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Can you explain why wild fire insurance is not tenable? Here in Canada all home insurance include wildfire insurance. All insurers have to do is to pool risk a

Can you explain why wild fire insurance is not tenable? Here in Canada all home insurance include wildfire insurance. All insurers have to do is to pool risk and diversify across geography. No way only California has homes near forests? There’s also reinsurers to pool even more risk.

Mikeb85 8y ago
> All insurers have to do is to pool risk and diversify across geography. Not all insurers are nation-wide.
- PeterisP 8y ago
  Not a problem, that's why the very, very large business of reinsurance exists. You don't have to be nationwide to effectively pool risk and diversify across many industries and nations.
  - Mikeb85 8y ago
    But someone operating solely in places without fire risk could easily undercut the larger insurers, driving rates down in that area. It's good and all to spread out the risk, but it's better not to take on risk. So in the end, those living in risk-factor areas will pay for it one way or another.
tathougies 8y ago
Why would someone in Oregon (where there is abundant water) or Louisiana purchase wildfire (specific) insurance? Home insurance includes wildfires, but let's limit ourselves to wildfire-specific insurance, which was the issue at hand.
- plasticchris 8y ago
  In flood plains you are required to buy insurance, in some parts of the us. It seems reasonable to determine fire risk and require insurance if you are in a 50 year burn zone, though determining that is probably the rub.
- briffle 8y ago
  apparently, you haven't been in oregon in a while.. We had hundreds of thousands of acres burn this summer..
  - yellowapple 8y ago
    Indeed. Wildfires aren't really about drought so much as they're about abundant kindling (e.g. smaller trees not already burnt). Wildfires are essential to keeping forests healthy, and by trying to stop them entirely we've only made them more frequent and destructive.
- deleted 8y ago
  [deleted]
happertiger 8y ago
With all respect I don’t see how this changes anything but shifting who pays. How is it better to pool risks to the group rather than the individual paying a for that risk? The US already has a huge problem with coastal real estate and federal insurance of coastal developments. Why would we introduce that at scale? Why should the collective pay for individual choices? It’s not like the society got together and made people move into fire prone areas. I am not trying to draw parallels to health insurance which has many ethical questions that drive deep consideration, but I don’t understand why asking for the group to insure individual risk that is fundamentally founded in individual choice is in any way necessarily better?
- michaelt 8y ago
  How is it better to pool risks to the group rather than the individual paying a for that risk? Imagine a population of 10,000 people, 1000 live in fire-prone areas, and 10 will have their $100,000 house destroyed by a wildfire for a total cost of $1,000,000. (1) If the state pays for wildfire damage, the 10000 people will pay $100 each whether they're in a fire-prone area or not. (2) With home insurance including wildfire insurance, insurers set individual premiums based on their best risk models, and the 1000 people in fire-prone areas will pay $1000 each, whether their home burns down or not. (3). If there is neither (1) nor (2), the 10 people whose houses were destroyed will pay $100,000 each. Some people would say that (2) is the morally correct level of cost distribution, as (1) unfairly subsidises risky behaviour, while (3) bankrupts disaster victims at random.

Mikeb85 8y ago

> All insurers have to do is to pool risk and diversify across geography. Not all insurers are nation-wide.

PeterisP 8y ago
Not a problem, that's why the very, very large business of reinsurance exists. You don't have to be nationwide to effectively pool risk and diversify across many industries and nations.
- Mikeb85 8y ago
  But someone operating solely in places without fire risk could easily undercut the larger insurers, driving rates down in that area. It's good and all to spread out the risk, but it's better not to take on risk. So in the end, those living in risk-factor areas will pay for it one way or another.

tathougies 8y ago

Why would someone in Oregon (where there is abundant water) or Louisiana purchase wildfire (specific) insurance? Home insurance includes wildfires, but let's limit ourselves to wildfire-specific insurance, which was the issue at hand.

plasticchris 8y ago
In flood plains you are required to buy insurance, in some parts of the us. It seems reasonable to determine fire risk and require insurance if you are in a 50 year burn zone, though determining that is probably the rub.
briffle 8y ago
apparently, you haven't been in oregon in a while.. We had hundreds of thousands of acres burn this summer..
- yellowapple 8y ago
  Indeed. Wildfires aren't really about drought so much as they're about abundant kindling (e.g. smaller trees not already burnt). Wildfires are essential to keeping forests healthy, and by trying to stop them entirely we've only made them more frequent and destructive.
deleted 8y ago
[deleted]

happertiger 8y ago

With all respect I don’t see how this changes anything but shifting who pays. How is it better to pool risks to the group rather than the individual paying a for that risk? The US already has a huge problem with coastal real estate and federal insurance of coastal developments. Why would we introduce that at scale? Why should the collective pay for individual choices? It’s not like the society got together and made people move into fire prone areas. I am not trying to draw parallels to health insurance which has many ethical questions that drive deep consideration, but I don’t understand why asking for the group to insure individual risk that is fundamentally founded in individual choice is in any way necessarily better?

michaelt 8y ago
How is it better to pool risks to the group rather than the individual paying a for that risk? Imagine a population of 10,000 people, 1000 live in fire-prone areas, and 10 will have their $100,000 house destroyed by a wildfire for a total cost of $1,000,000. (1) If the state pays for wildfire damage, the 10000 people will pay $100 each whether they're in a fire-prone area or not. (2) With home insurance including wildfire insurance, insurers set individual premiums based on their best risk models, and the 1000 people in fire-prone areas will pay $1000 each, whether their home burns down or not. (3). If there is neither (1) nor (2), the 10 people whose houses were destroyed will pay $100,000 each. Some people would say that (2) is the morally correct level of cost distribution, as (1) unfairly subsidises risky behaviour, while (3) bankrupts disaster victims at random.