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State Farm halts new property insurance policies in California

139 points by jader201 3y ago

tpmx 3y ago
"State Farm General Insurance Company made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market." https://newsroom.statefarm.com/state-farm-general-insurance-company-california-new-business-update/ https://newsroom.statefarm.com/state-farm-general-insurance-... Seems like a solid reason to me.
- ratmice 3y ago
  I guess though I'm kind of curious why they don't just raise their rates to the account for the actual cost of insuring there? I assume probably some regulation or volatility...
  - profile53 3y ago
    IIRC California prohibits raising rates by more than 5.9 percent per year.
    - photonbeam 3y ago
      So do they leave for a year then come back at new rates?
Nifty3929 3y ago
"A moratorium on insurance price increases during the pandemic only heightened tension within the insurance industry." Insurers have no control over either construction costs nor wildfire risk. All they might do is adjust premiums to accurately reflect those costs. By raising premiums they discourage people from continuing to live in fire-prone and/or high construction cost areas. Instead we put a price cap, taking away that mechanism, leaving insurers at the mercy of rising risk and costs, and preventing people from feeling the incentives to change things.
- lotsofpulp 3y ago
  As always, it is politically expedient to attempt to control prices, and usually wins votes from people who are interested in only short term results or do not understand how markets work. Adjusting supply and demand, however, inflicts a lot more pain, so it ends up being a last resort, if even that.
  - everybodyknows 3y ago
    > attempt to control prices Indeed, and they insist on doing so in the most fine-grained, bureaucratic way imaginable: > Established in October 2022 and touted as a first of its kind, the state program requires insurance providers to discount policies for property owners who mitigate wildfire threats by installing fire-rated roofs, enclosing eaves and creating ember-resistant zones. Insurance companies have 180 days to submit a wildfire risk assessment or score, which the state can appeal.
- justinator 3y ago
  Lots of people where I live can't get their current homes covered by home insurance, as a fire destroyed 1,000+ homes a few miles away in a matter of hours. Are these people to abandon their homes outright?
  - mjhay 3y ago
    They don't need to abandon their homes, but those homes are becoming uninsurable without heavy subsidies (like FEMA flood insurance). Houses should simply not be built in many of these places.
  - tekla 3y ago
    They don't have to, if they don't feel they need insurance.
    - kgwxd 3y ago
      Isn’t it usually required if you have a mortgage?
mindslight 3y ago
I've been wondering if there is any alternative to the traditional home insurance market, apart from just dropping it completely. I'm not in a fire area, nor really any other increased risk, yet premiums just keep shamelessly going up 20-30% / year. I'm sure it looks necessary to the underwriters, but from my perspective it seems like I'm getting lumped in with a lot of people who seem to think insurance is a substitute for a bank account. To me, insurance is for catastrophic losses like a structure fire, or withstanding legal attacks like someone suing you for hurting themselves. But I see a trend of people using it for what are small scale (ice dams) or even what should be routine house expenses (got a 25 year old roof? why patch it when you can get a roofer to tell your insurance that you have wind damage and get a whole new roof!). Even choosing the highest deductibles doesn't really lower premiums significantly. There just doesn't seem to be a way to express to an underwriter "really, I'm only going to call you if my house is a total loss". It's probably just the same oligopolic/info-cartel consolidation that is plaguing the rest of the economy. But it sure is frustrating. Also on the topic of insurance, it really irks me that insurances are allowed to have caps on liability coverage. The entire point of insurance is to cover long tail risk. Instead they upsell you on additional coverage that still doesn't cover the long tail risk.
- vuln 3y ago
  > routine house expenses (got a 25 year old roof? why patch it when you can get a roofer to tell your insurance that you have wind damage and get a whole new roof!). 25-30 years is about the lifespan of a shingled roof depending on climate. I agree it’s routine maintenance. It’s also 10k-20k in some areas. I much prefer insurance being used for a large issue vs using it to have a tree removed because it was hit by lightening 1-3k.
  - mindslight 3y ago
    Sure, but the whole roof doesn't vanish when it's at the end of its lifetime. Rather you start to get more leaks and whatnot and can pay to patch those spots, and/or start thinking about replacing the whole thing.
- User23 3y ago
chewbacha 3y ago
This has directly impacted me because it’s created unclear guidance for people currently in escrow.
0zemp2c 3y ago
years back, some insurers wanted to stop issuing home policies for people near the Santa Cruz Mountains due to fire risk. Dianne Feinstein applied pressure in the Senate and with some concessions, it all went away. this is just State Farm looking for concessions.
mdorazio 3y ago
