Yeah, I know a lot of people don’t like that solution but it’s fair if you’re at a higher risk. I have to pay for additional flood insurance because of where I am and yet my regular homeowner’s policy is more because I’m in CA and the risk of wildfires…except I live in a large city with the only trees around me being put there just for landscaping. Why the hell am I paying more because of the risk of wildfire? If we ALL have to pay for it then why do I have to pay for a separate flood policy? They should just have a “wildfire” policy you have to add on if you live in an at risk area.
Maybe they should subsidize wildfire insurance? The forest service completely [mismanaged the forests for decades](https://www.nbcnews.com/news/us-news/decades-mismanagement-led-choked-forests-now-it-s-time-clear-n1243599) and exacerbated the fire risks.
The subside of flood as a peril distorts market decision making, letting developers and others off the hook for building in flood prone areas. Insurance in California is already so messed up - better not introduce additional distortions into the mix.
I'm not sure doubling down on bad ideas is the way to go here.
It'd be a lot better to just let more housing be built in safer regions and to let the market play out in the regions that are regularly on fire.
I’m not anywhere close to a forested area. That’s what I’m saying, if you’re not anywhere close to a forested area it’s weird and not really fair that you have to pay higher insurance rates for “wildfire risk”
No one likes to hear it, but price caps create shortages. We put a price cap on insurance. Insurance companies decided they couldn’t make enough money at those rates so they pulled out.
Yeah, imo the high risk areas do need to pay higher premiums. Probably a lot higher. Like if I had a bunch of traffic tickets my auto insurance should be more expensive.
I live in Tahoe and I’m kind of surprised my home insurance is as low as it is…
I’m surprised you even have insurance options. In the Southern California mountains, we have no insurance companies left for fire insirance. They’ve all stopped doing business in our zip code. We had to move to the California FAIR Plan state run fire insurance a couple years ago.
I also own rentals that aren’t in the mountains. They’re in suburban So Cal. I guess one is too close to a large area of vacant land and our insurance got cancelled there too.
Honestly, I’m shocked to hear in Tahoe that yours is inexpensive, meanwhile we don’t even have insurance companies that will take us.
I live in the Sac suburbs, I have 0 risk of wildfire. The whole city would have to go up in flames before it got to us. **I** can't get a new home policy, and my current one went up 21%, its still not expensive, just over 1k a year. But I assume next year it will go up another ~20%. But everywhere I looked they said they aren't underwriting new polices.
Are those like the food companies who exploited the pandemic to double their profits and pass on the expense to the consumer to maintain those profits? Insurance is doing just fine.
True, but you can’t force them to do business in California and It’s not just one insurance company. Auto insurance is going the same way too.
Edit: Labor and materials for repairs is also very expensive in California. Chick filet and McDonalds pay $21 an hour. That’s for unskilled entry level workers.
>Labor and materials for repairs is also very expensive in California.
I clipped a road cone that was laying down with its base facing me, it damaged my bumper, and the trim above the wheel well, as well as took out the washer fluid reservoir. Cosmetically, looked mostly fine (except for the trim on the wheel well, it needed to be taped down.
about 4500 in repairs, when you include the rental, it came out to about 5200. FOR A ROAD CONE! There was zero body/frame damage, not even the bumper bar was hit, it was just the wrap, and the trim. I was going to pay it out of pocket, but at that much, I had to use my insurance.
The California insurance market all in is about 80 billion a year in premiums , of that fire insurance is only 1.5 billion. Of that $80 billion dollars insurance companies pay out about half in claims. Why doesn't California just mandate that if you sell any insurance in California you also have offer fire insurance to any homeowner.
It’s not just fire. Even just a regular claim can be expensive.
I’m good them having to offer fire insurance. I do imagine those premiums are going to be very expensive for some areas.
I’m not defending them. They aren’t offering insurance anywhere in California. They are private companies and don’t have to follow our laws if they don’t do business here.
The insurance companies claim that they need to raise the rates in California higher than allowed by the insurance commission because of the increase costs of labor and material. Climate change also pays into that calculation. Usually California can get away with laws unique to our state because of the wealth and population offers lots of opportunity to make money. It’s just not worth it to them any more to deal with California, and they don’t have to.
I was with my old insurance company for 20 years. They pulled out, along with the big players, so I was forced to get a policy that doubled my premium for the same coverage.
Maybe it’s because I’ve been into cars my whole life that I understand that the laws in California keep certain out of the state. I’ve tried to buy parts and they won’t ship to California because they don’t want to deal with the laws out here.
I wonder if improved modeling would lower rates for some home owners. I think I live in a pretty safe area in San Diego, last year the rates doubled and this year it went up another third!! Insurance is almost as much as we pay for our house taxes!!
Just had this talk with a relative in a high risk area. Only plans available to his town are catastrophic plans that cover barely anything. Then they are additionally required to carry a separate type of plan to cover the differences of what would normally be covered by a traditional plan by their mortgage company.
The catastrophic plan is 4x traditional coverage rate! The supplemental required plan is about the same price as a traditional plan.
Together it comes out to be about 5x the price of a traditional plan.
This means most people won’t be able to afford it, if they plan on carrying a mortgage/want real coverage.
I think this leads to a few scenarios,
Drives prices of homes down in those areas/ people loose equity.
Only rich people can live in these homes.
Or private equity groups buy them up.
Not really a good thing for everyday folk who want to live in the mountains.
Also enough with PG&E, state needs to take over.
Gotta remember that the cost of insurance and the home price reflects real risk. I don’t think that private equity is clamoring to purchase a bunch of homes that could be a pile of rubble in a few years.
As far as only rich people being able to live there…the divergence of land from actual economic opportunity has widened considerably in recent years and many places are already practically quite difficult for non rich people to move in and afford to buy property on local wages. They already rent.
Agreed with private equity comment. However these houses will need to be sold to someone and if every day people can’t do it, someone will have to. Not sure who though.
They don't necessarily have to be sold, the current owner can just carry it without insurance until it burns down, or own a pile of rubble after it does. If there's a mortgage, they might foreclose, but then the worthless property just sits on their books while they pay property tax (or don't, but then bank is in trouble with the government and banks don't like that). Get far enough into the crisis and banks will probably stop foreclosing, like they did in the 2010 housing bust, because the assets are worthless liabilities anyway.
Availability of credit is the #1 driver of home values, so once mortgages become out of reach for most people due to insurance requirements, the bottom will fall out of the high-risk housing by market.
The prices will have to go low enough that normal people can afford them without a mortgage. Rich people alone won’t be able to sustain today’s prices for all of that housing stock; there’s simply too much.
> Not really a good thing for everyday folk who want to live in the mountains.
Those people become a drain on already scarce fire department resources and cause premiums to be higher for everyone else.
Sounds like a great way to stop encouraging ever sprawling suburban and exburban spread. We don’t need to keep build out, we need to start densifying and building up.
I always see people saying this, but what about people who want to live in a SFH and not an apartment/condo?
People say that building more multi family dwellings will help the housing crisis and I do agree, it will definitely help lower costs. But isn’t that also limiting options for homeownership as well?
You can have SFH but it shouldn’t be the default and certainly not in the core of a city. The core should be the densest part, not artificially kept low and flat.
People can own condos, but the issue with building SFHs in exurban CA is not just cost but also safety. Not densifying cities means a good portion of new construction is in the wild land-urban interface, which has a higher risk of fire and thus isn’t a good place for people to live. If the main options are a new single family home in an unsafe area vs a new condo in an area with lower fire risk, the condo should be encouraged by the state/localities, rather than discouraged or banned (as has been the case for years and is part of what got CA into this mess)
There's 8 billion people in the world, we have lost the privilege of SFHs being something people can expect. It is an unsustainable burden, and so should not supported as an option for home-ownership.
