply human: while trust in insurance providers may be low, the fear of being left vulnerable is even stronger.
Consumers are pushing for greater accountability. In the wake of the California wildfires, a wave of class-action lawsuits targeted insurers for inadequate payouts and vague policy language. As a result, regulatory agencies and industry watchdogs are stepping in to enforce clearer language and fairer claim practices. The National Association of Insurance Commissioners (NAIC) is also responding by incorporating consumer complaints into reform efforts (Munch 2025).
This tension between mistrust and necessity is driving significant changes in other areas as well. Consumers are no longer passive recipients of one-size-fits-all policies. They’re asking smarter questions, comparing options digitally, and demanding transparency. Today’s consumers are forcing insurers to adapt, leading to innovation in digital platforms such as app-based insurance, AI-driven risk analysis, and climate-adjusted underwriting.
According to BCG Insurance’s Global Consumer Radar, 33% of consumers report increasing their insurance budgets. This trend likely follows premium increases driven by recent catastrophes and underscores a key insight: insurance demand is largely inelastic.
The data is crucial. It suggests that even consumers who previously viewed insurance as an unnecessary expense are now prioritizing it possibly over retirement savings or college funds. Is that necessary? Perhaps, perhaps not. However, if you need a mortgage, homeowner’s insurance is mandatory. In 2025, coverage is becoming a non-negotiable part of household spending.
Many have painfully learned that inaction is the most expensive decision. The silver lining? The insurance industry is being reshaped in real time by people who now understand that financial resilience is a form of climate preparedness. Whether driven by trauma, fear, or sheer practicality, more individuals are stepping into the driver’s seat when it comes to managing personal risk. Here are a few ways we are encouraging clients to do the same:
While fear has prompted many to take action, experts agree that education and proactive planning still have a long way to go. Meeting with a licensed financial advisor is one of the most powerful steps a consumer can take to ensure prioritized action and appropriate coverage.
Advisors can help identify coverage gaps and offer strategies to manage affordability, especially in high-risk zones where premiums are rising. Instead of waiting for a storm to force your hand, take time to talk with your advisor about your personal circumstances and create a plan before the next crisis hits.
Sources:
Boston Consulting Group. Insurance 2025: Adapting to a New Era of Opportunities and Challenges, 2025, p. 7 https://media-publications.bcg.com/Insurance-2025-Adapting-to-a-New-Era-of-Opportunities-and-Challenges.pdf?utm_source=chatgpt.com
Lazar, Kristine. “Wildfire Survivors Are Finding Out They Are Underinsured after Losing Their Homes.” CBS News Los Angeles, 29 Apr. 2025, https://www.cbsnews.com/losangeles/news/wildfire-survivors-underinsured-insurance-rebuilding/.
Munce, Megan Fan, and Susie Neilson. “Homeowners Accuse Major Insurers of Wildfire Underinsurance in New Lawsuits.” San Francisco Chronicle, 5 Jun. 2025, https://www.sfchronicle.com/california-wildfires/article/underinsurance-homes-los-angeles-20363535.php.
Neilson, Susie. “California and Four Other Western States Launch Probe into Underinsurance after Chronicle Investigation.” San Francisco Chronicle, 14 Jun. 2025, https://www.sfchronicle.com/california-wildfires/article/multistate-underinsurance-investigation-20418092.php.
Neilson, Susie, and Megan Fan Munce. “California’s Wildfire Victims Are Being Devastated by Underinsurance.” San Francisco Chronicle, 2 May 2025, https://www.sfchronicle.com/projects/2025/california-home-insurance-underinsured/.
Smith, R., & Renwick, A. (2023). Climate Disasters and Consumer Insurance Uptake. Journal of Risk and Insurance, 90(2), 143–162. https://doi.org/10.1111/jori.12345
“Wildfire Survivors Are Finding Out They Are Underinsured after Losing Their Homes.” Patch, 30 Apr. 2025, https://patch.com/california/los-angeles/wildfire-survivors-are-finding-out-they-are-underinsured-after-losing-their.
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