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

insurancejournal.com

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

#221

Post by MrMember »

sokoloff wrote: post #131
Tangurena2 wrote: post #128

Earlier quoted context omitted.

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…

> Some coastal states have passed laws prohibiting the consideration of climate change in insurance and governmental decisions. There's a significant feeling I have of "I hope residents of those states are happy with the outcomes created by their state government's choices."

In California home insurance companies cannot take into account any future forecasts (including climate change) when setting rates, only past events. There are also yearly caps on how much they can raise rates. The results of these policies on the state of home insurance in California speak for themselves.

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

#222

Post by Retric »

lotsofpulp wrote: post #151
yborg wrote: post #130

Earlier quoted context omitted.

>Buybacks come from net income (profit) Never confuse the textbook economics with the reality of individual incentives. Company management used the low interest rate environment of the recent past to borrow money that was then used in buybacks. Executive management generally is in a no-lose situation with regard to compensation, there may be long-term incentives, but the CEO generally can exit within the term of thei…

> Company management used the low interest rate environment of the recent past to borrow money that was then used in buybacks. Are people who buy stocks not incorporating the increased debt levels of the business in their valuation of the share price?

What’s the alternative?

Due to inflation people with large amounts of capital have little choice but to invest somewhere. Ultra safe bonds are also ultra low yield which limits options.

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

#223

Post by lotsofpulp »

Retric wrote: post #222
lotsofpulp wrote: post #151

Earlier quoted context omitted.

> Company management used the low interest rate environment of the recent past to borrow money that was then used in buybacks. Are people who buy stocks not incorporating the increased debt levels of the business in their valuation of the share price?

What’s the alternative? Due to inflation people with large amounts of capital have little choice but to invest somewhere. Ultra safe bonds are also ultra low yield which limits options.

The alternative to buying a business that has borrowed too much and hence will have poor return on investment is to not invest in the business. It is always a choice to take more risks than the bare minimum (i.e. buying USG debt).

If a business borrows money, and people still buy the shares, then that means people are willing to bet the amount borrowed will still allow for a sufficient return on investment. So where is the problem?

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

#224

Post by alistairSH »

Spooky23 wrote: post #220
alistairSH wrote: post #144

Earlier quoted context omitted.

I've wondered the same about storm damage in Florida. There has to be a better option than shingles, even really high quality shingles.

Metal roofs last 3x longer but cost 7x more. Depending on climate there’s some other options too.

Metal roofs last 3x longer but cost 7x more.

... in a non-hurricane zone, right?

Sounds like some of these coastal areas are on a ~5 year roof replacement cycle. Up here in DC, shingles last for 30+.

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

#225

Post by Manuel_D »

Invictus0 wrote: post #192
Manuel_D wrote: post #178

Earlier quoted context omitted.

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.

"costs are zero" Payroll? Overhead? Marketing? Rent? This isn't a thought exercise, there are real costs associated with being in a certain business.

All of which the competitor also has to pay, on top of losing money on each customer.

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

#226

Post by lotsofpulp »

ryandrake wrote: post #213
Analemma_ wrote: post #92

Earlier quoted context omitted.

> it's that the system that made mandatory the concept of insurance for a dignified, modern life You're talking like this is some kind of conspiracy theory, when there's not really any other way it could work. Banks will not give you a mortgage without home insurance, because then it would be an unsecured loan against an asset which would be worthless, with them eating the loss, if the house was destroyed. That's not…

What stops the bank from taking out their own policy and charging a higher interest rate on the mortgage to make up for it. Offer two interest rates: One rate for insured homes, one rate for uninsured homes. If that were offered, I'd definitely take the higher rate and choose to have the bank insure my home: Mortgage interest is tax deductible but home insurance isn't.

Nothing stops them, but lenders are not necessarily in the business of lending money for homes and then collecting interest for 30 years.

Lenders are mostly in the business of underwriting loans so that they conform to certain standards, such as those set by the government (fannie mae/ginnie mae/freddie mac/etc), and then selling them to the government after which their cash flows then get sold to investors looking for fixed income investments.

So it might be too much work to for little return to step outside of this optimized system and custom design a mortgage product, especially when the alternative is government subsidized mortgages whose interest rates you will not be able to beat.

