[HN Gopher] Home insurers cut natural disasters from policies as...
___________________________________________________________________
Home insurers cut natural disasters from policies as climate risks
grow
Author : croes
Score : 102 points
Date : 2023-09-04 18:44 UTC (4 hours ago)
(HTM) web link (www.washingtonpost.com)
(TXT) w3m dump (www.washingtonpost.com)
| kevinventullo wrote:
| As a homeowner in Southern California, this type of policy (not
| necessarily driven by climate) directly negatively affects me due
| to the risk of fires and earthquakes. However, I don't think
| there's a great solution. The basic problem is that natural
| disasters represent a _correlated risk_. Insurance pools only
| seem to make sense for uncorrelated risks such as house fires or
| pipe bursts or whatever, where the high individual cost of many
| relatively independent unlikely events can be smoothed out into a
| low guaranteed cost.
|
| Perhaps a sufficiently large insurer could dilute the risk of an
| earthquake destroying a large percentage of homes in Los Angeles
| by also covering large swaths of other high-risk parts of the
| country or world.
| lotsofpulp wrote:
| > Perhaps a sufficiently large insurer could dilute the risk of
| an earthquake destroying a large percentage of homes in Los
| Angeles by also covering large swaths of other high-risk parts
| of the country or world.
|
| At a certain point, this is just all taxpayers as a whole.
| bonestamp2 wrote:
| Exactly, and we frequently see Federal Aid in lots of big
| disasters. Eventually, the government will be the only
| insurance organization that covers the catastrophic events
| where we really need insurance the most, and then we can stop
| pretending that private for-profit insurance is something
| that our society wants. The government is already the
| "insurance" for so many different types of things that we
| should just lean into it 100%.
| digitalsushi wrote:
| As anti-human as this makes me sound, this does make me
| personally understand why eyes and teeth are not covered on my
| health insurance. I can't take a claim out on my car's tires
| getting used up over 100,000 miles, either.
| gruez wrote:
| >As anti-human as this makes me sound, this does make me
| personally understand why eyes and teeth are not covered on
| my health insurance.
|
| This doesn't make any sense. You can rack up way more
| expensive charges/procedures on the rest of your body (eg.
| triple bypass or hip replacement) than your eye or teeth ever
| could.
| jowea wrote:
| > Perhaps a sufficiently large insurer could dilute the risk of
| an earthquake destroying a large percentage of homes in Los
| Angeles by also covering large swaths of other high-risk parts
| of the country or world.
|
| Yes, I believe that's one the reasons reinsurance exists.
| jdlshore wrote:
| > Perhaps a sufficiently large insurer could dilute the risk of
| an earthquake destroying a large percentage of homes in Los
| Angeles by also covering large swaths of other high-risk parts
| of the country or world.
|
| This exists and is called "reinsurance."
| kevinventullo wrote:
| Okay, then I suppose no one wants to reinsure the California
| Earthquake Authority as their condo unit policy only covers
| up to $100k and everyone else seems to flat out refuse
| earthquake coverage for a large building.
| metadat wrote:
| https://archive.today/wIDtr
| mkoubaa wrote:
| Homes have always been inherently a risky asset, though we've
| been conditioned to think they aren't
| madaxe_again wrote:
| After having had a home flood and another burn, and being refused
| a claim in each case (the flood was caused by a river, and so
| isn't covered, and the fire was a wildfire, and also isn't
| covered - only fires starting in the property are covered - same
| for our truck that was incinerated), I no longer bother with home
| or vehicle insurance - if they don't pay out, there's no point in
| having it. Come to think of it the only insurance claim I ever
| had pay out was when I deliberately set out to defraud an
| insurer. Never have they paid out in a situation where it would
| have been helpful.
|
| I would wager others will follow the same way, once they realise
| their policies are just a tax that they get no benefit from, and
| then insurers will have to come up with some new racket to
| defraud marks.
| t3rabytes wrote:
| That's not really an option for almost anyone with a mortgage
| on a home -- the lender will _require_ home insurance with
| themselves listed as the primary payee.
|
| Same with an auto loan for most lenders (Lightspeed being one
| of the abnormal ones that doesn't hold the title to the vehicle
| as collateral).
| madaxe_again wrote:
| Sure, but if the lenders find themselves out of pocket
| because insurers repeatedly refuse to pay, they will change
| behaviour too - such as by no longer lending.
|
| Also, no such requirement in the U.K. - 3rd party vehicle
| insurance is mandatory, but home insurance is up to you - no
| lender I've ever had has mandated it.
| xenadu02 wrote:
| Don't assume insurers are competent. They often sell homeowner's
| policies entirely online or over the phone without inspecting the
| property, looking at as-builts, etc.
|
| My renovated up to 2015 earthquake standards house pays the same
| rate as the 1939 jalopy down the street despite my home having
| much higher quality electrical (less fire risk) and being built
| to a stronger standard (less likely to collapse or suffer damage
| from storms, earthquakes, etc).
|
| Neither private insurance nor the state chartered CA Earthquake
| Insurance price by actual risk.
|
| Florida and Texas are the same: insurers don't price in hurricane
| or hail proofing, anti-flooding measures, etc. Hail resistant and
| wind resistant roofs exist but they'd rather just stop writing
| policies.
|
| I don't know why things have gone so wrong in recent years.
| Insurance should be able to drive improvements in construction
| techniques rather than stopping policy writing. For example:
| instead of refusing to write policies in wildfire prone areas
| refuse if the home doesn't have fire-proof roofing and siding,
| along with a zone clear of combustibles around the house, fire
| screens on vents, etc. Such measures would allow far more homes
| to survive wildfires without damage but the insurers aren't
| interested.
