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CA insurance crisis: Thousands to lose coverage as two more insurers withdraw

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Re: CA insurance crisis: Thousands to lose coverage as two more insurers withdraw

#51

Post by rufus_foreman »

DoreenMichele wrote: post #50
rufus_foreman wrote: post #49

Earlier quoted context omitted.

>> My understanding is fires are getting worse on the west coast thanks to climate change So, without taking a position on whether fires are getting worse, how would that matter for the insurance markets? There's a price that would make it work. Risks are higher, price of an insurance policy would be higher. Insurance companies, left to their own devices, wouldn't leave markets due to that, insurance companies would…

So, without taking a position on whether fires are getting worse, how would that matter for the insurance markets? I'm not arguing with you nor rebutting your claim. I haven't studied the situation in California and have no opinion about what is going on there. But I did work in insurance for a few years and insurance began as a form of betting or gambling. If the possibility of X happening is too high, it's no longe…

>> Because most land with residential development floods

Every year?

Not every year. It's a math problem. Insurance will cover it if they are free to set the premiums.

Re: CA insurance crisis: Thousands to lose coverage as two more insurers withdraw

#52

Post by DoreenMichele »

rufus_foreman wrote: post #51
DoreenMichele wrote: post #50

Earlier quoted context omitted.

So, without taking a position on whether fires are getting worse, how would that matter for the insurance markets? I'm not arguing with you nor rebutting your claim. I haven't studied the situation in California and have no opinion about what is going on there. But I did work in insurance for a few years and insurance began as a form of betting or gambling. If the possibility of X happening is too high, it's no longe…

>> Because most land with residential development floods Every year? Not every year. It's a math problem. Insurance will cover it if they are free to set the premiums.

It tends to be something the market won't bear though. If people can't afford it, pricing it as high as you want tends to cause the market to collapse anyway, just from a different mechanism.

Some things simply don't work well when handled as a business model.

Fire departments that only show up for people paying their fire dues don't work at all. In practice, places that require you to pay for fire department help have the fire department show up anyway and they watch your house burn down while standing around to be on hand just in case it threatens to spread beyond the uncovered property.

Places where there is no police department and rich people all hire private security are also pretty dysfunctional socially.

Some things get provided as a public good by sane societies because other formats for addressing it simply don't work.

Re: CA insurance crisis: Thousands to lose coverage as two more insurers withdraw

#53

Post by polski-g »

sp332 wrote: post #4
polski-g wrote: post #3

[flagged]

What's the price fixing part?

> They include ideas such as changing the process for requesting rate hikes

"Requesting" means that prices are fixed to whatever the government feels is "fair".

Re: CA insurance crisis: Thousands to lose coverage as two more insurers withdraw

#54

Post by infecto »

redserk wrote: post #42
infecto wrote: post #30

Earlier quoted context omitted.

Because state run insurance is kind of a crock. These are programs put together for constituents to be pleased enough to vote in the next election cycle but will do little to help in an actual disaster. Its been years but the state run insurance had pretty limiting caps on both contents and the cost to rebuild. Seemed kind of pointless from a total loss perspective. Edit: I would guarantee that the state run plan is…

Genuinely curious, how so? Do they have frustrating claims processes or limit pay-out when an incident happens? I'm in another state and my home insurance has been increasing but nowhere near what it sounds like is happening in California and Florida.

Good question. Not about the claims process but about state programs being generally underfunded and not underwriting the risk properly. If multiple insurance companies cannot underwrite the risk properly, how can a state government do it any better and at a sometimes affordable price. Maybe everyone is baking in the idea that the state will just get a bailout from the federal government.

I also believe that it creates a perverse incentive for people to continue living in unmaintainable habitats. We also hear talk about how can these cities with no water continue to survive, its not maintainable etc. Well neither is living in a hurricane prone area or high fire risk area.

The options for these funds are often fairly limited too and not covering even 50% of the loss. YMMV.

Re: CA insurance crisis: Thousands to lose coverage as two more insurers withdraw

#55

Post by infecto »

everybodyknows wrote: post #41
infecto wrote: post #30

Earlier quoted context omitted.

Because state run insurance is kind of a crock. These are programs put together for constituents to be pleased enough to vote in the next election cycle but will do little to help in an actual disaster. Its been years but the state run insurance had pretty limiting caps on both contents and the cost to rebuild. Seemed kind of pointless from a total loss perspective. Edit: I would guarantee that the state run plan is…

> underfunded and not charging appropriate premiums Sure. But Sacramento has a secret disaster recovery plan: Appeal to Washington for a bailout.

And that probably would happen.

Re: CA insurance crisis: Thousands to lose coverage as two more insurers withdraw

#56

Post by infecto »

DoreenMichele wrote: post #50
rufus_foreman wrote: post #49

Earlier quoted context omitted.

>> My understanding is fires are getting worse on the west coast thanks to climate change So, without taking a position on whether fires are getting worse, how would that matter for the insurance markets? There's a price that would make it work. Risks are higher, price of an insurance policy would be higher. Insurance companies, left to their own devices, wouldn't leave markets due to that, insurance companies would…

So, without taking a position on whether fires are getting worse, how would that matter for the insurance markets? I'm not arguing with you nor rebutting your claim. I haven't studied the situation in California and have no opinion about what is going on there. But I did work in insurance for a few years and insurance began as a form of betting or gambling. If the possibility of X happening is too high, it's no longe…

I don't think your example is completely logical and is pretty biased sounding opinion from "someone who did work in insurance".