Unpopular opinion: Good. Now if the state of CA would also institute policy that homeowners affected by disasters will not be bailed out we can get somewhere productive. Want to live somewhere with a massive and well-known chance of wildfire, mudslide, or earthquake destruction on top of absurd property prices? Fine, you own the risk (and associated cost) of that. Incentivizing bad decisions is not a viable long-term strategy.
- toomuchtodo 3y ago
  I would say the same should go for Arizona, Florida, and Texas, all of which will see an increase in risk from climate change. Feel free to move there, but don't ask for a handout when you get punched in the face economically. The evidence is clear, although mandatory disclosure of the climate risk during a real estate transaction is a gap to be closed. > Homeowners are flocking to the likes of Florida and Texas, despite the growing threat of climate-related weather disasters, according to data from LexisNexis Risk Solutions reported by the New York Times. > Property insurance costs are rising across the country, with premiums up an average of 21 percent since 2015. Those bumps are significantly higher in states that carry more climate risk, however, including Florida (57 percent) and Texas (40 percent). https://therealdeal.com/national/2023/05/08/sun-belt-climate-risk-sends-insurance-premiums-soaring/ https://therealdeal.com/national/2023/05/08/sun-belt-climate... https://www.nytimes.com/2023/05/05/realestate/home-insurance-climate-change.html https://www.nytimes.com/2023/05/05/realestate/home-insurance... | https://archive.is/RRTW7 https://archive.is/RRTW7 https://impactlab.org/map/#usmeas=absolute&usyear=2020-2039&gmeas=absolute&gyear=1986-2005 https://impactlab.org/map/#usmeas=absolute&usyear=2020-2039&... https://projects.propublica.org/climate-migration/ https://projects.propublica.org/climate-migration/
  - vorpalhex 3y ago
    You're comparing theoretical future risk to a bunch of burnt out homes that keep getting burned down.
    - toomuchtodo 3y ago
mistrial9 3y ago
the 2017 and 2019 fire seasons in California were predicted and extensively documented, but not prevented. Reading a bit, and definitely not a fan of Big Insurance Inc., it does seem like the system is breaking from several directions at once. no easy answer, political problems for the ones that speak out..
WalterBright 3y ago
> DOI Commissioner Ricardo Lara in September 2022 invoked a law [...] prohibiting insurance providers from canceling or refusing to renew plans for properties affected by wildfires until 12 months after the fire. [...] A moratorium on insurance price increases during the pandemic only heightened tension within the insurance industry. When you fix it so a business is guaranteed to lose money, they stop doing business in the state.
- pxmpxm 3y ago
  Anytime there's a shortage, you can be sure a government policy is behind it. The irony of all the bureaucrats bullshitting about climate change to cover for a policy outcome of their making is not lost on me. Never change, California.
- ecf 3y ago
  > Refusing to renew It seems they’re trying to make it so insurers simply can’t cancel your policy out from under you. Note how it specifies “renew”. These were people already paying for wildfire insurance and the law prevented them from being screwed over. Insurers just want a way out of paying up unless they can renew your contract into an absurdly marked up premium.
PopAlongKid 3y ago
The silver lining could be a reduction in the endlessly repeated "Jake from State Farm" commercials that accompany so many TV programs here. It's actually hard to find any major insurance company that doesn't advertise ceaselessly on television, I can only think of Traveler's.
- emodendroket 3y ago
  Yeah those will not be missed.
- jeffbee 3y ago
  KQED radio in San Francisco has been sponsored for years by Progressive with a message about their pay-as-you-go auto insurance that is not available in California and never has been. The non-availability of State Farm policies might not kill off their commercials.
omgwtfbyobbq 3y ago
>The change does not apply to personal auto insurance or existing home insurance policies in the state. This is a little misleading. My family has State Farm, and they recently sent a letter informing us they will be inspecting our property. My guess is they are looking for things that could increase the risk of fire or risk of losing/damage to the house during a fire and will ask us to remediate any issues they find. This is understandable, but their current statement is likely misleading because they are likely implementing other, additional/different policies for existing home insurance policy holders.
aSockPuppeteer 3y ago
One of the problems is few insurance carriers offer a cash out option if your house is destroyed, flooded, and needs to be rebuilt then it must be rebuilt in the same place. Then it goes into do you have these options or this secret option where they do their job to not pay you anything. Calculate the depreciation value…etc “If you have the Cash-Out Option or Agreed Value, congratulations! If you face a total loss, you will receive the replacement cost amount on your home whether you decide to rebuild there or not. If you do not, you will only receive the replacement cost amount if you decide to rebuild in the same spot. If you decide to cash out and move, you will receive the depreciated amount.” https://www.ovationinsure.com/rebuild-my-house-destroyed/ https://www.ovationinsure.com/rebuild-my-house-destroyed/
deleted 3y ago
[deleted]
sacnoradhq 3y ago