|
| This is the opposite of vehicle insurance where the industry
| crash tests new vehicles and adjusts premiums for vehicles with
| better safety ratings.
| throwaway2865 wrote:
| [dead]
| JackFr wrote:
| You fail to account for the cost of accurately underwriting.
| They can do what you suggest fir cars because it involves
| testing a few dozen car models. If each car needed to be tested
| they wouldn't do it.
| throw0101c wrote:
| > _Hail resistant and wind resistant roofs exist but they 'd
| rather just stop writing policies._
|
| Note that the insurance folks have developed an entire system
| of how roofs (and entire residential, multi-family, commercial
| structures) should be built:
|
| * https://ibhs.org/fortified/
|
| * https://fortifiedhome.org/roof/
|
| * https://www.youtube.com/watch?v=Zd-0yAPs6Wc
|
| * https://www.youtube.com/watch?v=proGT6AtyJc
| airza wrote:
| The flip side of this is not simply assuming that insurers are
| stupid. Performing bespoke inspections of houses is an industry
| onto itself which i also would not rush into. It also doesn't
| help you much; if 10% of houses have these countermeasures your
| regional risk pool will still be vaporized when the other 90%
| are burned to the ground.
|
| It's just eventually impossible to insure these assets when
| these types of super correlated risks become as ubiquitous as
| they are.
| kelnos wrote:
| > _if 10% of houses have these countermeasures your regional
| risk pool will still be vaporized when the other 90% are
| burned to the ground._
|
| I think the GP's point was that the insurers just wouldn't
| insure the countermeasure-free 90%. Those 10% would be
| insured, and suffer less or no damage.
|
| Granted, reducing the risk pool to that 10% of homes isn't
| great either. But presumably at least _some_ of the other 90%
| would be strongly incentivized to retrofit those fire
| countermeasures so they could get coverage.
| oatmeal1 wrote:
| Not surprised WaPo leaves out relevant non-climate reasons that
| also contribute.
| jungturk wrote:
| The article isn't a WaPo assessment of the causes of the
| increases - it's relaying statements and changes made by
| participating insurance carriers.
|
| "At least five large U.S. property insurers...have told
| regulators that extreme weather patterns caused by climate
| change have led them to stop writing coverages in some
| regions."
| cpncrunch wrote:
| And cherry picks data starting at 2013. I was curious about pre
| 2013 and it seems i was right to be skeptical. The 2013 to 2016
| period just had unusually low losses.
|
| https://www.statista.com/statistics/428870/insured-property-...
| gruez wrote:
| >And cherry picks data starting at 2013.
|
| In their defense 10 years is a nice round number. Also, the
| text surrounding the chart says
|
| >"There's no place to hide from these severe natural
| disasters," said David Sampson, president of the American
| Property Casualty Insurance Association. "They're happening
| all over the country and so insurers are having to relook at
| their risk concentration."
|
| >That trend is too costly, insurers contend, and necessitates
| rewriting policies or eliminating coverages in growing
| geographic areas.
|
| If change the window from 10 years to 15 or 20 years, the
| general impression is still the same: insurance losses are
| trending up, and the last few years are consistently high (as
| opposed to having one or two years of high payouts followed
| by periods of low payouts).
| cpncrunch wrote:
| Except, that's now how random systems work: you don't get
| one high value, then some low values, then a value value.
| Try flipping a coin many times: if you do it enough times,
| you'll get 5 heads in a row due to chance. The same is true
| for random weather events. If you look at this graph going
| back further, you'll see high losses in previous years:
|
| https://www.researchgate.net/profile/Olivier-
| Mahul/publicati...
|
| Certainly this graph is trending higher from the 1970s, but
| is that due to more real estate with a higher valuation?
| And how much insurance premiums were collected?
| LightBug1 wrote:
| Insurance scum suckers ... hoarding money in tax havens while
| pretending to provide a service.
| 1MachineElf wrote:
| An unfortunate situation for those in need of housing and those
| housed who are in need - such policy coverage is a requirement
| for mortgages (and reverse mortgages), at least in Florida.
| [deleted]
| pauldenton wrote:
| It always did seem curious that people who believed heavily in
| climate risk never seem to put their money where their mouth is
| when it comes to Waterfront property. If you believed there was a
| serious risk of sea levels rising you wouldn't spend millions on
| a house with a waterfront view below sea level If banks believed
| there was a serious risk of sea levels rising they would put a
| discount instead of a premium on waterfront property. But I still
| cannot find any discount property that is discounted because it's
| next to the ocean
| llm_nerd wrote:
| >If banks believed there was a serious risk of sea levels
| rising they would put a discount instead of a premium on
| waterfront property
|
| Banks aren't the ones setting prices on properties. And no one
| should base anything on the actions of banks because financial
| institutions generally know to basically sell off the risk as
| soon as possible (although that can come back to bite them as
| it did with the subprime thing, where they sold it off, but
| then many of them made bets on those risks). Their window of
| exposure is generally extremely small, and they'll keep dancing
| as long as the music keeps playing.
|
| Further markets are irrational, and always have been. Even if
| you are absolutely certain that Miami is going to be devastated
| by climate change, for instance, you might still buy an
| overpriced oceanfront mansion because you know that you'll be
| able to find either a sucker or someone with the same
| assessment when the time comes.
| thecyborganizer wrote:
| "The market can remain irrational longer than you can remain
| solvent" - John Maynard Keynes
| mlyle wrote:
| > But I still cannot find any discount property that is
| discounted because it's next to the ocean
|
| Sea levels are expected to rise about a foot in the next 30
| years, which will impair some coastal property but not all
| (much worse on the east coast than the west).