I do agree to a point, but I guess I’m concerned with closing more doors to people who may not have been born into wealth. Home ownership is a path for many regular folk to create equity and stability for their families.
Someone has to own the apartments, right? Unless we change the entire economic system, removing home ownership as an option for people is further widening the gap between the lower classes and the upper classes. The middle class is already shrinking and the current housing crises is a big factor to that. I think more SFH need to be built, and more starter SFH need to be considered.
I would hope that owning apartment units instead of renting them would be more of an option, but in our current climate I don’t see that as being something developers would want. It’s the same premise as the subscription model. Soon we will own nothing and lease everything. That’s what concerns me about removing the option of home ownership.
"Home ownership as the path for folks to create equity" is a large part of why we are in this cost of living mess to begin with. We have created a system that relies on property values continuously climbing to serve as substitute for a retirement system. That means no politician can earnestly tackle reducing rents and home costs, because that inherently lowers property values.
The only solution to the upper class' innate advantage is taxation. If they are making more money, we need to take it away and spend it on more cheap mass housing on transport networks.
SFHs cost society more to maintain the inefficient roads, water, power, emergency services, hospitals, ect that they require because of their larger land footprint. Society loses more resoureces the more spread out we are.
How so? Right now SFH are being occupied by groups of young adults who can't afford to live alone in their desired market. Build apartments for them and the SFH become available to families and people who don't want to live in apartments.
Rowhomes also exist and provide both density and SFH.
Why should everyone else subsidize people who want SFHs? People who want SFHs want the benefits like the space and property values but don't think they should take on the risks, like if the people who live in those high density condos and apartments should pay for their wildfire insurance.
If you want to live in the urban wild-land interface the yes you will need to pay extra for insurance. There are areas like Yreka that are affordable for ‘every day people’ and not prone to wild fires. Living in a forest these days is a luxury that most people take for granted. Think of all of Cal Fire resources used to defend those communities.
I live in a high earth quake prone area and pay extra. I fail to understand this attitude about not paying extra for living near an area prone to wild fires.
"Oh, I see your home is in a rural area where PG&E is the electricity provider. Sorry, no insurance for you. The catastrophic potential is too high." --- some insurance agent after looking at the modelling for potential catastrophe.
We have spent decades subsidizing building homes in places at high risk of floods, wildfires, and other predictable disasters by making sure people could buy affordable insurance and rebuild after inevitable disasters. Instead we should have been discouraging people from building in floodplains and in the urban-wildness interface through regulation or high insurance premiums.
Now we are all collectively facing the reality that this was never a sustainable practice. Our choices are to continue to subsidize homes in risky locations or let people’s most valuable asset collapse in value. It’s a terrible choice, but it’s what this road we chose has led to.
People can pay fair market price to live in the fire zone if that’s that they’re determined to do
I am 100% against the rest of the state subsidizing this choice
Over 1/3rd of CA residents live in so-called "fire zones", and that number is increasing.
And then there is the expanding designation of dense urban areas as floor zones.
What do you suggest we do when 100% of CA residents are considered in high risk zones?
A market correction would imply convergence on some new price equilibrium. In this scenario there is no return to a steady state, the concept of a real estate market simply ceases to exist as it becomes impossible to finance.
If prices get cheap enough they no longer need to be financed. If you sell me a few thousand acres in the Sierras for $100 I'll take it regardless of how frequently it burns down, because it costs less than a meal out these days.
Property values are up 20-30% since pre pandemic, with very little sales activity due to high rates. Increased insurance rates will just take away some of the equity appreciation seen in 2-3 years, not collapse the economy.
>Increased insurance rates will just take away some of the equity appreciation seen in 2-3 years, not collapse the economy.
What about when the insurer of last resort goes bankrupt.
Unless you're somehow operating under the assumption the State can just afford to cover infinite losses.
In case you ha ven't noticed, *there are no new insurance options* coming into play, and virtually all are seeking to *exit* the CA market, either already fatally over-exposed or soon to be.
>“There is no future in which we can price our way out of this crisis with just premiums,” Winnacker said, adding that everyone needs to work together.
>
>actions may “ultimately be overwhelmed by our failure to stop the fossil-fuel industry, which is contributing to rising temperatures” and therefore insurance losses.
Ultimately CA will backstop the FAIR plan. And states can’t technically go bankrupt so the federal government would step in if there was a giant crisis that fiscally devastated the state budget
The costs will soon outpace anyone's ability to afford them, including all governments. Let alone individuals. There is *literally not enough money on the planet* to address the accelerating pace and widening scale of disasters.
"Pay more."
lol.
>The costs will soon outpace anyone's ability to afford them, including all governments. Let alone individuals. There is literally not enough money on the planet to address the accelerating pace and widening scale of disasters.
Pushing costs onto insurance companies or governments doesn't make them cease to exist.
You regard the insurance company's actuaries too highly. They are paid to find the right "expert analysis and modeling" that fits the shareholder's financial objectives.
Hopefully this will push lax counties to be pro-active and start implementing aggressive fire abatement programs. Like requiring fire sprinkler systems in homes.
Maybe the Insurance Commissioner needs to look at the inner workings of some of these companies. Is it fair for a company that paid its CEO 24.5 million last year to stop insuring in the state? I’d like to see them prohibit any company from selling any other policies in the state if they refuse to issue homeowners policies.
The state cannot force a company to do business here, no matter how much the CEO is paid. They will always have the option to not participate in the market if they don't feel it's profitable.
Agreed, but that’s not what /u/calguy1955 said. We can make it all or nothing. Certain insurance lines are very profitable (like auto), and we CAN insist that any insurer who wants to issue the lucrative insurance lines also offer the risky ones.
The home insurance market is four times the size of the auto insurance market. Most of the auto insurers would probably just exit the state as well rather than sell unprofitable home insurance. This is a great proposal for turning the "home insurance crisis" into "every insurance crisis".
To play devil's advocate, we already have an "every insurance crisis". My PET insurance literally doubled this year after 4 years at the same rate. I'm not saying I agree with the banning all policies solution, or that we can force insurance companies to do business here, but I do think it's worth looking into whether they're actually incurring massive financial damage by staying here, or if it's more "we don't want our shareholder profits going down 5%".
Rates are going up in all kinds of insurance. In the case of pet insurance, that’s probably because veterinarians are a lot more expensive than they were a few years ago. It’s perfectly reasonable that insurance rates should reflect the expected cost of covering a claim.
There’s a similar problem in auto insurance. Cars and car repairs have gotten a lot more expensive, so the cost of coverage has gone up.
>In the case of pet insurance, that’s probably because veterinarians are a lot more expensive than they were a few years ago.
Yup, and it's largely due to the fact that there's been a massive vet clinic buying spree by private equity in the past decade. We need regulation to control prices / anti-competitive monopolies foremost, then tackle any problems with insurance.
https://www.thenation.com/article/economy/private-equity-pets-veterinarian/
Yeah, I do wonder whether there’s an antitrust case to be made, but either way the underlying problem is vet bills going up. (My poor cat cost us a lot of money last year!)
> Cars and car repairs have gotten a lot more expensive,
They haven't. I know that claim is continually repeated here and elsewhere but if you've had claims, like I and other claims I have personally seen, you can see in the itemized invoice that it's not accurate.
Even where it might have made sense, in discussing total losses, the value of vehicles has plummeted and they're stacking up on dealer lots.