As a climate refugee from Paradise, CA, I agree. The insurance rates tripled between 2018 and 2020. I think this is unfair and un-business-wise in another sense because it fails to account for regional and local risks. Here's the best all risk estimate map by the US government[0]. 0: https://hazards.fema.gov/nri/map https://hazards.fema.gov/nri/map Many locations shouldn't be occupied, while Alpine and Sierra counties are low risk. Switch to census tract view, and it's clear there are many low risk in Sacramento/Citrus Heights away from fires and floods (downtown by the river floods). There are also pockets of low risk around San Diego and randomly around semi-populated areas.
- pkaye 3y ago
  Why are all the high populated areas higher risk on that map?
giardini 3y ago
[flagged]
debacle 3y ago
It's common for carriers to stop writing insurance in places, but apart from Florida I haven't seen large carriers like State Farm pull out of entire states in this way.
- itake 3y ago
  Insurance carriers pulled out of WA during the LTC crazy in 2020. The state passed a law that was basically, pay 0.8% tax for the rest of your life or buy private LTC care for 30 days and avoid paying the tax forever. The insurance providers were not happy to see people joining for 1 mo and then canceling.
  - DaveMebs 3y ago
    They didn’t pull out in WA, they just stopped offering really cheap plans that were easy to cancel. They continued to offer higher-end LTC Insurance.
    - Retric 3y ago
      Which is a little silly as people canceling LTC insurance early is just about the closest thing to free money you’ll find in the insurance industry.
      - Schiendelman 3y ago
        It isn’t. The costs associated with setting up the policy take a while to recover.
  - KingMachiavelli 3y ago
    Wouldn't insurance providers love getting 1 month of premiums with nearly 0 risk of any actual claims?
    - treis 3y ago
      These companies have high customer acquisition costs and are almost certainly losing money on a one month policy.
draw_down 3y ago
[dead]
olivermarks 3y ago
I live in northern California. some of this may partially be due to red tape, bureaucracy and the current number 3 ranking as a 'judicial hellhole' https://www.judicialhellholes.org/hellhole/2022-2023/california/ https://www.judicialhellholes.org/hellhole/2022-2023/califor...
- nimih 3y ago
  In terms of the insurance industry at least, California isn’t too far out of the ordinary compared in terms of bureaucracy and red tape (especially compared to, say, some eastern states with powerful and aggressive regulators such as NY or MA). Of course, the judicial environment is separate from the regulatory apparatus, and it seems eminently plausible that CA courts are much more willing to protect consumers from bad faith claims practices, etc. That all being said, catastrophic[1] wilfdire claims are a huge problem in the P&C insurance industry because they make the actuarial math much more difficult, and CA has had quite a few over the past couple years. Where I live in CO, none of the well-known insurers will, as a rule, write home policies in the mountain regions for similar reasons in spite of the relatively friendly regulatory environment. [1] a term with a rather precise meaning in insurance, referring to a single event which causes a large number of expensive and highly correlated claims
  - inferiorhuman 3y ago
    Yep. The cost for our master policy jumped 4x in 2018. This was right after PG&E burned huge chunks of California (including entire cities) to the ground. That's not a bureaucracy issue that's an "oh shit everything's a lot more likely to burn down than we realized" issue.
    - coryrc 3y ago
      The forests are supposed to burn. They burnt for centuries before 1900. The reaction when houses burn should be "should have built using fireproof materials" or "that happens when you live in a forest" not "here's billions of dollars from more-responsible people".
lttlrck 3y ago
Fire risk and building costs were the stated reason my insurance went up 50% last year. And I'm not in a high risk zone... the only way I can cut it by any useful amount is by increasing the deductible to $10K+ A carrier leaving the market doesn't bode well. It is hard to enough to get on the property ladder for first time buyers, the challenge may soon become staying on it.
- sokoloff 3y ago
  A $10K deductible seems reasonable to me. I wouldn’t want to bother with insurance for anything less than about $25K in losses. (I don’t have a $10K deductible because the savings over $5K wasn’t meaningful in my case.)
  - inferiorhuman 3y ago
    $10k seems insane to me because you are almost certainly guaranteed to be out of pocket for things that your insurance won't cover. In my case I had an issue that the HOA's master policy covered but my own HO6 didn't so there was zero loss of use coverage. Short-term furnished apartments run close to $7,000/month out here (typical minimum lease is three months), so even if you have a situation where your own insurance is providing loss of use coverage you're likely to blow through that pretty damn quickly. So, sure, you can absorb a ten thousand dollar deductible. Can you afford another twenty grand (or more) on top of that for some place to live while your home is repaired/rebuilt?
    - hedora 3y ago
      Deductibles are fiction for home owners insurance in California. After each of the recent natural disasters, the permitting departments dragged their feet, causing years of delay before homeowners could rebuild. At the same time, the disaster created a construction labor shortage, and the price of construction increased 20-30% between the insurance payout and permit approvals. Stricter regulations are required. In particular, it should be illegal to block permits for equal or improved structures, and the insurance companies should be on the hook for the total cost of reconstruction/buying a new home up to the day the homeowner moves in (minus deductible).