|
| It's much worse on a 60-100 year timeframe. If a discount were
| being applied, you'd expect most of the reduction in value to
| be 50 years out. The present values of enjoyment over the next
| 50 years could far exceed those residual values, and so it
| could be hard to observe any discount that is present. E.g.
| even if future sea level rise lops 10% off the value, other
| factors could add more in the short term.
| massysett wrote:
| If you have millions to spend on property, you may have
| millions to throw away. Elon Musk wasted billions on Twitter,
| so it's no surprise that smaller wealth might be willing to
| waste a few million on a house.
| simbolit wrote:
| This. People aren't wealth-maximisers all the time..
|
| Also, people aren't rational or well-informed all the time.
| standardUser wrote:
| There's no discount because the vast majority of oceanfront
| property won't be seriously impacted for more than 50 years. So
| youre not finding what you're looking for because there is no
| rational reason for it to exists.
| maCDzP wrote:
| Someone here that is sceptical to climate change maybe can shed
| some light.
|
| To me the fact that insurers aren't insuring natural disasters
| due to climate change is a good argument that it's real.
|
| Otherwise they would just sell the insurance to a premium and
| collect free money?
|
| Or do you guys think that it's just some companies being dumb and
| are likely to go out of business?
| lgleason wrote:
| Skeptic here. I don't deny that the climate is changing. It
| always has been. However the notion that all of this is based
| on human activity is not something I subscribe to. Climate
| change and the green initiatives have become a sort of religion
| which and a great way for certain people in power to drive
| their own business interests.
|
| There have been extreme weather cycles in the past and in some
| areas we had a period of calm for a number of years. In
| addition to that we had a period of cheap money and other
| factors that lead to development in areas that have a much
| higher likelihood of having a natural disaster destroy it over
| longer periods of time. Government natural disaster assistance
| for damage to these areas made it worse because there was not
| incentive to NOT develop homes in areas prone to issues or to
| take necessary precautions to adequately construct homes to be
| able to sustain the forces of a disaster.
|
| Now that we are in a cycle where there are more events, the
| actuarials are looking at the tables and determining that the
| risk it too high to insure based on current trends. Climate
| change is just the current in vogue cause so the insurance
| companies can use it for PR cover. "It's not our fault we can
| no longer insure your house.....climate change!"
| bobsmooth wrote:
| >However the notion that all of this is based on human
| activity is not something I subscribe to.
|
| Do you think the massive amount of CO2 pumped into the
| atmosphere since the industrial revolution has had no affect
| on the planet?
| lgleason wrote:
| It's tough to say what the effect is. The science has been
| corrupted by political interests instead of an actual
| scientific discovery. The overblown histrionic predictions
| of doom from the activists/climate change believers does
| not help to give credibility of any effects that climate
| change may actually be having.
|
| Back in the 70s and 80s they were predicting an ice age by
| the early 2000's. That of course extreme scenario also did
| not occur. Once I started to understand what was happening
| to scientific research, the special interests, corporate
| and political interests on both sides of this equation an
| extreme view on either side naturally sets off my internal
| BS meter.
| xormapmap wrote:
| > To me the fact that insurers aren't insuring natural
| disasters due to climate change is a good argument that it's
| real.
|
| The only thing I conclude from this is that they think this
| move will be profitable and that is independent from whether
| climate change is real.
| supertrope wrote:
| It's not quite that simple. Insurance is a financial product
| and social construct. It depends on market conditions and
| supply and demand as much as pure actuarial risk. The
| scientific consensus is that disastrous climate change happens
| over generations. They project out to 2100. What used to be a
| 100 year storm (1% probability per annum) might now have 3%
| probability per year due to rising ocean levels, and warmer
| oceans providing more energy.
| https://www.pbs.org/newshour/show/how-climate-change-is-
| load....
|
| In Florida the biggest factor in the market death spiral is
| actually excessive litigation not hurricanes. Regulations
| require insurers to pay to replace a damaged roof not pay for
| the depreciated value. Florida customers file 80% of the
| insurance lawsuits in the whole country but they are obviously
| not 80% of the customers. https://www.insurancejournal.com/news
| /southeast/2021/04/14/6.... Roofers who chase storms will sell
| customers on signing over assignment of benefits to them and
| they will file the lawsuit for them.
|
| The recent rise in interest rates has made insurance a less
| attractive capital sink. Why buy a disaster bond or invest in
| reinsurance when sovereign or investment grade corporate bonds
| yield 5%? Over long periods of time return on equity must keep
| up with interest rates. The trickles down to reinsurance costs
| for insurers and finally higher premiums and pickier
| underwriting for you and I. In a previous insurance market
| cycle a bad year of storms ironically was followed by lower
| reinsurance prices. Why? Because interest rates were low and
| there was strong competition between reinsurers.
| baggy_trough wrote:
| Much simpler than that. Price controls cause supply shortages.
| isaacremuant wrote:
| The problem with your supposed argument is that just because
| companies don't want to insure against eventd of type Y because
| they think they're likely or costly does not mean that they're
| caused by reason X.
|
| Your argument is, on logical merits, not good enough to create
| a causation between, what I presume is "human influenced global
| warming increase" and "natural disaster increase".
|
| Now I realize this being a politically charged topic that
| people look at in an absolutist way, a response that looks only
| at the logical proposition of your comment, might not be well
| received.
| swader999 wrote:
| There's certainly less effort to fight wild fires this season.
