As always, thanks you to Isabel Rittenberg for her help. And another thanks to Adobe's Leonardo for generating this art from the prompt "House made of avocado toast with storm clouds in the style of Christina's World"

It is happening again. Millennials are getting screwed. 

This news probably won’t come as a surprise. Like my peers, I’m aware of the economic “kick me” sign taped to our generation’s back. Singed by the tail-end of the dotcom bust, scorched by the Great Recession, and absolutely fried by the pandemic recession, Millennials simply love to be kicked while we’re already down.  

So, what’s it going to be this time? 

Wind, fire, water, and mud. Storms, waves, and earthquakes. The elements are coming — more violently and frequently than ever — to destroy Millennial’s last, best financial lifeline: their parent's home. 

Over the last 20 years, as home values have soared, Baby Boomers, who own over 40% of the homes in the US, have enjoyed a corresponding surge in household wealth. With Boomers aging, Millennials finally stand to enjoy a financial win: the “largest wealth transfer in history.” That is, unless something terrible were to happen?

It already happened. 

Homeownership can be an incredible mechanism for wealth creation. According to the National Association of Realtors in 2022, “Homeownership is the largest source of wealth among families, with the median value of a primary residence worth about ten times the median value of financial assets held by families.” 

But as much wealth as they can create, homes are an equally potent conduit for risk. Homes burn down, flood, wash away, get knocked about by trees, and otherwise bear the brunt of the increasing risks of our climate. And with “billion dollar disasters” becoming more frequent, it is more difficult and much, much more expensive to effectively protect and insure our homes. And it’s only going to get worse. 

Over the last 24 months, home insurance prices have increased by 15% or more in at least 31 states. In states like Florida and Texas, these increases are much higher, closer to 50% (and for the ultra-rich, insurance costs can be as much as 150% of the median American home price for one year’s worth of insurance). 

And that’s if you can even get a price. In 2023, home insurance availability is down by as much as 53%. In other words, a shopper who had 6 quotes to pick from in 2022 will only have 2 or 3 insurers interested in their business this year. More and more homeowners can’t find policies with enough coverage, leaving them to decide between going without, or turning to the rapidly expanding and unregulated surplus insurance market.

Millennials, as they eagerly await financial relief, are now contending with this new reality: the largest part of their inheritance — a home — will come laden with new liabilities, expenses, and probably some predatory behavior for good measure.

And like many of the economic problems that have saddled millennials, this one has been caused by years of inaction and avarice. 

Let’s take a look at interest rates as an example — something that insurers and reinsurers are eager to blame for their price hikes right now. While interest rates crept up from 2016 (until they were slashed in 2020), reinsurers — the companies that insure the insurance companies — kept their own rates at historic lows, happy to fuel reckless growth with cheap capital. 

Now though, as interest rates hit their highest points since 2000, reinsurers’ margins are getting squeezed, and they’re scrambling. Like the regional banks who were caught flat-footed by rising rates, reinsurers (and insurers) reacted sluggishly — and American consumers are paying the price

“Sluggish,” of course, is a matter of opinion. Someone else might say “opportunistic.” Over the last decade, as climate risks increased and capital was cheap, insurers were happy to keep their rates low and snap up customers with unsustainably cheap policies, enabling growth in regions that just a few years later are being declared “uninsurable.” 

In fact, while those “billion dollar disasters” increased dramatically across the US, insurance carriers rarely increased prices by more than 4% in a year. History doesn’t repeat, but it often rhymes — and while Millennials will not live through the 2008 crash again, they may start hearing familiar verses. 

Insurers will explain away these rushed price hikes by talking about climate risk or fears of inflation, but that’s window dressing. 150% price hikes and dramatic state withdrawals are signs of an industry that should have known better (and as recent loose-lipped lobbyists revealed, is probably just cynically exploiting current circumstances) but instead nearly got caught in the same trap as Silicon Valley Bank.  

So let’s come back to our weary Millennials, staring down an inherited home that will come with 30+ years of insurance obligations that may cost as much as their parents’ mortgage. What’s to be done? 

On an individual basis, there’s no end to the great advice out there. Do what you can to improve the resilience of your home. Shop for insurance frequently and with the same rigor you bring to the rest of your personal finances. If you can improve your credit score, do it, and then shop for a new quote. 

The more interesting and controversial question is this: what should concerned officials do about it? 

At the state and federal level there are clear steps that regulators can take to help American insureds. State regulators must keep their composure and resist the tantrums, and frankly, the coordinated capital strike, by insurance companies. These are cynical maneuvers — perhaps a cousin of Greedflation — to get the price hikes they should’ve implemented a decade ago in one-shot, often with a taxpayer funded bail-out fund to boot. And despite the hew and cry, the insurance industry itself is quietly predicting more profitability in the coming years anyways, as the effects of higher interest rates show up in investment portfolios. 

As an entrepreneur, it’s not satisfying to suggest that the solution is government intervention — something the insurance industry has been largely protected from (at the federal level) by the McCarran-Ferguson Act. But the government is one of the few entities large enough to reign in the mundane consumer abuses of the insurance industry, and it needs to take action before the largest generation in the US gets screwed, again. 

Insurance is an industry that has been happy to look the other way and sell policies in high-risk areas as climate change took its increasing toll. Insurance executives earn an average of $25 million a year, while American families choose between protecting their most valuable generational asset or putting gas in their car. And for some reason, while pleading poverty, major insurers are still blanketing the airwaves with billions of dollars of TV advertising.

Insurance is a deeply serious and critical piece of the American financial ecosystem. And the way it is operating today is not acceptable — it is neither functional, nor is it fair. Americans, and Millennials in particular, are getting screwed again. I’m not sure how much more we can take.