WirelessGigabit 3y ago
On one hand we have insurances are regulated, but on the other hand we postpone brush clearings and don't do controlled burns. So the risk goes up, but premiums don't. You cannot have it both.
- Schiendelman 3y ago
  We basically can’t do controlled burns safely anymore. We don’t have the personnel or expertise - it’s vanishing from government.
spencerchubb 3y ago
I work at State Farm. They have done things like this before. They pull out to light a fire under the ass of legislators. And then they resume business as usual.
- bagacrap 3y ago
  That's the feeling I got. What is the point of continuing to service existing customers, including paying for the agents who no longer have any new business to sign, if they aren't ever planning to reopen shop? Do you know what kind of legislative changes they're hoping to make?
  - rubyfan 3y ago
    Agents typically are responsible not only for generating new business but also servicing the policies they sell and they are compensated with commission for the life of the policy. Further, they didn’t close down the shop they just stopped putting a certain type of inventory on the shelf - they will continue to sell auto and other types of insurance that are less exposed to wildfire or are otherwise rate adequate.
    - bagacrap 3y ago
      Auto aside --- as an agent you must be annoyed that your commission can only go down over time unless this is reversed?
    - Suppafly 3y ago
      considering how often auto is bundled with home, this is going to severely limit their business.
  - Kalium 3y ago
    State Farm does plenty of business in auto and other areas, so agents are not suddenly completely out of business.
- S_A_P 3y ago
  I had to come back to this comment and congratulate you on your pun. Light a fire under the ass of legislators so they can do something about wildfire insurance. Ha!
shoo 3y ago
In the company's own words: > State Farm General Insurance Company made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market. If you understand the insurance & re-insurance business - can you explain these three factors in a bit more depth? Naive guesses: insurer offers a policy that agrees to rebuild a destroyed home -- so they're exposed to construction costs, if those costs rise above their projections. Unanticipated increases in construction costs increase the liability and reduce the expected profitability of each insurance policy. Increased risk of catastrophe might also increase liability of each insurance policy for homes exposed to those catastrophic risks, and also increase the risk to the whole portfolio of a catastrophe destroying many homes at once, causing many policies to come due at at the same time. A catastrophe might also do interesting things to market rates for construction costs.
- khuey 3y ago
  Premiums also are regulated so if liability is rising faster than premiums are allowed to rise you're in a bad place.
- to11mtm 3y ago
  I'll admit I don't understand insurance in CA specifically... But I have a decent general knowledge of a lot of insurance concepts from a past partner. Your naive guesses look to me to be on point. Another thing to consider, at least in the case of 'Replacement Cost' (What it would cost to build a house with similar features) versus 'Actual Cash Value' (What the house was worth on the market.) In the case of 'Replacement Cost' there is the issue that any changes to code must be factored in (i.e. a house built in 1980, may have wiring/plumbing/etc that had been grandfathered in but could not be approved as a new build today.) Increased risk of catastrophe is also a result of the root causes of massive losses from wildfires not being addressed at a government level.
BigCryo 3y ago
Environmental racism combined with climate change is a deadly combination
hedora 3y ago
Insurance should be for actual cost of replacement minus a fixed deductible (by law). As it is, homeowners policies are unlikely to actually allow you to obtain a new home.
camel_gopher 3y ago
Like a good neighbor
astrea 3y ago
[flagged]
Dig1t 3y ago
>due to wildfires and rebuilding costs. Why are rebuilding costs so much higher in California than other states?
- ndjdjd 3y ago
  [flagged]
- bagacrap 3y ago
  I'm guessing labor and/or taxes/permitting fees.
- foogazi 3y ago
  Cost of living ?
baggy_trough 3y ago
The central planners have done it again!
h2odragon 3y ago
I like the State representative speaking for State Farm's reasons. Don't wanna ask anybody at the company, in case they mention the price control legislation. Perhaps that's not fair; the insurance market is such that there's never not been "price controls".
bagacrap 3y ago
I'm not sure why state farm is doing this and citing wildfires. Most insurers already won't cover fire in the fire-prone areas of the state, so you have to get a separate plan just for fire through Cal FAIR which tends to be crazy expensive. The traditional insurers will cover everything else, like theft. So you end up with two plan, paying about 3x what you would normally. But State Farm insures a lot of areas that others already consider too risky. They could be more targeted about reducing their coverage area. If your home is in the middle of LA I don't think it's prone to wildfire risk.
g42gregory 3y ago
I wonder what is a definition of a failed state and whether California begins to fall under it? As Jon Stewart used to say “I am just asking…”
egberts1 3y ago
"we"? Is that Jake from State Farm?