| I know several helicopter pilots who say they have to get
| approval for each bucket drop where before they just flew
| agreed on hours. They say it's a joke, completely budget
| driven. They'd have several fires they worked on out sooner if
| they were not subject to this. On the ground it's the same,
| extreme focus on safety, not working over time, not using
| quads, heli attack crews cancelled. Only getting intense when
| it gets close to structures.
|
| So you get record fires here in Canada. Lowest area burned in
| USA in decades.
|
| Politicians save budget, don't get called to account because of
| course it's climate change.
|
| Bringing in the insurance angle, they are suffering more
| losses, the areas are built up more in fire prone forested
| land, houses are more expensive and there is less labour to
| fight fire. Poor history of fuel management too. So they are
| raising rates and I don't blame them. It's easy to just say
| climate change. Maybe it's a way to appropriate the land back
| to the elites.
| flangola7 wrote:
| Insurance firms are one of the few capitalistic entities that
| have a financial incentive to invest deep budgets finding and
| highlighting unpleasant empirical facts, rather than burying
| them.
|
| This is secondhand. I have been told property insurance experts
| lean semi-conservative politically but almost all of them
| firmly believe not only climate change is real, but incoming
| catastrophe.
| bick_nyers wrote:
| If hurricane insurance becomes impossible to acquire for a
| region, will banks stop giving out mortgages because they require
| homeowner's insurance in order to lend?
|
| Are banks legally required to offer mortgages to suitable
| candidates, regardless of region?
|
| I would prefer that my bank, my insurance company, and the
| government duke it out amongst themselves, and not involve me.
|
| Central FL doesn't see nearly as much hurricane damage as the
| coast, but we are also being subjected to increased premiums.
| Guvante wrote:
| I know when I bought I had to have a quote for appropriate
| insurance policy in order to close. I never asked what
| appropriate was however.
| SoftTalker wrote:
| The bank will want insurance at least in the amount of what
| you owe on the mortgage. They don't really care if it's
| enough to cover actual losses.
| BoxFour wrote:
| As pointed out in the article, states frequently maintain a
| taxpayer-backed insurers of last resort (and apparently notably
| prevalent in Florida).
|
| Nevertheless, as the article also highlights, this approach is
| unlikely to have favorable long-term financial implications for
| the state.
| cabalamat wrote:
| A subsidy for building houses in areas where they are likely
| to be struck by natural disasters (flooding in Florida,
| earthquakes in California) does not strike me as sensible.
| dehrmann wrote:
| At least it might finally force states to make hard choices.
| no_wizard wrote:
| I fear the end result of this is going to be federal bailouts
| of state insurance programs, which means that money will get
| politicized and used to further _someones_ agenda as a means
| to passing.
|
| I often wonder how far away we are from funding being
| withheld from states with bad public policy as perceived by
| the party in power. It sets dangerous precedents of coupling
| human suffering to policy maneuvers (which I realize, happens
| even today, but in broader strokes NY gets hurricane
| assistance same as Florida. Imagine a scenario where
| Florida's general public is punished because of laws on their
| books, or New York public is punished because of policies it
| has etc.)
| LapsangGuzzler wrote:
| > I often wonder how far away we are from funding being
| withheld from states with bad public policy as perceived by
| the party in power. It sets dangerous precedents of
| coupling human suffering to policy maneuvers
|
| This has been going on for many years. From GOP states
| refusing to accept expanded Obamacare grants, thereby
| restricting access to healthcare for the poor to refusing
| to extend 9/11 first responder healthcare until people like
| Jon Stewart got involved, oppression and cruelty has been
| used as leverage in policymaking going back to the founding
| of the US.
| civilitty wrote:
| _> I fear the end result of this is going to be federal
| bailouts of state insurance programs, which means that
| money will get politicized and used to further someones
| agenda as a means to passing._
|
| Welcome to the future: https://en.wikipedia.org/wiki/Nation
| al_Flood_Insurance_Progr...
|
| Congress has been bailing out the program for almost 20
| years now.
| Waterluvian wrote:
| Ideally the system isn't propped up by tax dollars. Previously
| lucrative regions becoming financially uninhabitable is
| probably the one thing nobody can ignore.
|
| It's what I like about the insurance industry: it cares not for
| opinions and moods and politics because it is betting with
| _cash._ No amount of climate denial changes the math on a bad
| deal.
| 911e wrote:
| This is quite interesting, I feel like at some point we need to
| cut those middleman that bail out as soon as paying is involved
| SoftTalker wrote:
| They aren't in business to give away money. Insurance is all
| about paying to mitigate risk. If the risk of loss increases
| or becomes too hard to predict, insurance will get more
| expensive or simply not be offered.
| alwaysbeconsing wrote:
| There's no inherent reason it must be a _profit-making_
| business. Organizeing as a cooperative, mutual insurance is
| also an option. Granted that any version still must set
| rates that cover expected payouts.
| itiro wrote:
| You're describing government. People cooperate through
| government to insure stability.
|
| I will never understand the endless linguistic
| indirection when in the end it's all Soylent Green; just
| people.
| fluoridation wrote:
| Are you saying that whenever people cooperate
| voluntarily, it's a government?
| pauldenton wrote:
| [flagged]
| JumpCrisscross wrote:
| > _no inherent reason it must be a profit-making
| business_
|
| Insurance is an _extremely_ demanding business. This
| isn't something you can throw commodity drones at. If
| you're willing to create a cooperative job that pays
| millions to its actuaries and risk managers, fine. Most
| don't. Hence why a profit-based model works: it can
| incentivise the people that are needed for it to work in
| the long run to do the job. (In the short run, anyone can
| run a sloppy insurance operation.)