"Because most land with residential development floods" - no i don't think its exactly that. Most land with residential development floods is not true. Now what is true is that most land in a flood zone does indeed have a high chance of flooding. Flood zones are a fairly known and accurate data set that anyone can look at. Heck most of the online realtor sites will show you a flood map with the property. This is the same problem for individuals that live in CA in known fire zones. These type of properties are impossible to underwrite because everyone in pool is high risk. You either need to build a home that is fireproof or accept the risk and potential for total loss. The fed's flood insurance and the state levels fire program are just allowing people to continue to live in unsustainable areas or with properties that have not taken the precautions to prevent loss.

Re: CA insurance crisis: Thousands to lose coverage as two more insurers withdraw

#57

Post by infecto »

DoreenMichele wrote: post #52
rufus_foreman wrote: post #51

Earlier quoted context omitted.

>> Because most land with residential development floods Every year? Not every year. It's a math problem. Insurance will cover it if they are free to set the premiums.

It tends to be something the market won't bear though. If people can't afford it, pricing it as high as you want tends to cause the market to collapse anyway, just from a different mechanism. Some things simply don't work well when handled as a business model. Fire departments that only show up for people paying their fire dues don't work at all. In practice, places that require you to pay for fire department help ha…

Some things simply don't work as a government model either. The logic in this entire thread is flawed. Just because someone decided to buy a home in a known flood zone or in a known high-risk fire zone, does not mean other individuals should have to compensate them for taking on that risk. Lets not dilute this with public services such a police or fire. This is about insuring homes that individuals bought, often/majority of the time with known data that it is at some risk. We cannot just eliminate risk for risk-takers.

Re: CA insurance crisis: Thousands to lose coverage as two more insurers withdraw

#58

Post by infecto »

DoreenMichele wrote: post #13

To be clear: California home owners insurance. One factor listed: post earthquake fires. California has "fire season," not a season I ever wanted in my life. I wonder how much this is actually kind of an issue of global warming without being called that. My understanding is fires are getting worse on the west coast thanks to climate change.

Most insurance companies have made pretty public statements about states not giving them the ability to properly account for global changes in climate. I don't think it has anything to do with what you are saying. There is no conspiracy that "fire season" is a code word for "climate change". Fire season is a complicated problem with many inputs but I am sure the lack of proper fire management of these lands did not help it.

Re: CA insurance crisis: Thousands to lose coverage as two more insurers withdraw

#59

Post by DoreenMichele »

infecto wrote: post #57
DoreenMichele wrote: post #52

Earlier quoted context omitted.

It tends to be something the market won't bear though. If people can't afford it, pricing it as high as you want tends to cause the market to collapse anyway, just from a different mechanism. Some things simply don't work well when handled as a business model. Fire departments that only show up for people paying their fire dues don't work at all. In practice, places that require you to pay for fire department help ha…

Some things simply don't work as a government model either. The logic in this entire thread is flawed. Just because someone decided to buy a home in a known flood zone or in a known high-risk fire zone, does not mean other individuals should have to compensate them for taking on that risk. Lets not dilute this with public services such a police or fire. This is about insuring homes that individuals bought, often/majo…

I spent some years trying to find someplace on earth I could theoretically move that had no natural disasters. It doesn't exist.

It's a case of pick your poison: Which kind of natural disaster are you more comfortable with? Tornados? Fires? Hurricanes? Landslides?

Flooding is the most common natural disaster humans face. We tend to build our biggest cities at natural port sites.

We need water to drink, for hygiene and for crop production and we use waterways as cheap transit for goods. So we tend to build in flood zones.

We could probably do a better job of favoring architecture that played nice with that, such as having carports at ground level under the house and residential development above that. But the reality is humans can't escape our inconvenient need for water.

Housing is a public good. One criticism cited frequently on HN of the US housing situation is that it has created problems socially to treat homes as investment vehicles. It gets cited as a root cause of the national housing crisis.

I don't know how to have a meaningful discussion of any of this by following the arbitrary rules you list. It makes no sense to me.

Re: CA insurance crisis: Thousands to lose coverage as two more insurers withdraw

#60

Post by DoreenMichele »

infecto wrote: post #58
DoreenMichele wrote: post #13

To be clear: California home owners insurance. One factor listed: post earthquake fires. California has "fire season," not a season I ever wanted in my life. I wonder how much this is actually kind of an issue of global warming without being called that. My understanding is fires are getting worse on the west coast thanks to climate change.

Most insurance companies have made pretty public statements about states not giving them the ability to properly account for global changes in climate. I don't think it has anything to do with what you are saying. There is no conspiracy that "fire season" is a code word for "climate change". Fire season is a complicated problem with many inputs but I am sure the lack of proper fire management of these lands did not h…

For the record, I never suggested that fire season was a code word for climate change. Just that fires are getting worse, fire hazard is being cited as a factor in this decision and I can't help but wonder if the thing not being explicitly spelled out is that this longstanding risk of post-earthquake fires is looming larger in the minds of insurance company decision makers because of this changing context.

It doesn't require any conspiracy theories or intentional deceit for people to start going "Oh. X thing. That's too much risk." without them thinking to explicitly state "...because the context has changed since my dad or grandad founded the company, so the risk he felt ok with now feels like too much risk to me."

People often don't spell everything out when talking about an issue. Humans are routinely kind of blind to their own implicit assumptions and the need to communicate them.

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