Climate Change Costing U.S. Households Up to $1,300 Annually, New NBER Report Finds

A new working paper from the National Bureau of Economic Research (NBER), titled "Who Bears the Burden of Climate Inaction?", authored by Kimberly Clausing (UCLA), Christopher Knittel, and Catherine Wolfram (both from MIT), delivers a rigorous economic accounting of how climate change is already affecting American households. Drawing on extensive climate, insurance, utility, and mortality data, the report quantifies the costs of climate inaction—not in abstract terms, but in real dollars and health outcomes borne by individuals and families across the country.

The researchers find that U.S. households are incurring between $400 and $900 per year in climate-related costs, with the highest-burden counties facing costs over $1,300 annually. These burdens are not evenly distributed. Low-income households and those in high-risk geographies—particularly the Gulf Coast, Florida, Western wildfire zones, and parts of the Midwest—are being hit hardest. The study emphasizes that most of these costs are not from rising temperatures alone but from extreme weather events, which are more difficult to adapt to and more damaging to infrastructure and homes.

For claims adjusters, this report is deeply relevant. It connects climate change directly to the rising cost and frequency of insured losses, particularly in the homeowners’ insurance market. The analysis finds that home insurance premiums increased 33% between 2020 and 2023, largely due to growing disaster risk. Reinsurance cost pass-throughs accounted for a significant share of that spike, especially in high-risk ZIP codes. The authors estimate that climate change alone is responsible for $73–$356 of annual premium increases per household, depending on modeling assumptions. This sharpens the conversation around rate adequacy, geographic underwriting, and risk segmentation—areas central to adjuster operations and carrier planning.

Energy costs are also rising due to climate impacts, especially from damage to utility infrastructure. Utilities in California, Texas, Florida, and Oregon have implemented rate hikes specifically tied to wildfire and storm recovery, with households absorbing those costs through their monthly bills. These rate increases, compounded by greater usage from cooling needs, add up to an additional $30–$46 per household per year, again with disproportionate impacts on lower-income groups. These figures are crucial for adjusters handling business interruption, subrogation, and infrastructure-related losses.

The report also quantifies mortality and health costs from wildfire smoke, estimating an annual $129 per household in premature death costs, primarily among the elderly. These findings may not directly affect property claims, but they illustrate the broader public health implications of climate-exacerbated events—implications that are likely to shape federal disaster declarations, mitigation funding, and litigation trends.

Importantly, the study identifies gaps in standard insurance coverage—including exclusions for flooding, sea-level rise, and storm surge—which are likely to become more contentious as events increase. It also flags the growing problem of insurance non-renewals and market exits, particularly in Florida, California, and the Gulf Coast, which increase the complexity of claims and recovery efforts in affected regions.

For adjusters, underwriters, and insurance executives, this NBER report is not just an academic exercise—it’s a clear, quantified forecast of how climate change is altering the landscape of insured risk today, and where the pressure points are intensifying. It offers both macro-level context and practical implications for day-to-day claims work, from understanding premium trends to anticipating policy gaps and regional vulnerabilities. In short, the burden of climate inaction is showing up in the claim files.