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Is the world becoming uninsurable?

charleshughsmith.substack.com

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Re: Is the world becoming uninsurable?

#621

Post by danielmarkbruce »

thrance wrote: post #386
danielmarkbruce wrote: post #176

This is silly, and overcomplicating the issue. The world is very insurable, at a price. The property and casualty business is competitive as hell in almost all parts. The government needs to just stay out of it.

When the cost of premium surpasses what people are able to pay, companies will just leave. That's the point of the article, you can only ignore material reality for so long.

The companies are leaving because of mandated price caps from the government. In every other market when cost > price and they can't control cost, companies increase price.

You can only ignore the reality of government interference in the insurance market for so long.

Re: Is the world becoming uninsurable?

#622

Post by DiggyJohnson »

vasco wrote: post #383
Panzer04 wrote: post #259

Earlier quoted context omitted.

Why bother building a better home when it's cheaper to buy insurance and rebuild later? This is why prices are important - sometimes it's sensible to build cheaper houses without these safeties if the risk isn't there, but if the risk does exist then it needs to be priced right to provide that incentive.

The key thing to understand is that you don't get to choose when the house gets destroyed or get advanced notice. Which means you might be in there, or your kids, or all your belongings. But yes, after you're dead in the rubble someone else can rebuild your house and it might be cheaper.

Yes of course, but everything in life is a risk trade off. Presumably the person you’re replying to understands that.

Re: Is the world becoming uninsurable?

#623

Post by cormorant »

teeray wrote: post #605

The problem is that in American home-buying, insurance is often compulsory for a purchase with a mortgage. This makes sense from the bank's perspective--they want to insure their collateral. However, the system doesn't really have an answer for "what happens when their collateral becomes uninsurable?" Even though lenders have force-placed insurance, even those insurers can deny coverage in certain circumstances (e.g.…

There's always some price at which an insurer would willingly insure. The only case where it is "impossible" is when there's a government price cap. The other issue that you implicitly refer to, though, is that the price of insurance can be altered annually, while the mortgage term is much longer. This mismatch creates "what happens when their collateral becomes [so expensive to insure that the homeowner would never have agreed to this mortgage deal on these terms upfront]?"

Re: Is the world becoming uninsurable?

#624

Post by Firaxus »

crawftv wrote: post #596
pclmulqdq wrote: post #561

Earlier quoted context omitted.

As the governments in the US get increasingly incompetent, insurance prices are going to have to rise. Government services are largely there to protect you during black swan events, so if those services get less and less effective, you're going to need more insurance for those events.

This was the whole issue. California made it illegal for insurance companies to raise rates, so the insurance companies stop renewals. Leaving everybody uninsured. Homeowners couldn't buy insurance at any price.

It’s regulated, not illegal.

“Experts say the insurance landscape in California is particularly tricky because, in addition to the wildfire risk, the state has a law that adds extra approval measures, including board approval and review by the insurance commissioner, if an insurance company wants to raise the rate of insurance by more than 7%. That’s been in effect since the 1980s.” https://www.cnbc.com/2024/02/05/what-homeowners-need-to-know...

Re: Is the world becoming uninsurable?

#625

Post by wegfawefgawefg »

throwawayqqq11 wrote: post #268
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…

This sounds like a very US-centric view and id strongly disagree that only the profit motive keeps economies and people going. You almost said it yourself, "The US does a weird thing where insurance no longer means pooling risk". Why? Is it the profit motive or gov. regulation? My answer: The selective approach of insurance companies mirrors the profit seeking lack of solidarity, which is ultimately incompatible with…

profit motive does keep the economy going. if you do not believe that youre like a flat earther.

Re: Is the world becoming uninsurable?

#626

Post by uludag »

> That the private-sector can trigger crises that have no political or technological fix is on very few pundits' radar.

Interestingly, there seems to a number of cultural solutions to this problem. Like, imagine if the people of LA adopted a fondness for living in dense urban environments, and a reluctance to "live near nature," the problem of wildfires becomes much more tractable. Or for example, a culture of maintenance (forests, power infrastructure, infrastructure fireproofing, risk preparedness, etc.), like outlined in the book "The Innovation Delusion," could very well reduce risk a considerable amount. Unfortunately our civilization is too much stuck in its traditional ways to consider such solutions.

Re: Is the world becoming uninsurable?

#627

Post by nradov »

marcosdumay wrote: post #575
aquaticsunset wrote: post #496

Earlier quoted context omitted.

Comments like the last here irritate me. No, we all learn that wood is the only appropriate building material and the Salesforce tower in San Francisco required a whole forest of trees to construct. The root comment is based on a very dated concept. Of course we can built earthquake resistant megastructures from steel and concrete. A lot of that building technology was created in California. It's either naive or will…

Hy from Brazil... You know, a poor country. We make single-level houses with a reinforced concrete structure, because it's cheap. You know what isn't cheap? Wood. Wood is incredibly expensive to put into a shape, even if you are willing to cut forests down to get it.

Wood is incredibly cheap in North America. We're not cutting down forests for it, either. Much of the wood used for residential construction is milled from trees grown specifically for that purpose.

Re: Is the world becoming uninsurable?

#628

Post by danielmarkbruce »

csours wrote: post #195
danielmarkbruce wrote: post #176

This is silly, and overcomplicating the issue. The world is very insurable, at a price. The property and casualty business is competitive as hell in almost all parts. The government needs to just stay out of it.

Ok, just play the next move. Insurance is expensive. Now what happens.

Can't think for yourself? This is econ 101. People will try to drive down the cost by:

1) Buying/building smaller houses that cost less to insure. 2) Building using different materials which are less prone to burn. 3) Moving to areas less prone to fires/hurricanes etc 4) Voting for representatives who take this more seriously and install better infrastructure to fight fires/floods.

These are all good ideas which haven't been put in place already because the government has distorted the insurance market so badly people aren't getting the right price signals.

Re: Is the world becoming uninsurable?

#629

Post by thisoneworks »

Panzer04 wrote: post #259
_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…

Why bother building a better home when it's cheaper to buy insurance and rebuild later? This is why prices are important - sometimes it's sensible to build cheaper houses without these safeties if the risk isn't there, but if the risk does exist then it needs to be priced right to provide that incentive.

Hah financialization strikes again. Try explaining this to a person from a third world country, they would say "what are you talking about". Also they would have better health care than your average American.

Re: Is the world becoming uninsurable?

#630

Post by lionkor »

infecto wrote: post #608
gertop wrote: post #558

Earlier quoted context omitted.

Drywall is two sheets of paper/cardboard cladding (increasingly) low density gypsum. Soundproofing material is also often made of cardboard (though we do have alternatives for that, unlike drywall).

Right, so the house is not constructed out of cardboard. Soundproofing in my part of the US is often rockwool and not cardboard.

Well it contains cardboard and wood, so it's made of cardboard and wood, among other non-flammables. If I say the house I live in is made of stone, brick, cement and rocks, obviously you know it has windows and insulation, and whatnot. It's still made of stone.
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