139 points by jader201 3y ago

tpmx 3y ago

"State Farm General Insurance Company made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market." https://newsroom.statefarm.com/state-farm-general-insurance-company-california-new-business-update/ https://newsroom.statefarm.com/state-farm-general-insurance-... Seems like a solid reason to me.

ratmice 3y ago
I guess though I'm kind of curious why they don't just raise their rates to the account for the actual cost of insuring there? I assume probably some regulation or volatility...
- profile53 3y ago
  IIRC California prohibits raising rates by more than 5.9 percent per year.
  - photonbeam 3y ago
    So do they leave for a year then come back at new rates?

Nifty3929 3y ago

"A moratorium on insurance price increases during the pandemic only heightened tension within the insurance industry." Insurers have no control over either construction costs nor wildfire risk. All they might do is adjust premiums to accurately reflect those costs. By raising premiums they discourage people from continuing to live in fire-prone and/or high construction cost areas. Instead we put a price cap, taking away that mechanism, leaving insurers at the mercy of rising risk and costs, and preventing people from feeling the incentives to change things.

lotsofpulp 3y ago
As always, it is politically expedient to attempt to control prices, and usually wins votes from people who are interested in only short term results or do not understand how markets work. Adjusting supply and demand, however, inflicts a lot more pain, so it ends up being a last resort, if even that.
- everybodyknows 3y ago
  > attempt to control prices Indeed, and they insist on doing so in the most fine-grained, bureaucratic way imaginable: > Established in October 2022 and touted as a first of its kind, the state program requires insurance providers to discount policies for property owners who mitigate wildfire threats by installing fire-rated roofs, enclosing eaves and creating ember-resistant zones. Insurance companies have 180 days to submit a wildfire risk assessment or score, which the state can appeal.
justinator 3y ago
Lots of people where I live can't get their current homes covered by home insurance, as a fire destroyed 1,000+ homes a few miles away in a matter of hours. Are these people to abandon their homes outright?
- mjhay 3y ago
  They don't need to abandon their homes, but those homes are becoming uninsurable without heavy subsidies (like FEMA flood insurance). Houses should simply not be built in many of these places.
- tekla 3y ago
  They don't have to, if they don't feel they need insurance.
  - kgwxd 3y ago
    Isn’t it usually required if you have a mortgage?

mindslight 3y ago

I've been wondering if there is any alternative to the traditional home insurance market, apart from just dropping it completely. I'm not in a fire area, nor really any other increased risk, yet premiums just keep shamelessly going up 20-30% / year. I'm sure it looks necessary to the underwriters, but from my perspective it seems like I'm getting lumped in with a lot of people who seem to think insurance is a substitute for a bank account. To me, insurance is for catastrophic losses like a structure fire, or withstanding legal attacks like someone suing you for hurting themselves. But I see a trend of people using it for what are small scale (ice dams) or even what should be routine house expenses (got a 25 year old roof? why patch it when you can get a roofer to tell your insurance that you have wind damage and get a whole new roof!). Even choosing the highest deductibles doesn't really lower premiums significantly. There just doesn't seem to be a way to express to an underwriter "really, I'm only going to call you if my house is a total loss". It's probably just the same oligopolic/info-cartel consolidation that is plaguing the rest of the economy. But it sure is frustrating. Also on the topic of insurance, it really irks me that insurances are allowed to have caps on liability coverage. The entire point of insurance is to cover long tail risk. Instead they upsell you on additional coverage that still doesn't cover the long tail risk.

vuln 3y ago
> routine house expenses (got a 25 year old roof? why patch it when you can get a roofer to tell your insurance that you have wind damage and get a whole new roof!). 25-30 years is about the lifespan of a shingled roof depending on climate. I agree it’s routine maintenance. It’s also 10k-20k in some areas. I much prefer insurance being used for a large issue vs using it to have a tree removed because it was hit by lightening 1-3k.
- mindslight 3y ago
  Sure, but the whole roof doesn't vanish when it's at the end of its lifetime. Rather you start to get more leaks and whatnot and can pay to patch those spots, and/or start thinking about replacing the whole thing.
User23 3y ago

chewbacha 3y ago

This has directly impacted me because it’s created unclear guidance for people currently in escrow.