| bonestamp2 wrote:
| One interesting experiment in this area is the Canadian
| Province of Saskatchewan, where the government has run a
| break even auto and property insurance organization since
| 1945. It does not receive money from the tax payers and
| is completely self sustaining:
|
| https://en.wikipedia.org/wiki/Saskatchewan_Government_Ins
| ura...
| shostack wrote:
| At what point do state-run insurance plans like California's for
| earthquakes make sense to expand to just ask housing insurance as
| big insurers like State Farm pull out of the state?
| dehrmann wrote:
| I wonder what the risk profile looks like for CA earthquake
| insurance. Earthquake damage is semi-isolated to areas close to
| the epicenter or built on landfill, major earthquakes are rare,
| but I could see 5-10% of policies making claims when there is a
| major earthquake.
| baq wrote:
| It's possible to build such that earthquakes aren't that big
| of a deal, see Japan.
|
| I don't think it's possible to build something resilient
| that's consistently flooded with salt water. Unless it's a
| boat. And those cost a lot to maintain.
| bick_nyers wrote:
| I am not familiar with state-run insurance plans but I would be
| worried if it was ran as a potential form of taxation/revenue
| for the state government, because then homeowners would be
| subject to the whims of the current dominating political party
| without the mechanism of free market competition to lower the
| cost of insurance. I would want it to be run "at cost" as much
| as possible.
|
| Edit: To be clear, what I am saying is that the stockpile
| formed from insurance premiums should not be accessible to
| other causes (even during emergencies unrelated to homes). I'm
| fine with tax revenue topping off insurance, but never
| insurance money being redirected to another budget.
| SoftTalker wrote:
| You also have the risk of it being underfunded, or borrowed
| against, as we've seen with so many state-run pension plans.
| ethbr1 wrote:
| Open to correction if I'm wrong, but from the examples I'm
| aware of (e.g. federal flood insurance) when insurance is run
| by the government it's always underpriced, then topped up
| behind the scenes from general taxes.
|
| People tend to gripe less about an extra few dollars in taxes
| (which aren't line itemed), but more if the price of their
| insurance premium ever goes up (which they do see a separate
| line item for).
| applied_heat wrote:
| In British Columbia automobile insurance is legally only
| available from the government ICBC, and ICBC had 800 million
| in the bank so the government took it and at the same time
| changed a recently constructed toll bridge to be free,
| essentially buying the votes of everyone who uses the bridge
| at the expense of everyone who pays automobile insurance.
| wredue wrote:
| Provincially run insurance and utilities traditionally keeps
| prices in check.
|
| Notably, when provincially run insurance and utilities have
| sold to private interests, the results have always been the
| same, even recent examples across Canada:
|
| Service gets worse (extremely worse/completely inaccessible
| if you're rural), AND costs to consumers double after 3
| years, then continue to rise astronomically for several years
| following.
|
| This, 100% of the time, is followed up by rural people that
| voted for this scenario to occur complaining that big city
| politicians fucked them again.
| MarkMarine wrote:
| Insurance isn't run "at cost" it's run for profit. Insurers
| are leaving because there isn't enough profit, and State
| insurance cuts out the profit part. It's also more
| trustworthy, there are many low cost insurers in Florida that
| just completely screwed their customers. A disaster hit and
| they just refuse to pay:
|
| https://www.wfla.com/8-on-your-side/florida-insurers-
| close-n...
| WillPostForFood wrote:
| You might be correct, but that article doesn't support your
| claim. The article says 86% of claims were closed, of that
| 86%, 70% received payment, 30% were closed without payment.
| Maybe that 30% were screwed, maybe they weren't actually
| covered, maybe they were below their deductible. The
| article doesn't have an answer.
| DaiPlusPlus wrote:
| Experience shows that of those closed-without-payment,
| some kind of get-out-clause will have been invoked by the
| insurer - but it's all above-board and legal, but _is it
| right?_
| standardUser wrote:
| When the market wants nothing to do with offering the
| product, there can be no free market competition. Not that
| most insurance is operating in anything remotely close to a
| free market to begin with.
| elzbardico wrote:
| They never liked it. Now, acting in collusion, they can have the
| perfect excuse to do so without looking like a cartel.
| Havoc wrote:
| In that situation increasing the price seems more appropriate.
|
| Not being insured for natural disasters to me defeats the
| point...black swan events like natural disasters
| pjscott wrote:
| When insurance companies are legally forced to choose between
| providing insurance at a loss and not providing it at all,
| they'll predictably choose the latter. I have to wonder: who on
| earth thought those price-restriction laws were a good idea?
| baq wrote:
| What's the difference between not providing a service and
| bumping the price 20x in a year?
| nomel wrote:
| Rate of change limits, to combat this, are sane.
|
| Historically, the rate one paid was related to the _risk_ one
| was insuring. The alternative is to have those with low risk
| pay for those with high risk. I would prefer we don't build
| I. Places that need to be rebuilt every few years, which you
| and I are paying for.
| mschuster91 wrote:
| > Historically, the rate one paid was related to the risk
| one was insuring.
|
| And that's still the case today. The rate of change
| regarding extreme weather events is significantly
| accelerating due to climate change and unintentional
| geoengineering [1], humans are ever more and more
| encroaching on nature, and a lot of infrastructure like
| power lines is frankly _rotting_ , so it's only a matter of
| maths that insurers introduce serious rate hikes.
|
| Another part is that insurers try to anticipate future risk
| increases as well so they can build up reserves for when
| disaster (inevitably) strikes... and politicians all over
| the world aren't exactly prioritizing tackling climate
| change, quite a few _openly deny_ it. So of course
| insurances have to price in the additional risk coming from
| the expectation of many more years of inaction making
| climate change and its impact even worse.
|
| [1] https://www.science.org/content/article/changing-
| clouds-unfo...
