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"A moratorium on insurance price increases during the pandemic only heightened tension within the insurance industry." Insurers have no control over either con
by 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 agoAs 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 agoLots 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 agoThey 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 agoThey don't have to, if they don't feel they need insurance.
- kgwxd 3y agoIsn’t it usually required if you have a mortgage?
- toast0 3y agoI can't remember the specific terms of my mortgage, but as I recall, the first level was 'you must have home insurance with certain parameters including having us as a named insured, etc; if you don't, we will obtain home insurance at your expense'. But I don't know what the recourse is if home insurance is unobtainable. Certainly, it would be a lot harder to get a new mortgage underwritten, which makes refinancing mostly impossible and makes selling difficult. Given that the property would be difficult to sell, I'd imagine even if the contract allows it, lenders wouldn't foreclose for lack of insurance if insurance is unavailable. Really, I think the way to move forward on the issue that so many homes are built in areas they shouldn't be is to make available insurance policies that cover permanent relocation, rather than rebuilding in place. You can still live there until it burns down, at which time, you must move elsewhere and the lot is deemed unbuildable for the forseable future. With some sort of provision to manage windfalls from changes in conditions allowing safe construction in the future. (It's not fair if you force people out, but ten or twenty years later, let people in again; OTOH, maybe one hundred years later, it will make sense?)
- bdowling 3y ago> But I don't know what the recourse is if home insurance is unobtainable. The recourse is usually foreclosure when the borrower doesn’t meet the essential terms of the mortgage agreement. It doesn’t matter why the borrower can’t get insurance any more than it would matter why the borrower couldn't make payments on the loan.
- prepend 3y ago
- 01100011 3y agoMaybe. Or maybe if their municipality got serious about fire breaks, fire prevention, and invested in their fire department they would be insurable again.
- justinator 3y agoNo is even sure what the original source of the fire was, after a very long investigation.
- lmm 3y agoDoes it matter? The problem isn't that the fire started, that's always going to happen sometimes, the problem is how much it spread and how much damage it did.
- semicolon_storm 3y agoThe situation sucks, but their continuing to live there and be insured has to be subsidized by somebody somewhere. The area is clearly insanely risky to the point where no premium justifies offering coverage. If coverage was offered, who should be the one subsidizing it? Private companies? No way, they never would. Government? That's just a regressive policy funneling money to a relative well-off (homeowners) group of people.
- bushbaba 3y agoThere’s always a premium. Even if 30% of home value per year. The issue is the fair price for risk isn’t something people would want to ever pay.
- frumper 3y agoNor should they. If they could pay that ridiculous rate then they wouldn’t have a problem not having insurance. You’re presenting it as someone that buys a 300k house and gets a $1500/mo mortgage doesn’t “want” to pay $8500/mo in home insurance.
- xref 3y agoIt’s better insurance just isn’t available at any price. You can know going into the purchase that the home will be uninsurable so your financial picture needs to account for that. Also in general I don’t believe you can get a mortgage without home insurance? So people buying these properties would have to come in cash.
- justinator 3y ago>but their continuing to live there and be insured has to be subsidized by somebody somewhere I think insurance companies cover customers because the customers pay for the insurance. You're saying that because profits for insurance companies aren't at the level the insurance companies want, that they can say - because it's illegal to own an uninsured home, where people can and can not live? That seems like an overreach of power of a private company.
- JumpCrisscross 3y ago> Are these people to abandon their homes outright? When they next burn down, yes.
- usernew 3y agoabout a decade ago, purchased a home half a mile away from a river. For the last 50 years, the river bank has been has been slowly moving outwards out due to erosion. I bought the house for a million, it's now worth two. Last year, a thousand houses a few miles downstream fell into the water. This year, my insurance company cancelled my coverage, and I can't find anyone else who will insure me. What I'd like is for premiums to be raised for people who bought their homes in a safe area, to pay me my million dollars in profit when my house falls into the watter. This is my Current home. Am I supposed to just abandon it because no one will buy it? So, the answer to your question, is yes. Home prices go up and down. Yours is now worth zero because of your bad decision. It is not the job of other people, to pay you for your mistake.
- deleted 3y ago[deleted]
- scarface_74 3y agoWhy should others subsidize your investment lost?
- NLPaep 3y agoHe says he’d like that, but that it wouldn’t be fair
- usernew 3y agothey should not. the fact that you did not understand this is what I was saying, suggests a lack of practice in social interaction. now this is not meant as a personal attack. think of it like this: you are teaching an arithmetic class - something for which fully functional members of society need to have the skill. you explain that 5+2*2=9. someone corrects you that it is in fact 14. what would you suggest this person do? this also applies to basic language skills. i suggest that whatever advice you have for the previous hypothetical person, you apply to basic social interaction in your own life. but maybe I'm wrong, and you did not read the comment to which I was replying. in that case, I suggest that when you read a comment, you should see the comment it's rebutting, prior to posting yours. this also, is a basic social skill. I'll start you off: I do not own a house at all as I travel internationally and move around too much to stay in one place over a few years. I would also never purchase one in a risk zone, since there are thousands of others available w/o the risk, and they don't cost more.
- emodendroket 3y agoUsually the answer is "they should just sell" though less clear is to whom.
- NegativeK 3y agoThe government could buy out the homes. There'd have to be restrictions to prevent abuse and the government buying 1M+ vacation homes (or whatever), but it'd make the problem go away.
- draw_down 3y ago[dead]
- twoodfin 3y agoFrankly, if the state of California believes it knows better than the insurers how to fairly price risks to its citizens’ homes, it should offer that insurance itself. As they’re doing with energy, they could implement progressive premium schemes for income redistribution purposes. The richer public services and lower inequality should keep the state’s population boom thundering on.
- hindsightbias 3y agoIt's like all the complaints about PG&E. Don't like the way PG&E operates? Take it over and make it a public utility. State Leg: crickets chirping.
- renewiltord 3y agoWait, no. That's the worst world. The state will simply pour taxpayer money into this and people will keep extracting it and throwing into a literal fire. Please God no. I already lose more than I get to the government in taxes on every marginal dollar I make.
- twoodfin 3y agoDon’t worry, every decade or so there’s a good reason for Congress to rescue the states from their foolish fiscal decisions (see also: public employee pensions). Somehow, though, the “bailout” boogeyman is never called out for the states, even though they got hundreds of billions of essentially no-strings-attached “Covid relief” dollars from the Feds.
- deleted 3y ago[deleted]
- mindslight 3y agoSubsidies to state governments are inevitable while the federal government retains monetary authority, and uses it to create continual monetary inflation. The idea that individual states could have fiscal responsibility and no funding from the feds would require that the federal reserve stop that fountain of new money. But the economic priests have decided that this must never happen, lest the plebs stop having to work as much.
- deleted 3y ago[deleted]
- jayd16 3y agoIf they can't find insurance does that not still count as an incentive?
- hyuuu 3y agothe same thing applies to eviction moratorium, there are a lot of financial institutions, big and small, are targeting mom and pop landlords who cannot withstand the non paying tenants. The owners sold at a cheaper price given the promise of no headache and the institutions have lawyers on retainers. Seen this played out many times, I even got involved in a JV deal for one. It's insane how californians complain about high rent prices, with insanely high risk like this of course there needs to be a high return, not to mention the nimby limiting the supply.