0zemp2c 3y ago

years back, some insurers wanted to stop issuing home policies for people near the Santa Cruz Mountains due to fire risk. Dianne Feinstein applied pressure in the Senate and with some concessions, it all went away. this is just State Farm looking for concessions.

mdorazio 3y ago

Unpopular opinion: Good. Now if the state of CA would also institute policy that homeowners affected by disasters will not be bailed out we can get somewhere productive. Want to live somewhere with a massive and well-known chance of wildfire, mudslide, or earthquake destruction on top of absurd property prices? Fine, you own the risk (and associated cost) of that. Incentivizing bad decisions is not a viable long-term strategy.

toomuchtodo 3y ago
I would say the same should go for Arizona, Florida, and Texas, all of which will see an increase in risk from climate change. Feel free to move there, but don't ask for a handout when you get punched in the face economically. The evidence is clear, although mandatory disclosure of the climate risk during a real estate transaction is a gap to be closed. > Homeowners are flocking to the likes of Florida and Texas, despite the growing threat of climate-related weather disasters, according to data from LexisNexis Risk Solutions reported by the New York Times. > Property insurance costs are rising across the country, with premiums up an average of 21 percent since 2015. Those bumps are significantly higher in states that carry more climate risk, however, including Florida (57 percent) and Texas (40 percent). https://therealdeal.com/national/2023/05/08/sun-belt-climate-risk-sends-insurance-premiums-soaring/ https://therealdeal.com/national/2023/05/08/sun-belt-climate... https://www.nytimes.com/2023/05/05/realestate/home-insurance-climate-change.html https://www.nytimes.com/2023/05/05/realestate/home-insurance... | https://archive.is/RRTW7 https://archive.is/RRTW7 https://impactlab.org/map/#usmeas=absolute&usyear=2020-2039&gmeas=absolute&gyear=1986-2005 https://impactlab.org/map/#usmeas=absolute&usyear=2020-2039&... https://projects.propublica.org/climate-migration/ https://projects.propublica.org/climate-migration/
- vorpalhex 3y ago
  You're comparing theoretical future risk to a bunch of burnt out homes that keep getting burned down.
  - toomuchtodo 3y ago

mistrial9 3y ago

the 2017 and 2019 fire seasons in California were predicted and extensively documented, but not prevented. Reading a bit, and definitely not a fan of Big Insurance Inc., it does seem like the system is breaking from several directions at once. no easy answer, political problems for the ones that speak out..

WalterBright 3y ago

> DOI Commissioner Ricardo Lara in September 2022 invoked a law [...] prohibiting insurance providers from canceling or refusing to renew plans for properties affected by wildfires until 12 months after the fire. [...] A moratorium on insurance price increases during the pandemic only heightened tension within the insurance industry. When you fix it so a business is guaranteed to lose money, they stop doing business in the state.

pxmpxm 3y ago
Anytime there's a shortage, you can be sure a government policy is behind it. The irony of all the bureaucrats bullshitting about climate change to cover for a policy outcome of their making is not lost on me. Never change, California.
ecf 3y ago
> Refusing to renew It seems they’re trying to make it so insurers simply can’t cancel your policy out from under you. Note how it specifies “renew”. These were people already paying for wildfire insurance and the law prevented them from being screwed over. Insurers just want a way out of paying up unless they can renew your contract into an absurdly marked up premium.

PopAlongKid 3y ago

The silver lining could be a reduction in the endlessly repeated "Jake from State Farm" commercials that accompany so many TV programs here. It's actually hard to find any major insurance company that doesn't advertise ceaselessly on television, I can only think of Traveler's.

emodendroket 3y ago
Yeah those will not be missed.
jeffbee 3y ago
KQED radio in San Francisco has been sponsored for years by Progressive with a message about their pay-as-you-go auto insurance that is not available in California and never has been. The non-availability of State Farm policies might not kill off their commercials.

omgwtfbyobbq 3y ago

>The change does not apply to personal auto insurance or existing home insurance policies in the state. This is a little misleading. My family has State Farm, and they recently sent a letter informing us they will be inspecting our property. My guess is they are looking for things that could increase the risk of fire or risk of losing/damage to the house during a fire and will ask us to remediate any issues they find. This is understandable, but their current statement is likely misleading because they are likely implementing other, additional/different policies for existing home insurance policy holders.

aSockPuppeteer 3y ago

One of the problems is few insurance carriers offer a cash out option if your house is destroyed, flooded, and needs to be rebuilt then it must be rebuilt in the same place. Then it goes into do you have these options or this secret option where they do their job to not pay you anything. Calculate the depreciation value…etc “If you have the Cash-Out Option or Agreed Value, congratulations! If you face a total loss, you will receive the replacement cost amount on your home whether you decide to rebuild there or not. If you do not, you will only receive the replacement cost amount if you decide to rebuild in the same spot. If you decide to cash out and move, you will receive the depreciated amount.” https://www.ovationinsure.com/rebuild-my-house-destroyed/ https://www.ovationinsure.com/rebuild-my-house-destroyed/

deleted 3y ago

[deleted]

sacnoradhq 3y ago

As a climate refugee from Paradise, CA, I agree. The insurance rates tripled between 2018 and 2020. I think this is unfair and un-business-wise in another sense because it fails to account for regional and local risks. Here's the best all risk estimate map by the US government[0]. 0: https://hazards.fema.gov/nri/map https://hazards.fema.gov/nri/map Many locations shouldn't be occupied, while Alpine and Sierra counties are low risk. Switch to census tract view, and it's clear there are many low risk in Sacramento/Citrus Heights away from fires and floods (downtown by the river floods). There are also pockets of low risk around San Diego and randomly around semi-populated areas.