| baq wrote:
| Exactly my point. They can't reduce their risk at current
| prices so either raise prices or stop offering products. If
| can't raise prices, only the other option remains.
| oatmeal1 wrote:
| Where are you getting the 20x number from?
| baq wrote:
| It's a IMHO reasonable first guess in a market without
| functioning price discovery. Can ask the same question from
| 2x to 200x easily.
| paulmd wrote:
| > I have to wonder: who on earth thought those price-
| restriction laws were a good idea?
|
| "Free-market, pro-freedom" conservatives in places like Florida
| and South Carolina.
|
| https://www.palmbeachpost.com/story/news/state/2023/07/18/hu...
|
| https://www.miamiherald.com/news/state/florida/article129837...
| dehrmann wrote:
| I'm not convinced a lot of state lawmakers are smart enough to
| realize this, it's an easy policy to sell to voters, and when
| insurance companies do pull out, you just frame them as "greedy
| businesses."
| jfoutz wrote:
| I'm not familiar with the price restrictions.
|
| I thought, the way insurance worked was, I take a little money
| from a lot of people, and when some rare event happens, I pay
| out that one person whose house burned down. I don't know the
| math off the top of my head to calculate how likely a lightning
| strike, or bad wiring or whatever might cause a house to burn
| down, but I'm sure such tables exist. So I bet every month that
| no more than one house will burn down. If no houses burn down,
| I'm in great shape and put that money in the stock market or
| whatever and get a better return. Maybe I get unlucky and have
| to rebuild 2 houses.
|
| The sort of sense I get is, the insurance companies can't
| calculate the probability of catastrophic weather. So there's
| no way to pick how much to charge for premiums.
|
| I get that it's a continuous curve. But if the cost of the
| premium is half the cost of rebuilding the house, why buy
| insurance? If I can squeak by one year without having to
| rebuild, I should just keep the money and rebuild out of
| pocket.
|
| Perhaps I'm way way wrong. But insurance is cheap. If it's not
| cheap, why bother? if it's annually a big chunk of the total
| value of the asset, is there any point? Why put a $100 lock on
| a $50 bicycle?
| gruez wrote:
| >I get that it's a continuous curve. But if the cost of the
| premium is half the cost of rebuilding the house, why buy
| insurance? If I can squeak by one year without having to
| rebuild, I should just keep the money and rebuild out of
| pocket.
|
| >Perhaps I'm way way wrong. But insurance is cheap. If it's
| not cheap, why bother?
|
| In that specific case it probably wouldn't make sense, but
| that doesn't mean it happens in real life or it's
| representative of the typical insurance buyer.
| kelnos wrote:
| Governments restrict how much insurance companies can
| increase premiums each year. If they want to increase prices
| beyond some percent, they need to make a special request,
| which -- at least in California -- is being denied.
|
| > _I thought, the way insurance worked was, I take a little
| money from a lot of people, and when some rare event happens,
| I pay out that one person whose house burned down._
|
| Correct. The problem is that instead of one house burning
| down, a significant percentage of the insured houses are
| burning down. And the insurance companies are claiming that
| when that happens, that wipes out all the premiums that have
| been collected (including from customers whose houses did
| _not_ burn down) and then some, so it 's not financially
| possible for them to insure all these houses in high-risk
| areas without eventually having to file for bankruptcy. So
| they want to raise prices, but the government won't let them.
| badlucklottery wrote:
| > If it's not cheap, why bother?
|
| The mortgage lender can require it. They don't want to have a
| burnt down house on the books for any amount of time.
| digitalsushi wrote:
| Mortgage lenders can just start to require yet another
| insurance, like PMI, but for natural disasters. I have
| faith in them that they will find a way to bill us.
| lotsofpulp wrote:
| In the US, the lender for a home mortgage is usually the
| federal government (Fannie Mae, Freddie Mac, Ginnie Mae).
|
| https://www.investopedia.com/terms/c/conformingloan.asp
| evilduck wrote:
| If you can afford 50% of your housing replacement cost in
| premiums every year you probably don't need a mortgage.
| photochemsyn wrote:
| I can see mortgage lenders moving towards a high-resistance
| model, e.g. only financing homes with tile-only roofs and
| defensive sprinkler systems in wildfire-risk zones,
| elevated foundations (or how about tethered houseboats?) in
| flood-risk zones, etc.
|
| The issue is that if adaptation and resistance strategies
| end up being required due to climate-related risks, climate
| denialism ends and there'll be a lot more pressure to
| replace fossil fuels with renewables.
| JumpCrisscross wrote:
| > _insurance companies can 't calculate the probability of
| catastrophic weather_
|
| They can. They can also sell the risk through cat bonds and
| to reinsurers.
|
| There is concentration risk, in that if you have one
| hurricane claim you probably have many others. But that isn't
| the problem. The problem is the price is too high, but the
| folks in the disaster zones can't afford to rebuild on their
| own.
| JackFr wrote:
| Natural disasters are especially problematic, because while
| burglaries and house fires are nicely distributed across
| time, when the earthquake or hurricane comes, every policy
| holder in a region makes a claim at the same time.
| nostrademons wrote:
| There's always a price where it makes sense to offer
| insurance. It's possible that nobody wants to pay that price,
| though.
|
| Like in your example, if the annual premium is half the cost
| of rebuilding the house, it implies that the insurance
| company expects the house to get destroyed every 2 years
| (maybe a bit less because profit & overhead). The rational
| thing to do there isn't really to bank the premium into your
| rebuilding fund (unless you're _really_ wealthy and _really_
| want to live there), _it 's to move_. Continuing to stay in a
| house that gets destroyed every 2 years is what we consider
| an exercise in futility. And that's the situation that
| climate change puts us in: some areas that were previously
| populated are economically uninhabitable, because the cost of
| rebuilding so frequently becomes greater than the benefit of
| continuing to live there.
