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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

#441

Post by toast0 »

Kon-Peki wrote: post #210
neilv wrote: post #161

Earlier quoted context omitted.

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?

> Why is basic insurance for ordinary people a for-profit business at all, rather than something the collective... There are mutual insurance companies [1], including the largest insurance company in the US (State Farm). At the end of every year, if the amount of money left over exceeds the formula they have set, every policyholder gets a refund. [1] https://en.wikipedia.org/wiki/Mutual_insurance

> At the end of every year, if the amount of money left over exceeds the formula they have set, every policyholder gets a refund.

That's commonly a requirement of regulation too. I've had refunds from car insurance and healthcare insurance because claims were lower than expected.

Re: Home insurers are dropping customers based on aerial images

#442

Post by MajimasEyepatch »

cortesoft wrote: post #285
tomp wrote: post #231

Earlier quoted context omitted.

Mathematically, if you sell insurance at break even, you're guaranteed to go bankrupt - on an infinite time scale, the "spike" of a random walk martingale (this last word means, it doesn't make a profit) will exceed every level, i.e. it will wipe out any amount of collateral / capital / equity the company might have. https://en.wikipedia.org/wiki/Law_of_the_iterated_logarithm

This is why you have re-insurance https://en.wikipedia.org/wiki/Reinsurance If the final insurer is the government, you don't have the risk of ruin because you have control of the money printer.

Reinsurance isn’t magic. This helps with one-off losses, but if you’re fundamentally not able to make a profit, they’re not going to cover you, because all you’ve done is shift the negative expected value to them.

Re: Home insurers are dropping customers based on aerial images

#443

Post by non-chalad »

sarchertech wrote: post #318
tptacek wrote: post #294

I don't really understand the privacy concern here. To wit: insurers can demand actual inspection of your home when making underwriting decisions. The condition of your house is very much their business. Why is an aerial photograph of your roof, which everybody in the world already has on Google Maps, such a big deal?

It’s an issue of scale. Similar to police tracking phones. Police have always been able to assign an officer to follow a suspect, but it’s expensive and therefore rarely done. If insurance companies can cheaply inspect everyone’s house from space, the end result will be to lower prices for people with homes in perfect condition and raise them for everyone else. This is potentially problematic because the people with…

The solution seems to be to remove the insurance mandate, and allow purchasing insurance across state lines. That way two locked-in markets are opened to more competition.

Re: Home insurers are dropping customers based on aerial images

#444

Post by shawndrost »

tptacek wrote: post #328
smodo wrote: post #323

Earlier quoted context omitted.

Lol that’s precisely what it is. It redistributes the cost of accidents. Across all its members, paid forward. Just don’t get insurance and nothing of yours will pay for anything belonging to anybody else.

No, it's not. The idea of a risk pool is that everyone's catastrophic risks cancel out, not that people who replace their roofs also chip in to cover hail and water damage for people who don't.

In fact, you are wrong; insurance in California is redistributive by regulatory design. Farmers (when operating in CA) must offer insurance X% of homeowners in a range of $Y-$Z, subsidizing those customers who are more expensive to Farmers. It's relevant to the story: Farmers is disallowed (for political reasons) from canceling accounts in Auburn due to actuarial climate updates; Farmers has new incentives to closely scrutinize home conditions and utilize any new datasets.

Re: Home insurers are dropping customers based on aerial images

#445

Post by unyttigfjelltol »

pants2 wrote: post #375
imgabe wrote: post #338

Earlier quoted context omitted.

I think the issue is that in some cases the information is inaccurate and there are sometimes limited avenues for a customer to object if their insurance is cancelled based on inaccurate information. To the extent that the information is accurate, I agree. If you make an agreement with a company and buy insurance based on your statement that you don't have a pool, but then you do have a pool, I don't see any reason w…

Last time I was shopping for home insurance, an agent told me I was too close to a canyon, which I thought was strange because there are no canyons near me. They sent me a screenshot of the fire danger map where clearly it had the wrong location / coordinates for my address (they thought I was about a mile from where I really live). I pointed them to my address on Google Maps which has my correct location, but they s…

I bought a house in when internet mapping was less mature, but still important, and many of the online data sources simply did not have the address. This was good at first, since very few people seemed to have been able to find the open house and bid against us, but it was annoying in the long run because you'd ask for Internet service to be installed and the technicians would blow off 2 appointments driving around the city lost and eventually you would have to talk them to the location turn-by-turn.

