Is the world becoming uninsurable? • Hacker News Board

Re: Is the world becoming uninsurable?

#241

Post by logicchains » Fri, Jan 17, 2025, 6:31 AM UTC

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…

This completely ignores incentives. If insurance isn't allowed to charge people more who live in fireprone or floodprone areas, more people will live in such areas, and overall society will have to spend more money rebuilding when disasters inevitably hit those areas. Personalised insurance pricing would allow insurers to charge much more to people living in such areas, which incentivises people not to live there. It's also a moral issue: if everyone pays the same rate, then people who did the right thing and chose to live in an area that wasn't fire or flood prone are subsidising people who did the risky thing.

Re: Is the world becoming uninsurable?

#242

Post by jpalawaga » Fri, Jan 17, 2025, 6:31 AM UTC

scarab92 wrote: post #239

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…

Wood for earthquake resistance vs masonry for fire resistance seems like a false dichotomy. Australia has a lot of experience with building fire resistant homes, and they didn’t do it with masonry, they did it with timber and steel framed homes, plus fireproof cladding and roofing materials, keeping a perimeter free of vegetation and protecting against ember ingress. It is possible to have both earthquake and fire re…

California's building codes are the same. Three problems: overhaul takes generations, monster fire storms will still burn resistant materials, and brush upkeep is difficult

Re: Is the world becoming uninsurable?

#243

Post by rcpt » Fri, Jan 17, 2025, 6:31 AM UTC

Tadpole9181 wrote: post #192

bluedevil2k wrote: post #8

Like we see in California, when the government sets a price ceiling, insurance companies just leave. Same in Florida. If the free market truly was allowed run normally, the insurance rates in Pacific Palisades or on the Florida coast would be so high that no one could afford to live there. Is that a bad thing? If someone was living in a house near where they tested missiles, we'd call them crazy. At what point can we…

> Is that a bad thing? Is it a bad thing that we should consider most of the planet unlivable because disasters happen that aren't eternally and increasingly profitable to insure? Is it a bad thing that literally tens of millions of Americans would no longer have insurance? That you're asking double digit percents of the entire population to leave cities and just... what? Suddenly have new homes in a region with plen…

Most of the populated areas are perfectly safe from fire.

https://wildfiretaskforce.org/updated-fire-hazard-severity-z...

Re: Is the world becoming uninsurable?

#244

Post by devman0 » Fri, Jan 17, 2025, 6:31 AM UTC

iandanforth wrote: post #133

Sabinus wrote: post #112

Earlier quoted context omitted.

If the market is allowed to price insurance correctly then we can motivate building designs to be more disaster resist. If the McMansion can't get insurance but disaster resistant, modest homes do, then people will adapt.

"Correctly" is doing a lot of work here. Some readers might miss that this is double edged. Insurance is a mandated product . You don't have a choice if you want a mortgage, or want to run a business. So while it is true that the sustainable price for insurance in many areas is higher than what current regulations allow, let's not forget what happens in an unregulated insurance market; price gouging.

P&C insurance is a pretty competitive industry, and there are plenty of mutual insurance companies in the P&C business that don't have a price gouging incentive. Most of the regulations that are about reducing counterparty risk for the insured are probably necessary, but price controls are not, and generally, they only distort the market.

Re: Is the world becoming uninsurable?

#245

Post by margalabargala » Fri, Jan 17, 2025, 6:32 AM UTC

loeg wrote: post #237

margalabargala wrote: post #193

Earlier quoted context omitted.

Price gouging isn't actually what we're seeing in the most disaster prone areas. Insurance companies aren't charging open ended prices, they're simply exiting the market. Florida for example.

I believe Florida market exits had more to do with litigation-friendliness than premium caps or disaster risks. E.g., > In 2020, 79 percent of homeowners insurance lawsuits nationwide were in Florida—even as the state accounted for only 9 percent of the U.S. homeowners insurance claims, according to the Florida Office of Insurance Regulation. There were some recent reforms in response (HB 837, 2023; SB 2-A, 2022).

Ah, fair point

Re: Is the world becoming uninsurable?

#246

Post by dboreham » Fri, Jan 17, 2025, 6:33 AM UTC

EGreg wrote: post #221

rafram wrote: post #186

Earlier quoted context omitted.

> Call me crazy but if I was the mayor of LA I’d make them invest heavily in PREVENTION. Cameras and drones all over the place in the forests, to nip fires in the bud (and carch arsonists). This is a terrible way to deal with fire. The issue isn’t preventing fires from starting at all, because small fires are all over the place. A dropped cigarette can light a city block on fire if the wind is just right. The issue i…

And those precautions are… putting out the fire before it spreads, right?

That's not how these fires work. Wind and dry fuels mean they can't be put out by the time they've been identified and someone has verified they're not some dude burning trash. Drone armies can't carry enough water.

Re: Is the world becoming uninsurable?

#247

Post by patmcc » Fri, Jan 17, 2025, 6:33 AM UTC

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…

Except if insurance company A does that, insurance company B will call the full-cinderblock home and say "hey, we can save you $20".

If it's a product you actually want everyone to carry (like health insurance) it should probably be the government offering it.

Re: Is the world becoming uninsurable?

#248

Post by creato » Fri, Jan 17, 2025, 6:33 AM UTC

chii wrote: post #173

doctorpangloss wrote: post #143

Earlier quoted context omitted.

Resistant homes will pay nearly the same prices as everyone else. So the cinder block home owner is subsidizing the sticks houses. Same happens in autos. Monitored safe driving nets at most 10-20% discounts. Biggest factor is age, and even then, difference between 20yo and 35yo driver is 38%. There are no tricks or deals to insurance.

> 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.

Re: Is the world becoming uninsurable?

#249

Post by loeg » Fri, Jan 17, 2025, 6:34 AM UTC

bluedevil2k wrote: post #8

Like we see in California, when the government sets a price ceiling, insurance companies just leave. Same in Florida. If the free market truly was allowed run normally, the insurance rates in Pacific Palisades or on the Florida coast would be so high that no one could afford to live there. Is that a bad thing? If someone was living in a house near where they tested missiles, we'd call them crazy. At what point can we…

> Same in Florida.

The Florida situation is actually markedly different. The main problem was extreme litigation-friendliness. Florida saw 80% of the nation's insurance lawsuits but only ~8% of the insurance business. They've also since passed some reforms (HB 837, 2023; SB 2-A, 2022).

Re: Is the world becoming uninsurable?

#250

Post by Panzer04 » Fri, Jan 17, 2025, 6:34 AM UTC

This seems like more of a commentary on a general lack of understanding of basic economics.

If things aren't priced correctly, mayhem ensues. Frustratingly the political solutions to high prices often just put off the problem. Government mandated price fixing, of insurance, rentals, etc never fixes the core problem, only allows it to fester.

Sometimes it's taxpayers losing money, sometimes it's the few unlucky ones being forced by the government - and arguably the latter is worse for everyone as private investment and services dry up because of regulatory risks.