|
| The issue with price restrictions is that in some places, the
| response to "it's becoming more expensive to keep rebuilding
| and insuring these places" has been "well, there should be a
| law to limit how much those greedy insurance companies can
| charge." And the predictable response to that is "if it costs
| me more in insurance payouts than we can charge in premiums,
| we are just going to stop doing business in this state." And
| so even homeowners that would've been willing to pay the
| higher premiums simply can't get insurance.
| izzydata wrote:
| I wonder what it take to convince people some of the coast
| of Florida, much of California and other disaster areas are
| uninhabitable. I definitely wouldn't want to live in a home
| that is not insured or have insurance that is exceedingly
| expensive. Also places in the middle of the desert that are
| going to literally run out of water.
| nostrademons wrote:
| It'd take their uninsured home getting destroyed when
| they don't have any money for a replacement. That's
| usually how market mechanisms work: you can no longer do
| something when you run out of money for it.
|
| (Also, I'm not convinced that the vast majority of houses
| in California and Florida are economically uninsurable.
| There's a wide variety in actual climate risk: houses in
| the middle of an urban area don't realistically have much
| more risk from wildfires than they do from an ordinary
| house fire, while houses in Central Florida are, as
| another commenter mentioned, much less vulnerable to
| hurricanes than houses on the coast. As I mentioned to
| another commenter, the rational response to everyone
| leaving an area, if it's not actually economically
| unviable, is to start your own insurance company and fill
| the void they left. There may be a business opportunity
| for startup insurers with better risk models than the
| insurers that are leaving the area.)
| mschuster91 wrote:
| > There may be a business opportunity for startup
| insurers with better risk models than the insurers that
| are leaving the area.
|
| Insurance is one of the most regulated areas in business,
| and for good reasons - too many cases of shady or
| undercapitalized companies going belly-up and leaving the
| customers stranded, or being outright scams. Besides,
| even the largest insurance companies don't shoulder all
| the risk themselves - _no_ company can survive getting
| hit by a few "century events" in too short order, so
| they purchase reinsurance, and even if your risk model
| may be "better", your reinsurance rates will still be
| based on the classic risk model.
|
| In any case I _seriously_ doubt it that _any_ startup
| could be a threat to the established giants of the
| insurance world with hundreds of years of experience in
| drawing up risk tables - Lloyd's of London dates back to
| the 17th century [1] for a reason.
|
| [1] https://en.wikipedia.org/wiki/Lloyd%27s_of_London
| toomuchtodo wrote:
| When the house is destroyed, the government must then buy
| the parcel and lock it up so it's never developed again.
| Otherwise, someone else will build and come with their
| hand out when the next catastrophic event occurs.
|
| https://www.fema.gov/press-release/20230502/fact-sheet-
| acqui...
|
| https://theconversation.com/when-homes-flood-who-
| retreats-an...
| acdha wrote:
| I've thought that ever since I was a kid reading news
| reports about the trailer park at the mouth of a local
| river getting junked every few years when Southern
| California got more rain than average. Let FEMA help
| people, sure, but it should be a one-time conversion to
| national forest not an "act of god" which happens
| multiple times per decade.
| bombcar wrote:
| What happens is the insurers are only allowed to insure
| by large areas (perhaps the entire state) so they
| normally handle the uninsurable areas by charging
| insanely high for those places - but that is being
| prohibited.
|
| So they either need to be allowed to let prices float or
| declare areas smaller than a state as "unisurable".
| nostrademons wrote:
| Ah, I could see how this'd lead to market failure. Any
| info on the specific regulation that's causing this? It's
| having pretty severe negative impacts on the densely
| populated urban areas of California to prop up specific
| parts of the WUI that really should not have people
| living in them anyway.
| jfim wrote:
| The convincing will happen by itself. A typical condition
| for getting a mortgage is to get property insurance, and
| if getting a new insurance policy issued is not possible,
| then the property is de facto unsellable to anyone that
| would require a mortgage.
| matthewdgreen wrote:
| I spent part of the summer in Fort Myers, where Hurricane
| Ian destroyed huge portions of the coastal areas and
| barrier islands (most of Sanibel and Fort Myers Beach).
| Most of a year later these islands look like a war zone -
| they're still knocking down buildings and rebuilding
| miles of structures. If another hurricane hits in the
| next two years, I just don't see any of those built-up
| coastal areas being economically viable to rebuild a
| second time: they will just have to become lightly-
| inhabited nature preserves. And we're still only halfway
| through this year's storm season, with huge amounts of
| energy stored up in record-warm gulf waters.
| mschuster91 wrote:
| The problem is that _a lot_ of wealth is tied up in the
| real estate markets of these areas. If the government
| were to declare them uninhabitable, it would have to pay
| out at least _some_ compensation to the owners, and that
| would be a huge amount of money, politically completely
| unviable.
| nostrademons wrote:
| Wouldn't necessarily be the government, it could also be
| the market. After a disaster came through, you'd likely
| have a lot of property owners that don't have the money
| to rebuild their property. It just becomes abandoned land
| with ruined houses on them, much like large swaths of
| Detroit or New Orleans.
| selimthegrim wrote:
| Which swathes of New Orleans do you claim are still like
| this? I live in the Lower Ninth Ward for the record.