pkaye 3y ago
Why are all the high populated areas higher risk on that map?

giardini 3y ago

[flagged]

debacle 3y ago

It's common for carriers to stop writing insurance in places, but apart from Florida I haven't seen large carriers like State Farm pull out of entire states in this way.

itake 3y ago
Insurance carriers pulled out of WA during the LTC crazy in 2020. The state passed a law that was basically, pay 0.8% tax for the rest of your life or buy private LTC care for 30 days and avoid paying the tax forever. The insurance providers were not happy to see people joining for 1 mo and then canceling.
- DaveMebs 3y ago
  They didn’t pull out in WA, they just stopped offering really cheap plans that were easy to cancel. They continued to offer higher-end LTC Insurance.
  - Retric 3y ago
    Which is a little silly as people canceling LTC insurance early is just about the closest thing to free money you’ll find in the insurance industry.
    - Schiendelman 3y ago
      It isn’t. The costs associated with setting up the policy take a while to recover.
- KingMachiavelli 3y ago
  Wouldn't insurance providers love getting 1 month of premiums with nearly 0 risk of any actual claims?
  - treis 3y ago
    These companies have high customer acquisition costs and are almost certainly losing money on a one month policy.

draw_down 3y ago

[dead]

olivermarks 3y ago

I live in northern California. some of this may partially be due to red tape, bureaucracy and the current number 3 ranking as a 'judicial hellhole' https://www.judicialhellholes.org/hellhole/2022-2023/california/ https://www.judicialhellholes.org/hellhole/2022-2023/califor...

nimih 3y ago
In terms of the insurance industry at least, California isn’t too far out of the ordinary compared in terms of bureaucracy and red tape (especially compared to, say, some eastern states with powerful and aggressive regulators such as NY or MA). Of course, the judicial environment is separate from the regulatory apparatus, and it seems eminently plausible that CA courts are much more willing to protect consumers from bad faith claims practices, etc. That all being said, catastrophic[1] wilfdire claims are a huge problem in the P&C insurance industry because they make the actuarial math much more difficult, and CA has had quite a few over the past couple years. Where I live in CO, none of the well-known insurers will, as a rule, write home policies in the mountain regions for similar reasons in spite of the relatively friendly regulatory environment. [1] a term with a rather precise meaning in insurance, referring to a single event which causes a large number of expensive and highly correlated claims
- inferiorhuman 3y ago
  Yep. The cost for our master policy jumped 4x in 2018. This was right after PG&E burned huge chunks of California (including entire cities) to the ground. That's not a bureaucracy issue that's an "oh shit everything's a lot more likely to burn down than we realized" issue.
  - coryrc 3y ago
    The forests are supposed to burn. They burnt for centuries before 1900. The reaction when houses burn should be "should have built using fireproof materials" or "that happens when you live in a forest" not "here's billions of dollars from more-responsible people".

lttlrck 3y ago

Fire risk and building costs were the stated reason my insurance went up 50% last year. And I'm not in a high risk zone... the only way I can cut it by any useful amount is by increasing the deductible to $10K+ A carrier leaving the market doesn't bode well. It is hard to enough to get on the property ladder for first time buyers, the challenge may soon become staying on it.

sokoloff 3y ago
A $10K deductible seems reasonable to me. I wouldn’t want to bother with insurance for anything less than about $25K in losses. (I don’t have a $10K deductible because the savings over $5K wasn’t meaningful in my case.)
- inferiorhuman 3y ago
  $10k seems insane to me because you are almost certainly guaranteed to be out of pocket for things that your insurance won't cover. In my case I had an issue that the HOA's master policy covered but my own HO6 didn't so there was zero loss of use coverage. Short-term furnished apartments run close to $7,000/month out here (typical minimum lease is three months), so even if you have a situation where your own insurance is providing loss of use coverage you're likely to blow through that pretty damn quickly. So, sure, you can absorb a ten thousand dollar deductible. Can you afford another twenty grand (or more) on top of that for some place to live while your home is repaired/rebuilt?
  - hedora 3y ago
    Deductibles are fiction for home owners insurance in California. After each of the recent natural disasters, the permitting departments dragged their feet, causing years of delay before homeowners could rebuild. At the same time, the disaster created a construction labor shortage, and the price of construction increased 20-30% between the insurance payout and permit approvals. Stricter regulations are required. In particular, it should be illegal to block permits for equal or improved structures, and the insurance companies should be on the hook for the total cost of reconstruction/buying a new home up to the day the homeowner moves in (minus deductible).