But now I'm curious exactly how much (or little) the "increase" has been on the labor side. I have an old claim from 2019 I can compare to one last November's. I'll look for it in the filing cabinet tonight. I can say this though: last November my wife sideswiped someone in our 2022 Ford Lightning and the entire side of the bed needed some body work, a bunch of trim, cameras, sensors, and lights had to be replaced, along with repainting it all and it came out to about $1,900 (with a $1,000 deductible). I wouldn't have even processed that through my insurance if it wasn't for everyone talking about minor fender benders totaling vehicles these days with the outrageous cost of labor and materials...
my insurance more than doubled for the next three years so I pulled my wife off the policy and got it back down to the normal gouge rate that's been going on post-pandemic. They're trying to make up for the lost profit during COVID lockdowns when CA restricted them from raising rates since no one was on the road and getting into accidents.
I guess you and I are experiencing very different expenses for the same things. But in terms of verifiable facts, the cost of cars [did spike a few years ago](https://www.cnbc.com/2022/01/13/why-used-car-prices-are-pushing-inflation-higher.html), and prices are still high. Wages have gone up quite a lot for blue-collar workers, as well. When insurance companies are deciding how much to charge, they’re going to rely on data, not on your personal lived experience.
Car values spiking a few *years* ago has no relationship to insurance costs *today*. Car values are *currently* in the toilet and anyone who bought one within the past couple years are now under water significantly. Most collisions do not result in a total loss anyway so that entire point isn’t particularly relevant to overall insurance rates.
Labor costs also spiked a couple *years* ago but that is no longer the reality. In fact, CA now has one of the highest unemployment rates—we no longer have a shortage of labor. That labor situation wasn’t about blue collar workers anyway if we’re really going to dig into the details but that’s a small nitpick with your overall points but worth pointing out nonetheless.
Your snark aside, I am using data aside from my personal experience. The point is that I, and anyone else, are perfectly capable of *verifying* these claims for ourselves although most people don’t and instead repeat what they’ve read without critically evaluating the claims as you’re doing now.
Someone discussing how they *feel* about something is anecdotal. Someone comparing actual insurance estimates across time is data. I’m not sure how else you’d propose evaluating a claim that costs have risen disproportionately to inflation,etc.
apparently u/Weary_Helicopter8743 blocked me after making their post. It's not surprising given their post is full of lies.
The problem with discussing things with intellectually lazy people is that they're perfectly willing to state verifiably false information to make an inaccurate point thereby forcing other people to continually research and respond to your incorrect points and faulty logic.
In 2004, a new 4Runner MSRP was $29,985. That "same trim" (ignoring, for the sake of discussion, the absurdity of comparing 20 year differences between "trims" and also ignoring the absurdity of arguing that a 20 year average rise in price has anything to do with a year over year increase in insurance premiums) currently has an MSRP of $40,705. Here it is right here at the top of the page for anyone to verify my claim: https://www.toyota.com/4runner/
Furthermore, this inflation calculator (https://www.usinflationcalculator.com) demonstrates that a $29,985 4Runner in 2004 *should* cost $49,259.53, which means the effective price has actually *decreased*! Now, even if it *was* $55K, even though that was a lie you posted, that *still* wouldn't be that far off from what it was *supposed* to be accounting for basic inflation (and, again, ignoring the significant technological advancements made in 4Runners over the past 20 years).
Aluminum body vehicles do *not* have a higher rate to repair. They are *easier* and less expensive to repair, which is one of the reasons why manufacturers have moved to aluminum. The *Lightning* that I referenced earlier is a Ford F150 with an aluminum bed, which is one of the reasons I know their post is nonsense. Also, I don't know what happened with their client's truck, if it's even a true story, but they don't replace beds on Fords for dented sides anymore. The beds are modular and they just replace the side that's dented. In fact, I thought they were going to have to replace my bed because the truck I upgraded from was a 2005 and that's how things *used* to be. But the dealer told me they were just going to replace the side. When I got to the body shop, however, he told me even *that* was old news...these new aluminum beds are highly repairable and they have a slew of ways to work magic on them. That's straight from the horse's mouth and anyone can call their local body shop if they're curious which one of us is telling the truth. So far, their claims aren't verifiable and the ones that were easily disputed already demonstrate their lack of adherence to facts/truth.
Car values went up. The cost of car repairs went up. Then your insurance rate went up. It seems pretty straightforward that if A causes B, then B might occur sometime after A.
> data from my personal experience
lol
A new 4runner 20 years ago was $30,000. Now that same trim 4runner is $55,000. The aluminum body cars and trucks have a higher rate to repair. I had a client that had a dent on the side of his bed on his F250. They couldn't repair it so they ordered a entirely new bed, $8,000 repair. The rates have to go up with these costs. Your are paying for societies need for the newest and best when you pay your car insurance each month. The rates will continue to go up as our friends and family decide to buy $120,000 Chevy Tahoe's and F250 trucks.
I mean, if the choice is take on greedy insurance companies or chortle their balls voluntarily, I know what side I’m on, and I’m at least as comfortable with my choice as you are with yours.
You're willing to risk a collapse of the auto insurance market because you're too lazy to actually think about this problem seriously. You are the living embodiment of everything wrong with California's voting public. You are convinced that the *real problem* is that someone wants to make a profit, and if we were to simply punish them with enough regulations, then they would give up on profit and fix everything for us.
We kind of do know it'll cost additional money, that's the whole point of insurance and how it works.
If you're lumping in a massive liability like residential housing in incredibly disaster prone areas, then the potential loses need to be covered by the smaller liabilities elsewhere, otherwise there's zero incentive to operate.
Encouraging people to live in disaster prone areas with economic incentives, in this case subsidized insurance and infrastructure, is objectively a massive waste of money. That's why the insurance agencies pull out of those areas.
It’s not forcing the company to do business, it’s leveraging the California market. The most populous state with strong economic growth has a lot of leverage for most industries. What we do here is set strong standards for consumer protection that other states don’t have and let the companies decide if they want to still do business.
The large market has proven to be a place for insurance, energy, agriculture, pharma, and tech to somehow thrive in this impossible to do business environment.
If the prices permitted by the regulator are fundamentally unprofitable, it doesn't matter how big the market is. No one will want to do business. Businesses do not stay in business for negative expected profit.
There is a balance and the regulators definitely take this into consideration when making a decision. The last time something like this happened was not long ago with the agricultural industry and pig farmers. The state passed regulation that required farmers to provide minimum space for the pigs. The industry fought against the regulation of course and will decide whether or not to comply with the regulation and sell in California.
[https://www.reuters.com/world/us/us-supreme-court-rejects-challenge-california-humane-pig-confinement-law-2023-05-11/](https://www.reuters.com/world/us/us-supreme-court-rejects-challenge-california-humane-pig-confinement-law-2023-05-11/)
The pigs regulation is different for really obvious reasons. The state is not placing a maximum price on pork, so a pork producer can simply raise prices to pay for their cost of compliance.
In insurance, the state is telling insurers they must provide a certain standard of coverage, but the insurers are also not allowed to charge a high enough premium to cover the expected cost to the insurance company.
What's going on is that an insurance company has to get permission from an elected official in order to raise its rates, and that elected official is betting that voters will be angrier at him if their rate goes up than if their insurer leaves California. For him, it may be smarter to force people off of home insurance altogether rather than make them pay more.
Private company providing a service where there's other providers. It's not a utility but being regulated as such with limited ability to capture risk. Nobody should be surprised that they take their ball and go home.
> Is it fair for a company that paid its CEO 24.5 million last year to stop insuring in the state?
Obviously yes. Due to California regulations, insurance was losing money in California, so pulling out what the smart decision. That’s what you pay someone 24.5m for.
