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Farmers Insurance Laying Off 11% of Workforce, Citing Industry Challenges

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Re: Farmers Insurance Laying Off 11% of Workforce, Citing Industry Challenges

#181

Post by seanharper »

JKCalhoun wrote: post #2

All I see in the article is the discussion of "profits". I would think the PR department could come up with something about "trying to keep costs competitive for our customers" or something like that. Instead they're telling California and Florida customers to take a hike ... along with 11% of their employees. When is the last time we heard a company enact a company-wide, 50% cut in officer's salaries and a freeze on…

I am the CEO of a tech company that provides homeowners insurance in hard to insure places.

I don't think it's really a bad thing for a company like Farmers to cut costs. Insurance companies are by and large pretty bloated from a cost perspective and could do to be more efficient, reduce overhead, use more technology.

It's very common for homeowners insurance companies to have expense ratios of 30-40%. So if you are paying $3000 per year thats ~$1000 EVERY YEAR that is being wasted on branches/agencies you don't visit and corporate overhead.

Re: Farmers Insurance Laying Off 11% of Workforce, Citing Industry Challenges

#182

Post by sokoloff »

Manuel_D wrote: post #178
pc86 wrote: post #169

Earlier quoted context omitted.

This only works if you can stay profitable enough long enough for it to start to happen. The fewer customers you have, the riskier your pool, and the higher your prices have to be. Suddenly $100 becomes $125 becomes $150 for the same or less profit. It's safer to just get out of the market entirely. You can always go back in but if you stay in too long it could wipe you out entirely.

If all your customers are flocking to the undercharging competitor, you're out of the market anyway and your costs are effectively zero since you don't have anyone filing claims. There's no practical scenario where the competitor, which is losing money on each customer in aggregate, lasts longer than a company with no customers.

Picking up nickels in front of a steamroller can appear profitable for a shockingly long time, as the traders using the "I'll just naked short VXX for easy money!" periodically find out.

Re: Farmers Insurance Laying Off 11% of Workforce, Citing Industry Challenges

#183

Post by harshitaneja »

selectodude wrote: post #175
harshitaneja wrote: post #143

Earlier quoted context omitted.

Yes. But not from the same group of people over and over again. At least not in the laissez faire style systems where the market would stop assuming uniform risk and increase insurance rates to the expected values based on the probabilities of the specific circumstance. In a dirigiste economy, state would choose certain social factors to protect and keep the distribution of costs uniform for the betterment of the who…

Which ends up being the issue with any insurance programs for the uninsurable. 100 percent of the time, it will end up being a subsidy to the policy holder. If it weren’t, they’d be insurable.

Exactly. And a market in general wouldn't ever create those programs themselves if they don't provide any direct or indirect profits. So these would be state directed. I am not sure we have any disagreement anywhere. :)

Re: Farmers Insurance Laying Off 11% of Workforce, Citing Industry Challenges

#184

Post by AaronM »

sokoloff wrote: post #106
uoaei wrote: post #98

Earlier quoted context omitted.

All the facts you state about the environment are true. But it makes zero sense IMO to make this an individual decision governed by the whims of the market and replicated anew across every single person. That is a purely reactive stance and, being humans, we can do better than that. We are smart enough to be proactive about these sorts of things, and considering we already have such an apparatus called "the state" to…

If enough insurance companies decide to stop doing business in Florida, Florida is welcome to create a state-run insurance company to serve its residents. That's literally the apparatus of the state (in both senses of the word) used to the benefit of the residents. That may just have the effect of moving the problem from "my insurance premiums are too high" to "my taxes are too high", because at the end of the day, s…

Florida already has a state run insurance company for this exact reason

https://www.citizensfla.com/who-we-are

Re: Farmers Insurance Laying Off 11% of Workforce, Citing Industry Challenges

#185

Post by hypeit »

Invictus0 wrote: post #123
hypeit wrote: post #114

Earlier quoted context omitted.

> after you pay for marketing There should be no marketing if it's mandated. These companies should not be run for profit since having insurance is required by law in many situations.

[flagged]

> Ok so your idea is to have the government be in the insurance business?

Yes, I think all insurance should be nationalized. You may not agree, but accusing me of not thinking clearly is an ad hominem.

Re: Farmers Insurance Laying Off 11% of Workforce, Citing Industry Challenges

#186

Post by hypeit »

whalesalad wrote: post #124
hypeit wrote: post #114

Earlier quoted context omitted.

> after you pay for marketing There should be no marketing if it's mandated. These companies should not be run for profit since having insurance is required by law in many situations.

You’re describing socialism and we are operating in a capitalist society. I’m not advocating for or against but it’s naive to make these claims about how this should just be pure, devoid of evil and provided by the state. This debate will go on until the end of days.

I am describing a socialistic policy, which I think private but mandatory for-profit insurance makes a great case for. We already have government controls in place, if we lived in a "capitalist society", there would be no such thing as a health insurance mandate. We live in a hybrid world designed for regulatory capture and corruption, with our required payments flowing straight to executives and shareholders instead of actually providing a public good.

