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Home insurers are dropping customers based on aerial images

wsj.com

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Re: Home insurers are dropping customers based on aerial images

#161

Post by neilv »

trogdor wrote: post #138
brogrammernot wrote: post #69

Earlier quoted context omitted.

Alright, I spent years working and building 0-1 insurance products. Let me peel back some stuff that’s been happening behind the scenes. Some officials are elected and some are appointed which all depends on the state. Appointed officials are usually more reasonable and elected are not because higher rates = mad voters = re-election chances lower. For a long time, insurers have struggled to get sufficient rate change…

Why are insurance rates regulated by the government? I understand that the state has a strong interest in ensuring that insurance companies are adequately capitalized, but I don’t understand the state interest in directly regulating premium prices. (Or is that not what you are referring to?)

Why is basic insurance for ordinary people a for-profit business at all, rather than something the collective (administered by the state) does to soften any misfortune that hits any of its members?

Re: Home insurers are dropping customers based on aerial images

#162

Post by rchaud »

bvan wrote: post #92

Insurance works on the basis of (a) quantifying risk and (b) charging fairly for the protection. In the long-term, getting better at (a) and consequently, (b), is in everybody’s interest. For far too long, certain risk covers have been under-charged. At the end of the day, difficulty in finding affordable insurance, or any insurance at all, tells you something about the level of risk and the ability of insurers to ch…

If this were true, health insurers would have taken a cudgel to the US hospital system decades ago and come up with a more efficient system. They haven't because an opaque system allows them to maintain their own opaque practices.

Re: Home insurers are dropping customers based on aerial images

#163

Post by gizmo686 »

salawat wrote: post #86
brogrammernot wrote: post #81

Earlier quoted context omitted.

Thanks for the insightful and thought-provoking comment.

They are not wrong. Insurance with perfect info ceases to ne any form of a recognizable social good. In fact, it just becomes indistinguishable from a sanctioned form of populational segregation, instead of the pull-a-long stick-with-carrot through which risk is mitigated against long tail events through active propagation of best practices as a condition of coverage. Insurance companies should be exposed to the same…

Insurance with perfect info would be an amazing social good. If they could say "you can build a house there, but it will burn down in a forest fire 15 years from now", we could make an informed decision on if we want to build that house.

Re: Home insurers are dropping customers based on aerial images

#164

Post by username332211 »

trogdor wrote: post #138
brogrammernot wrote: post #69

Earlier quoted context omitted.

Alright, I spent years working and building 0-1 insurance products. Let me peel back some stuff that’s been happening behind the scenes. Some officials are elected and some are appointed which all depends on the state. Appointed officials are usually more reasonable and elected are not because higher rates = mad voters = re-election chances lower. For a long time, insurers have struggled to get sufficient rate change…

Why are insurance rates regulated by the government? I understand that the state has a strong interest in ensuring that insurance companies are adequately capitalized, but I don’t understand the state interest in directly regulating premium prices. (Or is that not what you are referring to?)

There are votes in it.

Or, to be precise, the benefits are concrete go to precise groups of people, the costs are abstract and diffuse. Same thing as protective tariffs.

Re: Home insurers are dropping customers based on aerial images

#165

Post by rybosworld »

halfcat wrote: post #106
hn_throwaway_99 wrote: post #52

Earlier quoted context omitted.

I 100% agree with landedgentry. I don't really have any problem with insurers using drone photos - anyone can take drone photos of anyone else's property - and I'm not really a fan of the article calling it "spying" to imply some special kind of nefarious behavior. But I do think the total bullshit is that companies are just using it to come up with essentially fake reasons to drop customers: > Cindy Picos was droppe…

Why aren’t insurance companies required to operate like market makers in the equities markets, where they’re free to choose the price they’re offering, but must offer a price in the market they’re in? If the roof needs replacing (in the insurance company’s view) then charge whatever the rate is that covers that and still makes them a profit. Don’t just deny coverage.