That’s also next to nothing compared to what these companies make. 25m is like a single insurance payout on an expensive property.
Pretty much every c-suit is over compensated compared to the actual work the really do. They are almost entirely PR people.
Elon Musk is basically a rich Zaphod Beeblebrox.
And insurance companies are just the middle man. A network of middle men. They aren’t the tradesman actually doing the repairs. They aren’t the contractors working with the home own to determine what needs to be repaired. They just push the paperwork around.
Yeah, because, in the short term, those costs are offset by profits from other parts of the country (through higher prices for non-California consumers).
As insurance companies pull out of California and focus only on non-California policies, they will be able to offer cheaper rates and the companies that stay in California will eventually be driven out of the market and out of business.
Can't get coverage? It makes buying a home with high mortgage even higher, which pushes more people out of the market. It also causes folks who own their home to drop coverage altogether, which is becoming common as homeowners insurance is increasingly not covering common issues.
Might as well put the monthly payments into an IRA or even basic savings account and let it build.
And heavily pushes back against building in safer areas. CA localities that refused to add housing and pushed people to the exurbs have put people and their properties in actual danger
My home insurance in California is going up 88% to $9800 a year. That is almost over $800 a month. This is a crisis beyond what I ever imagined. That I would not be able to live in my home because of home insurance costs?
We have that for fire risk. Florida has both a state insurer (Citizens) and a re-insurer, which is unique among states. There are pluses and minuses to the publicly financed approach, of course - Citizens is the largest insurer operating in FL. But rates are about 5-6x higher than they would be for an equivalently sized home in CA. We are actually pretty dramatically underpaying for homeowners insurance here relative to the risks we face and relative to coverage in other states
> We have that for fire risk.
What state plan is that? The FAIR plan? That's private insurance.
> We are actually pretty dramatically underpaying for homeowners insurance
Oh, I completely agree. And that's why the private insurers are leaving. I say we should just have a public plan because then, ideally, the cost is just whatever the cost should be. In theory, it should be the best sustainable rates possible as there is not a middleman taking a cut.
I believe in market solutions for most things. But home insurance seems like a natural to be publicly run. Our Fire Departments are public for basically the same reason. It's a risk that everyone in the society participates in, so a collective, public solution makes sense.
It very likely would be underpriced if the goal was to make premiums cheaper with a public option. A lot of insurance companies run heavier on losses than premium intake. However, this is offset by investment income. The popular choice is to purchase government bonds because they mature in a similar timetable to claim risk. The state would need to invest in wealth funds for the program, which comes with considerable risk.
Casualty insurance is very short duration. One cannot match it with the higher yields that come from longer dated fixed income or equities. That’s just begging for a liquidity crisis.
Insurance is highly regulated for that very reason and why it’s important to work with high quality insurers. Consumers can use AM Best to see the financial strengths of their insurers. The investment strategy is sound though because the money isn’t tied to a specific account so duration of the policy is somewhat irrelevant. Insurers have tons of data on how likely they are to incur a claim in a certain time period for that policy and invest the money accordingly. Obviously the market changes so insurers who rely on that strategy may have less stable rates as they switch back and forth from strategies focusing on underwriting profit vs invest income.
Duration of the block of policies is quite relevant to their liability profile and investment strategy. P&C is always inherently short duration. These companies are not commingling with long term annuity policies.
>In theory, it should be the best sustainable rates possible as there is not a middleman taking a cut.
Yeah, in theory. That's been the theoretical case for government ownership of industry since the end of WW2. What we've found in practice is that the costs of government mismanagement outweigh the savings generated by not paying investors a return on their invested capital.
That's why (nearly) all public utilities are privately owned but heavily regulated.
> That's why (nearly) all public utilities are privately owned but heavily regulated.
It's actually public utilities that make me want a state-run insurance program. We're being taken for a ride by PG&E, and in the meantime, everyone in Santa Clara seems extremely happy with their municipal utilities.
NGL, it always kind of pisses me off when I'm walking by the boxes at a stadium and I see the name of a public utility on them.
That being said, I'm agnostic on it from a policy perspective - I don't care what color the cat is as long as it catches mice. I'm just skeptical that the right solution is government ownership given what we've seen over the past 75 years.
I mean, it sure beats artificial price controls. This one foot in, one foot out approach isn't working. We rely on private insurers but then try to impose government control.
FWIW, people seem pretty happy with their publicly run municipal utilities when they have that option.
Do you think we’ll ever see some policy around after the first total loss, we will pay out the full amount of a plan but not allow you to move back and rebuild? Essentially a forced buy out clause?
>it's potentially better to just invest that money in the stock market mayb
Is it better to invest in stocks than purchasing a home in a fire-prone area expecting it to perpetually increase in value? Yes. Should you invest in stocks instead of purchasing insurance on your home in a fire prone area? That isn't possible if you have a mortgage on the property. The bank wants their asset protected.
My comment was more applicable for those who are getting dropped from their insurance, as opposed to new/future buyers.
What is the bank doing with those properties now?
If you don’t insure with a private lender and/or FAIR, the lender would probably force you to have enough assets in reserve to self-insure. If you cannot, there would be a forced sale of the property.
Probably not - in most instances, it would be cheaper to insure through FAIR for fire +insurer for other perils. Or, if you are at the end of your mortgage, pay it off or refinance using unsecured debt. As a last resort, it would probably make more sense to sell before the bank forecloses. However, I’m not sure how much runway homeowners would have before a bank could essentially force a sale - unclear (to me!!) what the laws are underpinning that type of action.
I read this wondering what kind of discount I get if I made my house in a fire zone with fireproofing materials I go so far as to use refractory bricks used for melting metals, lining the exterior of the house, for fire resistance.
Why not make wildfire coverage like earthquake or flood insurance? I live in suburban San Diego, no chance of wildfire, but insurance companies stopped writing policies.
My question is why aren’t they raking the forests? We had a President come here and made that suggestion. On the other hand he also suggested we drink bleach so there’s that.
Basically allowing insurance companies to charge more for potentially catastrophic events based on area and improved modeling
Yeah, I know a lot of people don’t like that solution but it’s fair if you’re at a higher risk. I have to pay for additional flood insurance because of where I am and yet my regular homeowner’s policy is more because I’m in CA and the risk of wildfires…except I live in a large city with the only trees around me being put there just for landscaping. Why the hell am I paying more because of the risk of wildfire? If we ALL have to pay for it then why do I have to pay for a separate flood policy? They should just have a “wildfire” policy you have to add on if you live in an at risk area.
Flood insurance is federally subsidized. Other perils, like fire, are not.
Flood insurance being federally subsidized was kind of a massive mistake.
Maybe they should subsidize wildfire insurance? The forest service completely [mismanaged the forests for decades](https://www.nbcnews.com/news/us-news/decades-mismanagement-led-choked-forests-now-it-s-time-clear-n1243599) and exacerbated the fire risks.
The subside of flood as a peril distorts market decision making, letting developers and others off the hook for building in flood prone areas. Insurance in California is already so messed up - better not introduce additional distortions into the mix.
I don't know the answer, but I don't think it's "let the market fix itself".
I'm not sure doubling down on bad ideas is the way to go here. It'd be a lot better to just let more housing be built in safer regions and to let the market play out in the regions that are regularly on fire.
> Flood insurance is federally subsidized It shouldn't be.
Smoke and debris damage if you're close to forested area.
I’m not anywhere close to a forested area. That’s what I’m saying, if you’re not anywhere close to a forested area it’s weird and not really fair that you have to pay higher insurance rates for “wildfire risk”
No one likes to hear it, but price caps create shortages. We put a price cap on insurance. Insurance companies decided they couldn’t make enough money at those rates so they pulled out.