Re: Farmers Insurance Laying Off 11% of Workforce, Citing Industry Challenges

#187

Post by sokoloff »

harshitaneja wrote: post #143
sokoloff wrote: post #115

Earlier quoted context omitted.

Isn't the essence of pooled-risk insurance that a vast minority of policies will represent a disproportionate number of the claims in any given time period?

Yes. But not from the same group of people over and over again. At least not in the laissez faire style systems where the market would stop assuming uniform risk and increase insurance rates to the expected values based on the probabilities of the specific circumstance. In a dirigiste economy, state would choose certain social factors to protect and keep the distribution of costs uniform for the betterment of the who…

> even in those systems, I am not sure we should have beachfront properties or similar as factors

If beachfront properties have substantial risks that inland properties don't (such as flooding from storm surge*), then not using is_beachfront? as a factor will end up being a subsidy to the owners of beachfront properties.

* - https://www.nhc.noaa.gov/surge/

Re: Farmers Insurance Laying Off 11% of Workforce, Citing Industry Challenges

#188

Post by AlbertCory »

uoaei wrote: post #98
whalesalad wrote: post #84

Earlier quoted context omitted.

The world is physically changing. Weather patterns are shifting. Hot is getting hotter. Wet is getting wetter. Wildfires are becoming larger, more prevalent and more destructive. Sea levels are rising. Ocean temperatures are rising. Parts of the world are becoming inhospitable for human life. We can try as we might to terraform and engineer against it but Mother Nature will win. At some point as an insurance company…

All the facts you state about the environment are true. But it makes zero sense IMO to make this an individual decision governed by the whims of the market and replicated anew across every single person. That is a purely reactive stance and, being humans, we can do better than that. We are smart enough to be proactive about these sorts of things, and considering we already have such an apparatus called "the state" to…

"whims of the market"

as opposed to the whims of a few unelected bureaucrats? influenced by the whims of the politicians trying to buy votes?

> We are smart enough to be proactive about these sorts of things,

no, "we" are not. Let's suppose you are, for the sake of argument. What reason is there to think that the sort of people who get appointed to regulatory bodies are equally smart? As opposed to just "well-connected."

Re: Farmers Insurance Laying Off 11% of Workforce, Citing Industry Challenges

#189

Post by lotsofpulp »

Tangurena2 wrote: post #128
JKCalhoun wrote: post #2

All I see in the article is the discussion of "profits". I would think the PR department could come up with something about "trying to keep costs competitive for our customers" or something like that. Instead they're telling California and Florida customers to take a hike ... along with 11% of their employees. When is the last time we heard a company enact a company-wide, 50% cut in officer's salaries and a freeze on…

In the distant past, insurance companies used actuaries to price policies, so that the companies could make informed, rational decisions like "for people in this risk category, if we want to make X% profit, how much do we need to charge for that coverage?" Instead it became "insurance company M is charging $N for this type of policy, we have to charge something similar or else our customers would switch." Along comes…

You ignored the role of government, where the government has to approve insurance pricing and reserves. And the political incentive to push for lower premiums for votes.

Also, pretty sure actuaries are still pricing risk, based on how many people in these organizations’ directories work at insurance companies.

https://www.casact.org/

https://www.soa.org/

Re: Farmers Insurance Laying Off 11% of Workforce, Citing Industry Challenges

#190

Post by seanharper »

Tangurena2 wrote: post #128
JKCalhoun wrote: post #2

All I see in the article is the discussion of "profits". I would think the PR department could come up with something about "trying to keep costs competitive for our customers" or something like that. Instead they're telling California and Florida customers to take a hike ... along with 11% of their employees. When is the last time we heard a company enact a company-wide, 50% cut in officer's salaries and a freeze on…

In the distant past, insurance companies used actuaries to price policies, so that the companies could make informed, rational decisions like "for people in this risk category, if we want to make X% profit, how much do we need to charge for that coverage?" Instead it became "insurance company M is charging $N for this type of policy, we have to charge something similar or else our customers would switch." Along comes…

I don't think that's a fair characterization of how pricing works in homeowners insurance. Every time you want to change prices, you need to justify the price change to the regulator using the actuarial math. The regulator's own actuaries review the actuarial math and, if they don't agree, will not change allow the rate change.

One of the hardest things about insurance is figuring out the probabilities of very unlikely events. Hurricane Andrew was a moderately large storm that directly hit three major population centers - Miami, Ft. Myers and New Orleans. That circumstance is infrequent enough that modeling it statistically leaves a wide range of uncertainty.

I would think about insurance as more of a smoothing mechanism of inherently uncertain outcomes. When something happens that's unexpected and causes a larger loss, that is typically recouped by the industry over a few years of higher rates. That way the industry is still absorbing volatility, which is valuable to their customers, but doesn't require that they be 100% correct about the probabilities of infrequent events.

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