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Is the world becoming uninsurable?

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Re: Is the world becoming uninsurable?

#281

Post by atleastoptimal »

layman51 wrote: post #46
atleastoptimal wrote: post #29

Every year, humanity grows richer, more resilient to natural disasters, and more capable of predicting natural disasters and their negative outcomes. The point of insurance is to spread the expected burden of calamities that will affect a minority of a population to the entire population, so that those affected will have a financial safety net. This principle works regardless of how disastrous or prone to calamity a…

I agree with your analysis of how insurance works. But, wouldn’t the burden of calamities only spread amongst the insurance holders? I am not sure what the factors are, but if a lot more people go without insurance (because they are independently wealthy or live in an uninsurable location), doesn’t change the calculation?

People who go without insurance because they live in an uninsurable location would leave those who remain insured better off, because the insurance company would be less likely to need to make an exorbitant payout to the victims in the disaster-prone area. This is of course true as long as insurers don't manipulate the market to keep premiums high despite their total expected claim outlay lowering.

As an insurance buyer, in a hypothetically ideal market situation, you would want all those who also purchase from the same insurer to have the lowest risk of needing an expensive claim paid. The lower the expected payout * risk of disaster means lower premiums for the insurer to still make an expected profit.

I think what will happen is simply: Houses are built in places which are more insurable, existing danger-prone houses will exist until they are destroyed, until then they will increasingly be status objects for the elite who can afford the loss and have inaccurate risk appraisal. The fact that so many valuable objects are kept in Malibu/Palisades homes despite fires happening there a lot (as recent as 2018) indicates homeowners in disaster-prone areas aren't acting perfectly rationally.

Re: Is the world becoming uninsurable?

#282

Post by Scoundreller »

creato wrote: post #248
chii wrote: post #173

Earlier quoted context omitted.

> Resistant homes will pay nearly the same prices as everyone else. but this means the insurance company is mispricing (or is being forced to misprice) the risk of resistant homes. In theory, when correct pricing happens, these resistant homes should face less claims, and thus the premiums paid on them is high profit margin; ala, the customer is a good one, and the insurer should persue this customer more than anothe…

This does happen, it's just done at neighborhood level. That makes some sense, the biggest fire risk factor for your house is probably your neighbor's house burning down.

I kinda figured it was self-destructive arson (detected or undetected) or gross negligence, and I'm mostly paying for those.

Similar to when I look at causes of death for my age group and can pretty much eliminate the top 2 of 3 causes for myself.

Re: Is the world becoming uninsurable?

#283

Post by tobyhinloopen »

American, living in area prone to natural disasters: "Is the WHOLE WORLD becoming uninsurable?"

The answer is obviously "no" since there are other parts of the world that don't live on a hurricane highway nor build houses made from firewood in an area prone to wildfires.

Re: Is the world becoming uninsurable?

#284

Post by theultdev »

matwood wrote: post #269
Dig1t wrote: post #23

Earlier quoted context omitted.

There should be a way to build fire resistant buildings to reduce the cost of insuring them, likely this would be the solution in California without price caps. You can build out of concrete and use fire resistant materials like metal or tile for the roof and your house is nearly fireproof. These buildings would be realistically insurable in both California or Florida. They would cost more to build, not THAT much mor…

Since you mentioned FL, we have mostly solved hurricane level wind resistant building codes. Hurricane ties are cheap and they work. Anything built post hurricane Andrew has these. There's also materials like Hardi Plank siding, which does add a bit more cost, but effectively surrounds the house in a thin layer of concrete. Flooding is a mixed bag. My house is built substantially up and off the ground above the '100…

That's false. Hurricanes are not getting bigger or more frequent due to climate change.

They aren't getting bigger or more frequent at all.

NOAA has stated this multiple times and you can read an article addressing it here:

https://www.climate.gov/news-features/blogs/beyond-data/can-...

It's well known that hurricanes go through multidecadal swings.

Why this keeps getting repeated when it's obviously false is beyond me.

Re: Is the world becoming uninsurable?

#285

Post by kgwgk »

hakfoo wrote: post #234
roenxi wrote: post #179

Earlier quoted context omitted.

If the regulators have defined 'price gouging' as a price substantially below the break even mark, literally any profitable insurance product is implicitly believed by them to be price gouging. The US does a weird thing where "insurance" no longer means pooling risk but some sort of transfer payment welfare system. If they're going to define "price gouging" as profitable activity it is hard to see how the economy is…

The math of insurance suggests that, if it needs to be widely carried (either due to things like mortgage requirements, or the simple realization most people don't have enough resources to absorb a major catastrophe themselves), the most economical way to go is to have a single risk pool that's as broad and diverse as possible, so it can swallow a large clustered crisis more easily. Yes, this is a bit of robbing Pete…

> I always found it funny when insurance marketing talks about "personalized rates", when the goal is to DE-PERSONALIZE the risk.