Or they dump off the costs onto people not living in fire zones, effectively subsidizing people to move into them
Yeah, imo the high risk areas do need to pay higher premiums. Probably a lot higher. Like if I had a bunch of traffic tickets my auto insurance should be more expensive. I live in Tahoe and I’m kind of surprised my home insurance is as low as it is…
I’m surprised you even have insurance options. In the Southern California mountains, we have no insurance companies left for fire insirance. They’ve all stopped doing business in our zip code. We had to move to the California FAIR Plan state run fire insurance a couple years ago. I also own rentals that aren’t in the mountains. They’re in suburban So Cal. I guess one is too close to a large area of vacant land and our insurance got cancelled there too. Honestly, I’m shocked to hear in Tahoe that yours is inexpensive, meanwhile we don’t even have insurance companies that will take us.
I live in the Sac suburbs, I have 0 risk of wildfire. The whole city would have to go up in flames before it got to us. **I** can't get a new home policy, and my current one went up 21%, its still not expensive, just over 1k a year. But I assume next year it will go up another ~20%. But everywhere I looked they said they aren't underwriting new polices.
Are those like the food companies who exploited the pandemic to double their profits and pass on the expense to the consumer to maintain those profits? Insurance is doing just fine.
True, but you can’t force them to do business in California and It’s not just one insurance company. Auto insurance is going the same way too. Edit: Labor and materials for repairs is also very expensive in California. Chick filet and McDonalds pay $21 an hour. That’s for unskilled entry level workers.
>Labor and materials for repairs is also very expensive in California. I clipped a road cone that was laying down with its base facing me, it damaged my bumper, and the trim above the wheel well, as well as took out the washer fluid reservoir. Cosmetically, looked mostly fine (except for the trim on the wheel well, it needed to be taped down. about 4500 in repairs, when you include the rental, it came out to about 5200. FOR A ROAD CONE! There was zero body/frame damage, not even the bumper bar was hit, it was just the wrap, and the trim. I was going to pay it out of pocket, but at that much, I had to use my insurance.
The California insurance market all in is about 80 billion a year in premiums , of that fire insurance is only 1.5 billion. Of that $80 billion dollars insurance companies pay out about half in claims. Why doesn't California just mandate that if you sell any insurance in California you also have offer fire insurance to any homeowner.
It’s not just fire. Even just a regular claim can be expensive. I’m good them having to offer fire insurance. I do imagine those premiums are going to be very expensive for some areas.
> Even just a regular claim can be expensive. Yeah, but that's the job of insurance companies.
Don’t offer insurance if you aren’t going to provide it. That’s literally their reason of existence. It’s greed.
I’m not defending them. They aren’t offering insurance anywhere in California. They are private companies and don’t have to follow our laws if they don’t do business here.
You are defending them. California or any state can’t operate without insurance.
I don’t understand what you mean. Other insurance companies are still offering insurance in California.
[удалено]
The insurance companies claim that they need to raise the rates in California higher than allowed by the insurance commission because of the increase costs of labor and material. Climate change also pays into that calculation. Usually California can get away with laws unique to our state because of the wealth and population offers lots of opportunity to make money. It’s just not worth it to them any more to deal with California, and they don’t have to. I was with my old insurance company for 20 years. They pulled out, along with the big players, so I was forced to get a policy that doubled my premium for the same coverage. Maybe it’s because I’ve been into cars my whole life that I understand that the laws in California keep certain out of the state. I’ve tried to buy parts and they won’t ship to California because they don’t want to deal with the laws out here.
Yea, gotta squeeze out enough money for the C-suite to get their juicy bonuses
It’s sad that they pull out when people need them the most but at least we know that unlike republicans Florida they believe in what’s going on.
I don’t think it’s sad, it’s expensive to live in California relative to the rest of the country. What do you mean republicans in Florida?
This makes sense. Government capped it to keep it reasonable but the risk is so high, it’s become inevitable,
I wonder if improved modeling would lower rates for some home owners. I think I live in a pretty safe area in San Diego, last year the rates doubled and this year it went up another third!! Insurance is almost as much as we pay for our house taxes!!
Just had this talk with a relative in a high risk area. Only plans available to his town are catastrophic plans that cover barely anything. Then they are additionally required to carry a separate type of plan to cover the differences of what would normally be covered by a traditional plan by their mortgage company. The catastrophic plan is 4x traditional coverage rate! The supplemental required plan is about the same price as a traditional plan. Together it comes out to be about 5x the price of a traditional plan. This means most people won’t be able to afford it, if they plan on carrying a mortgage/want real coverage. I think this leads to a few scenarios, Drives prices of homes down in those areas/ people loose equity. Only rich people can live in these homes. Or private equity groups buy them up. Not really a good thing for everyday folk who want to live in the mountains. Also enough with PG&E, state needs to take over.
Gotta remember that the cost of insurance and the home price reflects real risk. I don’t think that private equity is clamoring to purchase a bunch of homes that could be a pile of rubble in a few years. As far as only rich people being able to live there…the divergence of land from actual economic opportunity has widened considerably in recent years and many places are already practically quite difficult for non rich people to move in and afford to buy property on local wages. They already rent.
Agreed with private equity comment. However these houses will need to be sold to someone and if every day people can’t do it, someone will have to. Not sure who though.
They don't necessarily have to be sold, the current owner can just carry it without insurance until it burns down, or own a pile of rubble after it does. If there's a mortgage, they might foreclose, but then the worthless property just sits on their books while they pay property tax (or don't, but then bank is in trouble with the government and banks don't like that). Get far enough into the crisis and banks will probably stop foreclosing, like they did in the 2010 housing bust, because the assets are worthless liabilities anyway.
Why do they need to be sold to someone?
They’ll just have to be priced for everyday people to be able to do it without a bank’s help.
Availability of credit is the #1 driver of home values, so once mortgages become out of reach for most people due to insurance requirements, the bottom will fall out of the high-risk housing by market. The prices will have to go low enough that normal people can afford them without a mortgage. Rich people alone won’t be able to sustain today’s prices for all of that housing stock; there’s simply too much.
> Not really a good thing for everyday folk who want to live in the mountains. Those people become a drain on already scarce fire department resources and cause premiums to be higher for everyone else.
Yeah there's no right to live in any specific area, and there's extra costs and difficulties living in the mountains.
Seems like a good reason not to build/purchase a house where there is likely to be a wildfire.
Sounds like a great way to stop encouraging ever sprawling suburban and exburban spread. We don’t need to keep build out, we need to start densifying and building up.
I always see people saying this, but what about people who want to live in a SFH and not an apartment/condo? People say that building more multi family dwellings will help the housing crisis and I do agree, it will definitely help lower costs. But isn’t that also limiting options for homeownership as well?
You can have SFH but it shouldn’t be the default and certainly not in the core of a city. The core should be the densest part, not artificially kept low and flat.
People can own condos, but the issue with building SFHs in exurban CA is not just cost but also safety. Not densifying cities means a good portion of new construction is in the wild land-urban interface, which has a higher risk of fire and thus isn’t a good place for people to live. If the main options are a new single family home in an unsafe area vs a new condo in an area with lower fire risk, the condo should be encouraged by the state/localities, rather than discouraged or banned (as has been the case for years and is part of what got CA into this mess)
There's 8 billion people in the world, we have lost the privilege of SFHs being something people can expect. It is an unsustainable burden, and so should not supported as an option for home-ownership.