The solution was to complain vociferously to the folks that maintained data sources. In those days it was Google, someone else, and it turned out the remainder of the defective commercial products were put out by a predecessor of, I think, the folks who eventually published or supplied the data for HERE We Go. Basically, every few months I would call them or write messages to them, social engineering who might be in a position to fix it. They did respond pretty quickly, for a bigcorp, but it took a few years for the prior versions of their database to cycle out of usage.

Re: Home insurers are dropping customers based on aerial images

#446

Post by delecti »

non-chalad wrote: post #443
sarchertech wrote: post #318

Earlier quoted context omitted.

It’s an issue of scale. Similar to police tracking phones. Police have always been able to assign an officer to follow a suspect, but it’s expensive and therefore rarely done. If insurance companies can cheaply inspect everyone’s house from space, the end result will be to lower prices for people with homes in perfect condition and raise them for everyone else. This is potentially problematic because the people with…

The solution seems to be to remove the insurance mandate, and allow purchasing insurance across state lines. That way two locked-in markets are opened to more competition.

Effectively removing the ability of states to regulate businesses in their own jurisdiction.

Re: Home insurers are dropping customers based on aerial images

#447

Post by illusive4080 »

hnburnsy wrote: post #392

I wish insurance was more flexible with risk and deductibles, 20 year old roof, your deductible is 20000, 5 year old roof your deductible is 500, something that equalizes the risk without the need to drop customers. Heck I would self insure or set an extremely high deductible for rebuilding, but I still need coverage for any liability risk like when the mailman trips on my sidewalk.

You can get basic liability coverage if that’s what you desire. But be prepared to pay out of your pocket in case of total loss. If you have a mortgage you’re almost certainly required to hold coverage.

Re: Home insurers are dropping customers based on aerial images

#448

Post by MajimasEyepatch »

mopenstein wrote: post #247
Hendrikto wrote: post #184

Earlier quoted context omitted.

[flagged]

Very few people hate having insurance in case of accidents but a lot of people hate having guns stuck in their back and told to pay up for other people. I pay a rate based on my risk factors which I actively work to maintain as low as possible. I don't want to be forced to pay for every reckless idiot in my country (of which there are too many to count). But I also hate non-voluntary anything, so I'm weird.

Imagine a world where only the people like you can be insured. Everyone else, “of which there are too many to count,” has to go without insurance because they can’t get approved or the premiums are so insane they can’t afford it. Some of those people may take it to heart and change their behavior, but some will not.

Now imagine one of those uninsured people causes an accident, and you get seriously injured. You sue, but this person is broke as a joke, so you never manage to get anything meaningful back. In fact, you probably wouldn’t even be able to get a lawyer to take your case, since they know they wouldn’t even be able to collect enough to cover their fees. That’s why you “have to pay for every ridiculous idiot.” I suppose could round them all up and put them in camps, and then your premiums would be lower.

Or consider major medical insurance. Before the ACA, in the US, people with pre-existing conditions couldn’t get individual health insurance, or if they did, it was incredibly expensive. These people didn’t necessarily do anything wrong, but their healthcare costs were higher than any individual could reasonably afford. Did they not deserve healthcare?

Re: Home insurers are dropping customers based on aerial images

#449

Post by potatolicious »

compiler-guy wrote: post #346
drekipus wrote: post #322

Earlier quoted context omitted.

Isn't insurance entirely a redistribution mechanism?

No. It’s a risk pooling mechanism. If a group of ten people all have a one in one-thousand per year chance of a million-dollar loss each year, then their annual premium will be: 10 x 0.001 x $1,000,000 = $10,000 (plus some administrative overhead and assuming a very basic risk model) It has nothing to do with who is rich and who is poor or making anyone come out ahead of their own losses.

> "If a group of ten people all have a one in one-thousand per year chance of a million-dollar loss each year"

More importantly, each person in this group has a different chance of a million-dollar loss each year, and it's important if you're going to write a policy to get that chance as accurate as possible.

Some members of the pool have a 1-in-1000 chance per year, others have a 1-in-10 chance.

An efficient insurance market assess who has what risk, and offers premium commensurate with risk. If you're one of the 1-in-10 people you pay more.

A risk pool combines resources to pay out for losses that are otherwise individually unaffordable by each member of the pool. It is explicitly not a mechanism - nor is the intent to - have members with wildly different risk exposure pay the same premium. In fact the only way it can sustainably function is if each member's risk level is accurately gauged to some level of precision.

There are risk pools where the intent is to subsidize higher-risk members, where we believe that such subsidy is a social good - health insurance for example is one of those things.

But I don't see a good argument that home insurance is, or should be, one of these types of risk pools.

Re: Home insurers are dropping customers based on aerial images

#450

Post by bvan »

rchaud wrote: post #162
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.

Property insurance and health or life insurance are very different markets.
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