Actuarial science is not often associated with “fun” but they have been partying for centuries.

“In 1662, a London draper named John Graunt showed that there were predictable patterns of longevity and death in a defined group, or cohort, of people, despite the uncertainty about the future longevity or mortality of any one individual. This study became the basis for the original life table. Combining this idea with that of compound interest and annuity valuation, it became possible to set up an insurance scheme to provide life insurance or pensions for a group of people, and to calculate with some degree of accuracy each member's necessary contributions to a common fund, assuming a fixed rate of interest.”

> you can either isolate the LA customers and charge them the "real" price of the risk […] or you can include them in the broad pool

Maybe you don’t understand that the insurance business is based on including everyone in one pool (so it can swallow a large clustered crisis more easily) AND charge them (more than) the real price of the risk.

Re: Is the world becoming uninsurable?

#286

Post by [deleted] »

energy123 wrote: post #159
api_or_ipa wrote: post #11

Every era has it's Malthusian alarmists and without fail, each has been proven wrong by exactly the same thing the author decries and says won't work this time: technological change and adaption. There's no reason to think this time will be any different. Will some places become uninsurable? Sure, plenty of places over time have become uninsurable. Will the whole world became uninsurable? Absolutely not, because we a…

> "we are quite good at adaptation in the face of adversity." Historically, much of this "adaptation" was achieved via migration. If your vision for the future includes mass migration away from the equator into the cooler north, then okay, we are on the same page as to one of the plausible outcomes.

[deleted]

Re: Is the world becoming uninsurable?

#287

Post by johnisgood »

_tariky wrote: post #230
Animats wrote: post #107

Not uninsurable, but buildings are going to have to become tougher. It's happened before. Chicago's reaction to the Great Fire was simple - no more building wooden houses. Chicago went all brick. Still is, mostly. The trouble is, brick isn't earthquake resistant. Not without steel reinforcement. I live in a house built of cinder block filled with concrete reinforced with steel. A commercial builder built this as his…

In Yugoslavia, in 1969, one of the biggest earthquakes occurred, destroying several cities. After that, the country’s leaders decided to change building codes. Even today, although Yugoslavia no longer exists, the countries that adopted those codes have homes capable of withstanding earthquakes up to 7.5 on the Richter scale. My main point is that if we face major natural disasters, we need to take action to mitigate…

Yeah, I'm surprised that the damages of the LA fire occurred, because it was known beforehand that California had a fire problem (and also have an earthquake problem I think).

I'm here in Eastern Europe and our buildings can withstand a lot of things.

> we need to take action to mitigate their impact in the future. As a foreigner, it seems to me that Americans prioritize building cheap homes over constructing better and more resilient ones.

As an European, it baffles me as well.

If this doesn't happen to "cheap" homes here, why does it happen in California, to rich people's houses?

Re: Is the world becoming uninsurable?

#288

Post by inferiorhuman »

lostlogin wrote: post #213
CalRobert wrote: post #198

Earlier quoted context omitted.

For what it’s worth, you can get a house with no insurance or mortgage. They tend to be cheap. I had an uninsured thatched cottage for a while, it was 68k

You can have a mortgage with no insurance (after purchase day) here in New Zealand. The bank won’t like it, but also won’t know.

You can do that in the US too. As well the banks won't like it, so what they'll do is protect their assets with force-placed insurance that you pay a hefty premium for.

A quick google suggests a similar situation in that there's no legal mandate but most lenders in NZ require insurance.

Re: Is the world becoming uninsurable?

#289

Post by nobodywillobsrv »

johnisgood wrote: post #287
_tariky wrote: post #230

Earlier quoted context omitted.

In Yugoslavia, in 1969, one of the biggest earthquakes occurred, destroying several cities. After that, the country’s leaders decided to change building codes. Even today, although Yugoslavia no longer exists, the countries that adopted those codes have homes capable of withstanding earthquakes up to 7.5 on the Richter scale. My main point is that if we face major natural disasters, we need to take action to mitigate…

Yeah, I'm surprised that the damages of the LA fire occurred, because it was known beforehand that California had a fire problem (and also have an earthquake problem I think). I'm here in Eastern Europe and our buildings can withstand a lot of things. > we need to take action to mitigate their impact in the future. As a foreigner, it seems to me that Americans prioritize building cheap homes over constructing better…

The government banned insurance companies from raising prices. They used tax payer money to subsidize this for a while which increase home prices. Eventually insurance companies stopped offering insurance.

When state actors even dabble in socialism disasters happen people die.

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