If you ever look at the options chain on a thinly traded equity, you'll notice small volume and very large bid/ask spreads. Sometimes the bid/ask spread is so large that it looks like a computer glitch.

The primary insurance market is even more illiquid than thinly traded options.

Re: Home insurers are dropping customers based on aerial images

#166

Post by dan-robertson »

gumby wrote: post #143
trogdor wrote: post #138

Earlier quoted context omitted.

Why are insurance rates regulated by the government? I understand that the state has a strong interest in ensuring that insurance companies are adequately capitalized, but I don’t understand the state interest in directly regulating premium prices. (Or is that not what you are referring to?)

For the same reason credit card interest rates are regulated: there's an asymmetry in bargaining power. Car prices are not regulated because there are plenty of options for the consumer.

I thought there were also requirements that insurance rates are profitable (in expected value) to prevent some loss-making customer acquisition strategies and to reduce some long-term risks from insurers going bust. I’m not very confident in this claim.

Re: Home insurers are dropping customers based on aerial images

#167

Post by jeffbee »

Auburn, California, is a mistake and should be uninsurable, and I don't want either my tax dollars or my insurance premiums being used to subsidize the treehouse lifestyle of exurban home owners. Whether this specific person's roof is rotted or not isn't really the point. Right now, the real estate sprawl industry is running their printing press at 110% design speed, trying to convince everyone that people who live on the fringes of civilization are getting a bad deal. But from where I sit, in a fireproof building downtown, I see it differently. We need a massive correction in California, under which we stop subsidizing the firefighting, insurance, and roads that serve the sprawl.

The subject property, by the way: https://www.google.com/maps/place/2350+Buttes+View+Ln,+Aubur...

Re: Home insurers are dropping customers based on aerial images

#168

Post by hilux »

tptacek wrote: post #139
sircastor wrote: post #12

I'm going to assume that nobody's insurance premiums or deductibles are going down from this data. No analysis is making the insurer say "Oh, that roof is in much better condition despite its age." Insurance feels like the biggest scam in the history of the world. You are legally obligated to pay us for nothing, most of the time.

You're not legally obligated to pay for homeowners insurance.

It is probably required if you have a mortgage.

And of course it's a practical requirement for anyone whose net worth is primarily in their home.

Re: Home insurers are dropping customers based on aerial images

#169

Post by t0mas88 »

gmd63 wrote: post #72
kjkjadksj wrote: post #31

Earlier quoted context omitted.

Why are they in the business of denying coverage? They are insurance. They estimate their payouts from the entire pool and price your premiums accordingly. Paying out should therefore not really affect their bottom line if they price the premiums appropriately.

Home insurance companies are leaving Florida because it's not profitable to operate in an area with so much vulnerability to hurricane damage. Also, the only thing stopping medical insurers from denying coverage or increasing prices for people with pre-existing conditions is the Affordable Care Act.

There is an important additional factor, regulators are setting limits on rates / rate increases. Florida is not profitable with those limits. If the insurance companies are free to set any rate, they would happily cover a high hurricane risk area.

You can get insurance on very risky things. The way it's done is high rates and "reinsurance" which means the insurance company shares the risk (and premium) with a pool of other insurance companies. For policies with a large possible payout (e.g. a big ship or aircraft) this is always done, to avoid issues for the insurance company that gets unlucky enough to have to pay out.

Re: Home insurers are dropping customers based on aerial images

#170

Post by ska »

sircastor wrote: post #12

I'm going to assume that nobody's insurance premiums or deductibles are going down from this data. No analysis is making the insurer say "Oh, that roof is in much better condition despite its age." Insurance feels like the biggest scam in the history of the world. You are legally obligated to pay us for nothing, most of the time.

> I'm going to assume that nobody's insurance premiums or deductibles are going down

That's exactly backwards. If you have better information than a competitor, you have an effective strategy to steal their lower-risk customers and still make a ton of money.

This absolutely will happen. And the rates for the higher-risk customers they are left with will absolutely go up.

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