WirelessGigabit 3y ago

On one hand we have insurances are regulated, but on the other hand we postpone brush clearings and don't do controlled burns. So the risk goes up, but premiums don't. You cannot have it both.

Schiendelman 3y ago
We basically can’t do controlled burns safely anymore. We don’t have the personnel or expertise - it’s vanishing from government.

spencerchubb 3y ago

I work at State Farm. They have done things like this before. They pull out to light a fire under the ass of legislators. And then they resume business as usual.

bagacrap 3y ago
That's the feeling I got. What is the point of continuing to service existing customers, including paying for the agents who no longer have any new business to sign, if they aren't ever planning to reopen shop? Do you know what kind of legislative changes they're hoping to make?
- rubyfan 3y ago
  Agents typically are responsible not only for generating new business but also servicing the policies they sell and they are compensated with commission for the life of the policy. Further, they didn’t close down the shop they just stopped putting a certain type of inventory on the shelf - they will continue to sell auto and other types of insurance that are less exposed to wildfire or are otherwise rate adequate.
  - bagacrap 3y ago
    Auto aside --- as an agent you must be annoyed that your commission can only go down over time unless this is reversed?
  - Suppafly 3y ago
    considering how often auto is bundled with home, this is going to severely limit their business.
- Kalium 3y ago
  State Farm does plenty of business in auto and other areas, so agents are not suddenly completely out of business.
S_A_P 3y ago
I had to come back to this comment and congratulate you on your pun. Light a fire under the ass of legislators so they can do something about wildfire insurance. Ha!

shoo 3y ago

In the company's own words: > State Farm General Insurance Company made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market. If you understand the insurance & re-insurance business - can you explain these three factors in a bit more depth? Naive guesses: insurer offers a policy that agrees to rebuild a destroyed home -- so they're exposed to construction costs, if those costs rise above their projections. Unanticipated increases in construction costs increase the liability and reduce the expected profitability of each insurance policy. Increased risk of catastrophe might also increase liability of each insurance policy for homes exposed to those catastrophic risks, and also increase the risk to the whole portfolio of a catastrophe destroying many homes at once, causing many policies to come due at at the same time. A catastrophe might also do interesting things to market rates for construction costs.

khuey 3y ago
Premiums also are regulated so if liability is rising faster than premiums are allowed to rise you're in a bad place.
to11mtm 3y ago
I'll admit I don't understand insurance in CA specifically... But I have a decent general knowledge of a lot of insurance concepts from a past partner. Your naive guesses look to me to be on point. Another thing to consider, at least in the case of 'Replacement Cost' (What it would cost to build a house with similar features) versus 'Actual Cash Value' (What the house was worth on the market.) In the case of 'Replacement Cost' there is the issue that any changes to code must be factored in (i.e. a house built in 1980, may have wiring/plumbing/etc that had been grandfathered in but could not be approved as a new build today.) Increased risk of catastrophe is also a result of the root causes of massive losses from wildfires not being addressed at a government level.

BigCryo 3y ago

Environmental racism combined with climate change is a deadly combination

hedora 3y ago

Insurance should be for actual cost of replacement minus a fixed deductible (by law). As it is, homeowners policies are unlikely to actually allow you to obtain a new home.

camel_gopher 3y ago

Like a good neighbor

astrea 3y ago

[flagged]

Dig1t 3y ago

>due to wildfires and rebuilding costs. Why are rebuilding costs so much higher in California than other states?

ndjdjd 3y ago
[flagged]
bagacrap 3y ago
I'm guessing labor and/or taxes/permitting fees.
foogazi 3y ago
Cost of living ?

baggy_trough 3y ago

The central planners have done it again!

h2odragon 3y ago

I like the State representative speaking for State Farm's reasons. Don't wanna ask anybody at the company, in case they mention the price control legislation. Perhaps that's not fair; the insurance market is such that there's never not been "price controls".

bagacrap 3y ago

I'm not sure why state farm is doing this and citing wildfires. Most insurers already won't cover fire in the fire-prone areas of the state, so you have to get a separate plan just for fire through Cal FAIR which tends to be crazy expensive. The traditional insurers will cover everything else, like theft. So you end up with two plan, paying about 3x what you would normally. But State Farm insures a lot of areas that others already consider too risky. They could be more targeted about reducing their coverage area. If your home is in the middle of LA I don't think it's prone to wildfire risk.

g42gregory 3y ago

I wonder what is a definition of a failed state and whether California begins to fall under it? As Jon Stewart used to say “I am just asking…”

egberts1 3y ago

"we"? Is that Jake from State Farm?