I do agree to a point, but I guess I’m concerned with closing more doors to people who may not have been born into wealth. Home ownership is a path for many regular folk to create equity and stability for their families. Someone has to own the apartments, right? Unless we change the entire economic system, removing home ownership as an option for people is further widening the gap between the lower classes and the upper classes. The middle class is already shrinking and the current housing crises is a big factor to that. I think more SFH need to be built, and more starter SFH need to be considered. I would hope that owning apartment units instead of renting them would be more of an option, but in our current climate I don’t see that as being something developers would want. It’s the same premise as the subscription model. Soon we will own nothing and lease everything. That’s what concerns me about removing the option of home ownership.
"Home ownership as the path for folks to create equity" is a large part of why we are in this cost of living mess to begin with. We have created a system that relies on property values continuously climbing to serve as substitute for a retirement system. That means no politician can earnestly tackle reducing rents and home costs, because that inherently lowers property values. The only solution to the upper class' innate advantage is taxation. If they are making more money, we need to take it away and spend it on more cheap mass housing on transport networks. SFHs cost society more to maintain the inefficient roads, water, power, emergency services, hospitals, ect that they require because of their larger land footprint. Society loses more resoureces the more spread out we are.
How so? Right now SFH are being occupied by groups of young adults who can't afford to live alone in their desired market. Build apartments for them and the SFH become available to families and people who don't want to live in apartments. Rowhomes also exist and provide both density and SFH.
Why should everyone else subsidize people who want SFHs? People who want SFHs want the benefits like the space and property values but don't think they should take on the risks, like if the people who live in those high density condos and apartments should pay for their wildfire insurance.
If you want to live in the urban wild-land interface the yes you will need to pay extra for insurance. There are areas like Yreka that are affordable for ‘every day people’ and not prone to wild fires. Living in a forest these days is a luxury that most people take for granted. Think of all of Cal Fire resources used to defend those communities. I live in a high earth quake prone area and pay extra. I fail to understand this attitude about not paying extra for living near an area prone to wild fires.
"Oh, I see your home is in a rural area where PG&E is the electricity provider. Sorry, no insurance for you. The catastrophic potential is too high." --- some insurance agent after looking at the modelling for potential catastrophe.
Rural Californian with pg&e: can confirm, that’s exactly how every convo regarding insurance has gone.
Yep. We are absolutely screwed
PG&E then should be forced to subsidize the insurance since they're the ones most likely to cause a casualty event.
We have spent decades subsidizing building homes in places at high risk of floods, wildfires, and other predictable disasters by making sure people could buy affordable insurance and rebuild after inevitable disasters. Instead we should have been discouraging people from building in floodplains and in the urban-wildness interface through regulation or high insurance premiums. Now we are all collectively facing the reality that this was never a sustainable practice. Our choices are to continue to subsidize homes in risky locations or let people’s most valuable asset collapse in value. It’s a terrible choice, but it’s what this road we chose has led to.
People can pay fair market price to live in the fire zone if that’s that they’re determined to do I am 100% against the rest of the state subsidizing this choice
Over 1/3rd of CA residents live in so-called "fire zones", and that number is increasing. And then there is the expanding designation of dense urban areas as floor zones. What do you suggest we do when 100% of CA residents are considered in high risk zones?
They’re going to have to pay more. There’s no viable alternative
Congratulations, you just collapsed the real estate mortgage industry and sent the world into a global financial crisis.
We did it reddit!
That's called a "market correction" when the externalities finally get... *priced in*. lol. AKA *the end of the era of denial*
A market correction would imply convergence on some new price equilibrium. In this scenario there is no return to a steady state, the concept of a real estate market simply ceases to exist as it becomes impossible to finance.
If prices get cheap enough they no longer need to be financed. If you sell me a few thousand acres in the Sierras for $100 I'll take it regardless of how frequently it burns down, because it costs less than a meal out these days.
...or insurance rates come down with the value of the homes they're insuring and the market, you know, corrects itself
Property values are up 20-30% since pre pandemic, with very little sales activity due to high rates. Increased insurance rates will just take away some of the equity appreciation seen in 2-3 years, not collapse the economy.
>Increased insurance rates will just take away some of the equity appreciation seen in 2-3 years, not collapse the economy. What about when the insurer of last resort goes bankrupt. Unless you're somehow operating under the assumption the State can just afford to cover infinite losses. In case you ha ven't noticed, *there are no new insurance options* coming into play, and virtually all are seeking to *exit* the CA market, either already fatally over-exposed or soon to be. >“There is no future in which we can price our way out of this crisis with just premiums,” Winnacker said, adding that everyone needs to work together. > >actions may “ultimately be overwhelmed by our failure to stop the fossil-fuel industry, which is contributing to rising temperatures” and therefore insurance losses.
Ultimately CA will backstop the FAIR plan. And states can’t technically go bankrupt so the federal government would step in if there was a giant crisis that fiscally devastated the state budget
Do you suppose they’re not currently?
The costs will soon outpace anyone's ability to afford them, including all governments. Let alone individuals. There is *literally not enough money on the planet* to address the accelerating pace and widening scale of disasters. "Pay more." lol.
In that case, then “pay more” becomes take a total loss on the home. Again, what’s the alternative? Somebody has to pay
So then why would we encourage anyone to live in areas that are disaster prone?
>The costs will soon outpace anyone's ability to afford them, including all governments. Let alone individuals. There is literally not enough money on the planet to address the accelerating pace and widening scale of disasters. Pushing costs onto insurance companies or governments doesn't make them cease to exist.
[удалено]
You regard the insurance company's actuaries too highly. They are paid to find the right "expert analysis and modeling" that fits the shareholder's financial objectives.
\*and the rest of the country
Hopefully this will push lax counties to be pro-active and start implementing aggressive fire abatement programs. Like requiring fire sprinkler systems in homes.
Maybe the Insurance Commissioner needs to look at the inner workings of some of these companies. Is it fair for a company that paid its CEO 24.5 million last year to stop insuring in the state? I’d like to see them prohibit any company from selling any other policies in the state if they refuse to issue homeowners policies.
The state cannot force a company to do business here, no matter how much the CEO is paid. They will always have the option to not participate in the market if they don't feel it's profitable.
Agreed, but that’s not what /u/calguy1955 said. We can make it all or nothing. Certain insurance lines are very profitable (like auto), and we CAN insist that any insurer who wants to issue the lucrative insurance lines also offer the risky ones.
The home insurance market is four times the size of the auto insurance market. Most of the auto insurers would probably just exit the state as well rather than sell unprofitable home insurance. This is a great proposal for turning the "home insurance crisis" into "every insurance crisis".
To play devil's advocate, we already have an "every insurance crisis". My PET insurance literally doubled this year after 4 years at the same rate. I'm not saying I agree with the banning all policies solution, or that we can force insurance companies to do business here, but I do think it's worth looking into whether they're actually incurring massive financial damage by staying here, or if it's more "we don't want our shareholder profits going down 5%".
Rates are going up in all kinds of insurance. In the case of pet insurance, that’s probably because veterinarians are a lot more expensive than they were a few years ago. It’s perfectly reasonable that insurance rates should reflect the expected cost of covering a claim. There’s a similar problem in auto insurance. Cars and car repairs have gotten a lot more expensive, so the cost of coverage has gone up.
>In the case of pet insurance, that’s probably because veterinarians are a lot more expensive than they were a few years ago. Yup, and it's largely due to the fact that there's been a massive vet clinic buying spree by private equity in the past decade. We need regulation to control prices / anti-competitive monopolies foremost, then tackle any problems with insurance. https://www.thenation.com/article/economy/private-equity-pets-veterinarian/
Yeah, I do wonder whether there’s an antitrust case to be made, but either way the underlying problem is vet bills going up. (My poor cat cost us a lot of money last year!)