| giantg2 wrote:
| Historically it is viable. The trick is to affect a small
| minority at a time. For example, if you live in a flood
| zone (and have a federally backed mortgage), you are
| required to buy flood insurance. Then you can expand the
| flood zones to include more properties. This scenario is
| a real example that happened around 2010 or so.
| baggy_trough wrote:
| Voters and politicians don't want to believe the laws of
| economics. A tale as old as time.
| Obscurity4340 wrote:
| Only when it works for them. The Lord, in his infinite
| wisdom, makes it rain for the rich and rain on the poor
| alike.
| cortesoft wrote:
| > I have to wonder: who on earth thought those price-
| restriction laws were a good idea?
|
| Your mistake is assuming the intention of the people who passed
| the law was to actually create cheaper insurance.
|
| The laws WERE a good idea for the people who got them passed,
| for their actual purpose; getting the representatives re-
| elected.
| eurleif wrote:
| That implies voters thought the laws were a good idea, which
| is consistent with the GP's question.
| MattGaiser wrote:
| You assume that the goal of everyone involved was to have
| affordable insurance.
|
| This is also an easy way to get people out of wildfire areas
| without being the bad guy. Can blame Allstate that someone
| needs to move.
|
| It could also be that it is better politically to have cheap
| insurance for 80% than more expensive insurance for 100%.
|
| Or frankly, just an easy way to get some votes without really
| getting blamed later.
| YeBanKo wrote:
| Do insurances actually end up loosing money in the sate of
| California for example? Or is it a negotiating tactic tp
| increase rate? So far the statement coming from insurers
| themselves, and I think the reason why it was denied, is that
| they refused to share they financial statements proving losses.
| mistrial9 wrote:
| > end up loosing money in the sate of California for example?
|
| the home insurance industry in California changed
| dramatically with the 2017 summer fire season. The numbers
| are about "billion" in claims. ( _edit_ ) substantial
| destruction of buildings of a major city Santa Rosa. At the
| same time, price escalation of homes was in full swing. Some
| houses experience a paper-value growth of more than ten
| percent a year, on top of high prices. The combination is
| fatal to the stable insurance industry.
|
| No party is innocent on this.. all players are aggressively
| padding their positions adversarially, including local
| government. Less than half the burned homes were rebuilt,
| four years later IIR.
|
| ps- a recent study claims that about fifteen percent of
| residential homes are under extreme fire risk in California
| now, out of maybe 1.5 million structures... roughly,
| depending on definitions.
| jeffbee wrote:
| None of those houses should be rebuilt, of course. Cities
| need to retreat from their interface with combustible
| lands, and keep a large cleared buffer around built-up
| areas. Sprawling out onto parched hillsides isn't a good
| idea and I fully approve of insurers dropping those
| policies.
|
| Some of your other statements are exaggerated. You say a
| third of Santa Rosa burned in 2017 but it was more like 3%
| of the dwellings in that city. The Census states that Santa
| Rosa has gained net dwellings in the last 5 and 10 years,
| so Santa Rosa is not another Paradise.
| mistrial9 wrote:
| more rigorous analysis available for a modest fee.
| Superficial AI search shows ~2800 homes destroyed
| completely in Santa Rosa October 2017.
|
| ps- I recommend this site.. https://ccst.us/reports/the-
| costs-of-wildfire-in-california/
| nostrademons wrote:
| If they're smart insurers, they would leave _before_ there
| are actual losses, because there 's a pretty significant lag
| time between when you write the policy and when the customer
| makes a claim. By the time there's a major disaster, it's too
| late: they'll be bankrupt if they didn't collect premiums at
| a rate that makes the disaster survivable.
|
| If you believe that insurance is still profitable at the
| rates where other insurers leave the market, the rational
| response is to start your own insurance company. Run the
| numbers and prepare a presentation to investors; if your
| numbers are rational and convincing, you can capture the
| market for yourself and reap the profits.
| fatfingerd wrote:
| I think few insurers can actually do any of that, let alone
| a new one when the question is larger calamities. They all
| have to buy from reinsurers which have a lower limit of
| what they would charge that may be considerably lower than
| what they are able to charge given how few reinsurers can
| play with large risks.
|
| For the consumer insurer its more like looking at a
| commission and guessing whether it will go up again as
| other market participants decide what to do.
| gruez wrote:
| If you're against insurance company profiting, shouldn't you
| fix that through payout minimums? Even if they could somehow
| make money in california as a whole, it still a bad idea
| because the price limit implies of transfer from people with
| less risk to people with high risk, effectively subsidizing
| people to live in high risk areas. Regardless of how you feel
| about insurance profits, I think you can agree that's a bad
| idea for society as a whole.
| jabroni_salad wrote:
| Insurance companies already have profit caps. If the loss
| ratio is too low they will partially refund premiums to
| bring it up.
| supertrope wrote:
| In 2017 home insurance companies paid out 250% of premiums in
| claims.
|
| See page 63 of: https://www.energy.ca.gov/sites/default/files
| /2019-12/Forest...
| hedora wrote:
| Nationwide recently said they will no longer provide plans in
| coastal regions, excluding many of the population centers of the
| US. They should be required to either cover everyone or no one,
| just like health insurers supposedly do.
| onlyrealcuzzo wrote:
| They probably want to move in the direction of health insurance
| - which is to basically take on no risk, have the state mandate
| you have it anyway, and charge you a lot of money for _almost_
| nothing.
| silisili wrote:
| Gonna disagree here. At some point, people have to do the same
| due diligence the insurance companies have done. Anyone
| building a sea level house in the keys shouldn't be surprised
| that insurance won't cover them. And no company should have
| to..
| alasdair_ wrote:
| You don't have a choice of which body you inhabit. You
| definitely have a choice of home you inhabit.
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