>Mortgage interest is tax deductible but home insurance isn't.

Since 2017, 90% of US tax filers do not itemize, and so they cannot deduct home mortgage interest.

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

#227

Post by ryandrake »

lotsofpulp wrote: post #226
ryandrake wrote: post #213

Earlier quoted context omitted.

What stops the bank from taking out their own policy and charging a higher interest rate on the mortgage to make up for it. Offer two interest rates: One rate for insured homes, one rate for uninsured homes. If that were offered, I'd definitely take the higher rate and choose to have the bank insure my home: Mortgage interest is tax deductible but home insurance isn't.

Nothing stops them, but lenders are not necessarily in the business of lending money for homes and then collecting interest for 30 years. Lenders are mostly in the business of underwriting loans so that they conform to certain standards, such as those set by the government (fannie mae/ginnie mae/freddie mac/etc), and then selling them to the government after which their cash flows then get sold to investors looking f…

> Since 2017, 90% of US tax filers do not itemize, and so they cannot deduct home mortgage interest.

Wow, as someone who's been itemizing his whole life, that's astonishing if true. Learned something new today!

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

#228

Post by Analemma_ »

ryandrake wrote: post #213
Analemma_ wrote: post #92

Earlier quoted context omitted.

> it's that the system that made mandatory the concept of insurance for a dignified, modern life You're talking like this is some kind of conspiracy theory, when there's not really any other way it could work. Banks will not give you a mortgage without home insurance, because then it would be an unsecured loan against an asset which would be worthless, with them eating the loss, if the house was destroyed. That's not…

What stops the bank from taking out their own policy and charging a higher interest rate on the mortgage to make up for it. Offer two interest rates: One rate for insured homes, one rate for uninsured homes. If that were offered, I'd definitely take the higher rate and choose to have the bank insure my home: Mortgage interest is tax deductible but home insurance isn't.

Why would insurers provide insurance to the bank, but not you? The issue is the house, not who is paying for the policy.

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

#229

Post by lotsofpulp »

ryandrake wrote: post #227
lotsofpulp wrote: post #226

Earlier quoted context omitted.

Nothing stops them, but lenders are not necessarily in the business of lending money for homes and then collecting interest for 30 years. Lenders are mostly in the business of underwriting loans so that they conform to certain standards, such as those set by the government (fannie mae/ginnie mae/freddie mac/etc), and then selling them to the government after which their cash flows then get sold to investors looking f…

> Since 2017, 90% of US tax filers do not itemize, and so they cannot deduct home mortgage interest. Wow, as someone who's been itemizing his whole life, that's astonishing if true. Learned something new today!

Due to the drastic increase in the standard deduction as part of 2017 Tax Cuts and Jobs Act. The standard deduction is scheduled to drastically decrease as of Dec 31, 2025, though.

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

#230

Post by Retric »

lotsofpulp wrote: post #223
Retric wrote: post #222

Earlier quoted context omitted.

What’s the alternative? Due to inflation people with large amounts of capital have little choice but to invest somewhere. Ultra safe bonds are also ultra low yield which limits options.

The alternative to buying a business that has borrowed too much and hence will have poor return on investment is to not invest in the business. It is always a choice to take more risks than the bare minimum (i.e. buying USG debt). If a business borrows money, and people still buy the shares, then that means people are willing to bet the amount borrowed will still allow for a sufficient return on investment. So where…

US government debt is only safe in that it guarantees a small loss. It isn’t an option for say a retirement fund looking for a long term income stream. Money has value, but for an hedge fund or wealthy individual it’s also a hot potato they want to trade for something else.

> If a business borrows money, and people still buy the shares, then that means people are willing to bet the amount borrowed will still allow for a sufficient return on investment.

The problem isn’t with the company but with the market. Sure the value of those companies adding debt drops with the reduction in their expected ROI but that’s not the end of the story because you need to consider how that money is reinvested.

Suppose the S&P collectively borrowed 10 trillion dollars doing this. Each company that takes part is as you say a worse choice, but the overall market is now inflated with this money so everything becomes a worse investment simultaneously. Which then sends some money back to the original companies who issued dividends/ buybacks with borrowed money.

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