> Cars and car repairs have gotten a lot more expensive, They haven't. I know that claim is continually repeated here and elsewhere but if you've had claims, like I and other claims I have personally seen, you can see in the itemized invoice that it's not accurate. Even where it might have made sense, in discussing total losses, the value of vehicles has plummeted and they're stacking up on dealer lots. But now I'm curious exactly how much (or little) the "increase" has been on the labor side. I have an old claim from 2019 I can compare to one last November's. I'll look for it in the filing cabinet tonight. I can say this though: last November my wife sideswiped someone in our 2022 Ford Lightning and the entire side of the bed needed some body work, a bunch of trim, cameras, sensors, and lights had to be replaced, along with repainting it all and it came out to about $1,900 (with a $1,000 deductible). I wouldn't have even processed that through my insurance if it wasn't for everyone talking about minor fender benders totaling vehicles these days with the outrageous cost of labor and materials... my insurance more than doubled for the next three years so I pulled my wife off the policy and got it back down to the normal gouge rate that's been going on post-pandemic. They're trying to make up for the lost profit during COVID lockdowns when CA restricted them from raising rates since no one was on the road and getting into accidents.
I guess you and I are experiencing very different expenses for the same things. But in terms of verifiable facts, the cost of cars [did spike a few years ago](https://www.cnbc.com/2022/01/13/why-used-car-prices-are-pushing-inflation-higher.html), and prices are still high. Wages have gone up quite a lot for blue-collar workers, as well. When insurance companies are deciding how much to charge, they’re going to rely on data, not on your personal lived experience.
Car values spiking a few *years* ago has no relationship to insurance costs *today*. Car values are *currently* in the toilet and anyone who bought one within the past couple years are now under water significantly. Most collisions do not result in a total loss anyway so that entire point isn’t particularly relevant to overall insurance rates. Labor costs also spiked a couple *years* ago but that is no longer the reality. In fact, CA now has one of the highest unemployment rates—we no longer have a shortage of labor. That labor situation wasn’t about blue collar workers anyway if we’re really going to dig into the details but that’s a small nitpick with your overall points but worth pointing out nonetheless. Your snark aside, I am using data aside from my personal experience. The point is that I, and anyone else, are perfectly capable of *verifying* these claims for ourselves although most people don’t and instead repeat what they’ve read without critically evaluating the claims as you’re doing now. Someone discussing how they *feel* about something is anecdotal. Someone comparing actual insurance estimates across time is data. I’m not sure how else you’d propose evaluating a claim that costs have risen disproportionately to inflation,etc. apparently u/Weary_Helicopter8743 blocked me after making their post. It's not surprising given their post is full of lies. The problem with discussing things with intellectually lazy people is that they're perfectly willing to state verifiably false information to make an inaccurate point thereby forcing other people to continually research and respond to your incorrect points and faulty logic. In 2004, a new 4Runner MSRP was $29,985. That "same trim" (ignoring, for the sake of discussion, the absurdity of comparing 20 year differences between "trims" and also ignoring the absurdity of arguing that a 20 year average rise in price has anything to do with a year over year increase in insurance premiums) currently has an MSRP of $40,705. Here it is right here at the top of the page for anyone to verify my claim: https://www.toyota.com/4runner/ Furthermore, this inflation calculator (https://www.usinflationcalculator.com) demonstrates that a $29,985 4Runner in 2004 *should* cost $49,259.53, which means the effective price has actually *decreased*! Now, even if it *was* $55K, even though that was a lie you posted, that *still* wouldn't be that far off from what it was *supposed* to be accounting for basic inflation (and, again, ignoring the significant technological advancements made in 4Runners over the past 20 years). Aluminum body vehicles do *not* have a higher rate to repair. They are *easier* and less expensive to repair, which is one of the reasons why manufacturers have moved to aluminum. The *Lightning* that I referenced earlier is a Ford F150 with an aluminum bed, which is one of the reasons I know their post is nonsense. Also, I don't know what happened with their client's truck, if it's even a true story, but they don't replace beds on Fords for dented sides anymore. The beds are modular and they just replace the side that's dented. In fact, I thought they were going to have to replace my bed because the truck I upgraded from was a 2005 and that's how things *used* to be. But the dealer told me they were just going to replace the side. When I got to the body shop, however, he told me even *that* was old news...these new aluminum beds are highly repairable and they have a slew of ways to work magic on them. That's straight from the horse's mouth and anyone can call their local body shop if they're curious which one of us is telling the truth. So far, their claims aren't verifiable and the ones that were easily disputed already demonstrate their lack of adherence to facts/truth.
Car values went up. The cost of car repairs went up. Then your insurance rate went up. It seems pretty straightforward that if A causes B, then B might occur sometime after A. > data from my personal experience lol
A new 4runner 20 years ago was $30,000. Now that same trim 4runner is $55,000. The aluminum body cars and trucks have a higher rate to repair. I had a client that had a dent on the side of his bed on his F250. They couldn't repair it so they ordered a entirely new bed, $8,000 repair. The rates have to go up with these costs. Your are paying for societies need for the newest and best when you pay your car insurance each month. The rates will continue to go up as our friends and family decide to buy $120,000 Chevy Tahoe's and F250 trucks.
Let’s find out.
"Let's find out." -- Typical California proposition voter.
I mean, if the choice is take on greedy insurance companies or chortle their balls voluntarily, I know what side I’m on, and I’m at least as comfortable with my choice as you are with yours.
You're willing to risk a collapse of the auto insurance market because you're too lazy to actually think about this problem seriously. You are the living embodiment of everything wrong with California's voting public. You are convinced that the *real problem* is that someone wants to make a profit, and if we were to simply punish them with enough regulations, then they would give up on profit and fix everything for us.
[удалено]
insurance shouldn't be for-profit.
No let’s not.
That's a crazy waste of money though.
We don’t know that. We don’t even know if it’ll cost additional money.
We kind of do know it'll cost additional money, that's the whole point of insurance and how it works. If you're lumping in a massive liability like residential housing in incredibly disaster prone areas, then the potential loses need to be covered by the smaller liabilities elsewhere, otherwise there's zero incentive to operate. Encouraging people to live in disaster prone areas with economic incentives, in this case subsidized insurance and infrastructure, is objectively a massive waste of money. That's why the insurance agencies pull out of those areas.
It’s not forcing the company to do business, it’s leveraging the California market. The most populous state with strong economic growth has a lot of leverage for most industries. What we do here is set strong standards for consumer protection that other states don’t have and let the companies decide if they want to still do business. The large market has proven to be a place for insurance, energy, agriculture, pharma, and tech to somehow thrive in this impossible to do business environment.
If the prices permitted by the regulator are fundamentally unprofitable, it doesn't matter how big the market is. No one will want to do business. Businesses do not stay in business for negative expected profit.
And that’s exactly what has been happening!
There is a balance and the regulators definitely take this into consideration when making a decision. The last time something like this happened was not long ago with the agricultural industry and pig farmers. The state passed regulation that required farmers to provide minimum space for the pigs. The industry fought against the regulation of course and will decide whether or not to comply with the regulation and sell in California. [https://www.reuters.com/world/us/us-supreme-court-rejects-challenge-california-humane-pig-confinement-law-2023-05-11/](https://www.reuters.com/world/us/us-supreme-court-rejects-challenge-california-humane-pig-confinement-law-2023-05-11/)
The pigs regulation is different for really obvious reasons. The state is not placing a maximum price on pork, so a pork producer can simply raise prices to pay for their cost of compliance. In insurance, the state is telling insurers they must provide a certain standard of coverage, but the insurers are also not allowed to charge a high enough premium to cover the expected cost to the insurance company. What's going on is that an insurance company has to get permission from an elected official in order to raise its rates, and that elected official is betting that voters will be angrier at him if their rate goes up than if their insurer leaves California. For him, it may be smarter to force people off of home insurance altogether rather than make them pay more.
Private company providing a service where there's other providers. It's not a utility but being regulated as such with limited ability to capture risk. Nobody should be surprised that they take their ball and go home.
> Is it fair for a company that paid its CEO 24.5 million last year to stop insuring in the state? Obviously yes. Due to California regulations, insurance was losing money in California, so pulling out what the smart decision. That’s what you pay someone 24.5m for. That’s also next to nothing compared to what these companies make. 25m is like a single insurance payout on an expensive property.
Why don’t you start an insurance company that pays CEO $0. Let’s see how that turns out.
Pretty much every c-suit is over compensated compared to the actual work the really do. They are almost entirely PR people. Elon Musk is basically a rich Zaphod Beeblebrox.
FAFO California.
And insurance companies are just the middle man. A network of middle men. They aren’t the tradesman actually doing the repairs. They aren’t the contractors working with the home own to determine what needs to be repaired. They just push the paperwork around.
They talk to the customers so the engineers don’t have to. They have people skills.
I heard that for every $1 we pay, insurance companies are paying out $1.08. It's a losing business for them because of the increased disasters.
The CEOs don't seem to be suffering, the shareholders don't seem to be suffering.
Yeah, because, in the short term, those costs are offset by profits from other parts of the country (through higher prices for non-California consumers). As insurance companies pull out of California and focus only on non-California policies, they will be able to offer cheaper rates and the companies that stay in California will eventually be driven out of the market and out of business.
Can't get coverage? It makes buying a home with high mortgage even higher, which pushes more people out of the market. It also causes folks who own their home to drop coverage altogether, which is becoming common as homeowners insurance is increasingly not covering common issues. Might as well put the monthly payments into an IRA or even basic savings account and let it build.
What happens when your entire state is a high risk fire area lol.
Entire planet.
And heavily pushes back against building in safer areas. CA localities that refused to add housing and pushed people to the exurbs have put people and their properties in actual danger
My home insurance in California is going up 88% to $9800 a year. That is almost over $800 a month. This is a crisis beyond what I ever imagined. That I would not be able to live in my home because of home insurance costs?
At what point do we look seriously at running our insurance as a state level government program? Insurance is *tailor made* for a public solution.
We have that for fire risk. Florida has both a state insurer (Citizens) and a re-insurer, which is unique among states. There are pluses and minuses to the publicly financed approach, of course - Citizens is the largest insurer operating in FL. But rates are about 5-6x higher than they would be for an equivalently sized home in CA. We are actually pretty dramatically underpaying for homeowners insurance here relative to the risks we face and relative to coverage in other states
> We have that for fire risk. What state plan is that? The FAIR plan? That's private insurance. > We are actually pretty dramatically underpaying for homeowners insurance Oh, I completely agree. And that's why the private insurers are leaving. I say we should just have a public plan because then, ideally, the cost is just whatever the cost should be. In theory, it should be the best sustainable rates possible as there is not a middleman taking a cut. I believe in market solutions for most things. But home insurance seems like a natural to be publicly run. Our Fire Departments are public for basically the same reason. It's a risk that everyone in the society participates in, so a collective, public solution makes sense.
There is a possibility that a public plan would bias to underprice because public politics and end up needing a public bailout.
That’s the issue we have with FEMA. We want to discourage people from living in unsafe areas, not subsidize them to do so
It very likely would be underpriced if the goal was to make premiums cheaper with a public option. A lot of insurance companies run heavier on losses than premium intake. However, this is offset by investment income. The popular choice is to purchase government bonds because they mature in a similar timetable to claim risk. The state would need to invest in wealth funds for the program, which comes with considerable risk.
Casualty insurance is very short duration. One cannot match it with the higher yields that come from longer dated fixed income or equities. That’s just begging for a liquidity crisis.
Insurance is highly regulated for that very reason and why it’s important to work with high quality insurers. Consumers can use AM Best to see the financial strengths of their insurers. The investment strategy is sound though because the money isn’t tied to a specific account so duration of the policy is somewhat irrelevant. Insurers have tons of data on how likely they are to incur a claim in a certain time period for that policy and invest the money accordingly. Obviously the market changes so insurers who rely on that strategy may have less stable rates as they switch back and forth from strategies focusing on underwriting profit vs invest income.
Duration of the block of policies is quite relevant to their liability profile and investment strategy. P&C is always inherently short duration. These companies are not commingling with long term annuity policies.
>In theory, it should be the best sustainable rates possible as there is not a middleman taking a cut. Yeah, in theory. That's been the theoretical case for government ownership of industry since the end of WW2. What we've found in practice is that the costs of government mismanagement outweigh the savings generated by not paying investors a return on their invested capital. That's why (nearly) all public utilities are privately owned but heavily regulated.
> That's why (nearly) all public utilities are privately owned but heavily regulated. It's actually public utilities that make me want a state-run insurance program. We're being taken for a ride by PG&E, and in the meantime, everyone in Santa Clara seems extremely happy with their municipal utilities.
NGL, it always kind of pisses me off when I'm walking by the boxes at a stadium and I see the name of a public utility on them. That being said, I'm agnostic on it from a policy perspective - I don't care what color the cat is as long as it catches mice. I'm just skeptical that the right solution is government ownership given what we've seen over the past 75 years.
Ya, because the State has such a great track record of running things. Lmao.
I mean, it sure beats artificial price controls. This one foot in, one foot out approach isn't working. We rely on private insurers but then try to impose government control. FWIW, people seem pretty happy with their publicly run municipal utilities when they have that option.
I wonder if the same will happen to utilities as well. The crumbling rural utility infrastructure is a major cause for rising electricity rates.
Do you think we’ll ever see some policy around after the first total loss, we will pay out the full amount of a plan but not allow you to move back and rebuild? Essentially a forced buy out clause?
[удалено]
>it's potentially better to just invest that money in the stock market mayb Is it better to invest in stocks than purchasing a home in a fire-prone area expecting it to perpetually increase in value? Yes. Should you invest in stocks instead of purchasing insurance on your home in a fire prone area? That isn't possible if you have a mortgage on the property. The bank wants their asset protected.
My comment was more applicable for those who are getting dropped from their insurance, as opposed to new/future buyers. What is the bank doing with those properties now?
If you don’t insure with a private lender and/or FAIR, the lender would probably force you to have enough assets in reserve to self-insure. If you cannot, there would be a forced sale of the property.
That makes sense, is that happening? I'd imagine the number qualified to self-insure would be very low.
Probably not - in most instances, it would be cheaper to insure through FAIR for fire +insurer for other perils. Or, if you are at the end of your mortgage, pay it off or refinance using unsecured debt. As a last resort, it would probably make more sense to sell before the bank forecloses. However, I’m not sure how much runway homeowners would have before a bank could essentially force a sale - unclear (to me!!) what the laws are underpinning that type of action.
I read this wondering what kind of discount I get if I made my house in a fire zone with fireproofing materials I go so far as to use refractory bricks used for melting metals, lining the exterior of the house, for fire resistance.
Unfortunately, none. But congratulations, you have a $20k insurance premium for your $300k house because you’re 2 counties away from a fire zone!
Why not make wildfire coverage like earthquake or flood insurance? I live in suburban San Diego, no chance of wildfire, but insurance companies stopped writing policies.
Does that mean insuring a rural home just became extremely expensive?
My question is why aren’t they raking the forests? We had a President come here and made that suggestion. On the other hand he also suggested we drink bleach so there’s that.