5 ms·

Most insurance is for acts of God. Wind, Hail, Flood...

mulletbum 3y ago
What would the point of it be if it wasn't. I think this person is confusing the difficulty in getting insurance if you live in a flood zone. That is how this would potentially work, no insurance because you are in a hail zone. Never heard of that before though, so this is probably covered and something the insurance will reassess to not cover in future work.
- ianai 3y ago
  Ah but “hail zone” isn’t quite the same order of magnitude problem as “flood zone” for the places that can’t get flood insurance. Those are starting to look uninhabitable due to encroaching sea waters. Hail’s just freak weather.
- BenjiWiebe 3y ago
  Living in Kansas - hail is extremely localized. A mile or two (or sometimes much less) away from large hail can be no hail or only tiny pebbles.
tialaramex 3y ago
(Legally) Acts of God may invalidate any contract, including insurance contracts. However they have to be natural ("God did it") not man-made, and they have to be unforeseeable, so "This only happens every ten years" won't count, but "Suddenly central Paris disappeared into a previously unknown volcano" would be an Act of God. If you're in Tornado Alley, and your house gets destroyed by a tornado, your insurer can't be like "Act of God, our tornado insurance doesn't cover that" because that's no act of god, that's just weather where you live.
dredmorbius 3y ago
"Most" insurance is not for Acts of God, but for small, discrete, predictable, and uncorrelated risks: Life, health, automobile, homeowners / renters, property & casualty (usually structural fires), theft, burglary, and business-related risks. It is major and widespread disasters which private insurers typically avoid, specifically because many policies receive claims at the same time: flood, earthquake, hurricane, and increasingly of late, wildfire. An alternate term is force majeur, which might offer a clearer image of why such widespread events are uncovered. <https://www.investopedia.com/terms/a/act-god.asp https://www.investopedia.com/terms/a/act-god.asp> Other common exclusions are for civil unrest and acts of war. I'll note that the Investopedia article above includes tornadoes amongst its events. This somewhat suprises me as tornadoes, whilst locally devastating, often do limit damage to a highly localised area or path. Yes, large storms or clusters may devastate a city or region, but most events are reasonably small-scale, as major natural disasters go. A widespread hailstorm could well be far more costly in terms of claims, as discussed in TFA. Insurance works by predicting the future value (or cost) of a particular event, and by spreading that cost out over a large number of policyholders. On the back-end, insurance companies operate through reinsurers, who bundle those already-bundled risks into even larger tranches, and hence, more predictable outcomes. The ultimate private-sector backstops are entities such as the Lloyds Names, in which high-net-worth individuals pledge their entire personal assets against particular risks. (The nature of this and the potential downside cost has been much commented on over the years, and there have been periods in which there have been spectacular personal wipe-outs as a consequence.) Where private companies can not or will not tread, governments frequently step in. Flood insurance in the US is frequently offered or backstopped by the US Federal Government. This is one of numerous ways in which governmment enters into and manipulates risk markets, with other examples being Federal Deposit Insurance (on bank and savings and loan deposits, see recently Silicon Valley Bank), exemptions from liability as with the nuclear industry, and backstopping other financial instruments as with Fanny Mae and Freddy Mac in the home mortgage sector. And there are instances in which insurance companies have stepped away from their obligations. My understanding that this was the case in the 1906 San Francisco Earthquake and Fire, argued in part by insurers on the fact that records of both individual policyholders and of the insurance companies themselves were destroyed in the event. I don't know what the antecedents of US state-based regulation of insurance are, though I suspect that this event played a role. One view of government is that it operates where the private sector can not or will not, generally, notably in national defence, in various risk and safety-net systems (notably the modern social welfare state, in many ways born under Bismark in Germany in the late 19th century), as an establisher of standards (from money to measurement to industrial specifications), and as a provider or coordinator in the case of public goods: those whose marginal cost approaches nil, which are nonrivalrous in consumption, and/or which are non-excludable in consumption. This gives rise to the observation that the US Government is an insurance company with an army: <https://archive.nytimes.com/krugman.blogs.nytimes.com/2011/04/27/an-insurance-company-with-an-army/ https://archive.nytimes.com/krugman.blogs.nytimes.com/2011/0...>

What would the point of it be if it wasn't. I think this person is confusing the difficulty in getting insurance if you live in a flood zone. That is how this would potentially work, no insurance because you are in a hail zone. Never heard of that before though, so this is probably covered and something the insurance will reassess to not cover in future work.

ianai 3y ago
Ah but “hail zone” isn’t quite the same order of magnitude problem as “flood zone” for the places that can’t get flood insurance. Those are starting to look uninhabitable due to encroaching sea waters. Hail’s just freak weather.
BenjiWiebe 3y ago
Living in Kansas - hail is extremely localized. A mile or two (or sometimes much less) away from large hail can be no hail or only tiny pebbles.

tialaramex 3y ago

(Legally) Acts of God may invalidate any contract, including insurance contracts. However they have to be natural ("God did it") not man-made, and they have to be unforeseeable, so "This only happens every ten years" won't count, but "Suddenly central Paris disappeared into a previously unknown volcano" would be an Act of God. If you're in Tornado Alley, and your house gets destroyed by a tornado, your insurer can't be like "Act of God, our tornado insurance doesn't cover that" because that's no act of god, that's just weather where you live.

dredmorbius 3y ago

"Most" insurance is not for Acts of God, but for small, discrete, predictable, and uncorrelated risks: Life, health, automobile, homeowners / renters, property & casualty (usually structural fires), theft, burglary, and business-related risks. It is major and widespread disasters which private insurers typically avoid, specifically because many policies receive claims at the same time: flood, earthquake, hurricane, and increasingly of late, wildfire. An alternate term is force majeur, which might offer a clearer image of why such widespread events are uncovered. <https://www.investopedia.com/terms/a/act-god.asp https://www.investopedia.com/terms/a/act-god.asp> Other common exclusions are for civil unrest and acts of war. I'll note that the Investopedia article above includes tornadoes amongst its events. This somewhat suprises me as tornadoes, whilst locally devastating, often do limit damage to a highly localised area or path. Yes, large storms or clusters may devastate a city or region, but most events are reasonably small-scale, as major natural disasters go. A widespread hailstorm could well be far more costly in terms of claims, as discussed in TFA. Insurance works by predicting the future value (or cost) of a particular event, and by spreading that cost out over a large number of policyholders. On the back-end, insurance companies operate through reinsurers, who bundle those already-bundled risks into even larger tranches, and hence, more predictable outcomes. The ultimate private-sector backstops are entities such as the Lloyds Names, in which high-net-worth individuals pledge their entire personal assets against particular risks. (The nature of this and the potential downside cost has been much commented on over the years, and there have been periods in which there have been spectacular personal wipe-outs as a consequence.) Where private companies can not or will not tread, governments frequently step in. Flood insurance in the US is frequently offered or backstopped by the US Federal Government. This is one of numerous ways in which governmment enters into and manipulates risk markets, with other examples being Federal Deposit Insurance (on bank and savings and loan deposits, see recently Silicon Valley Bank), exemptions from liability as with the nuclear industry, and backstopping other financial instruments as with Fanny Mae and Freddy Mac in the home mortgage sector. And there are instances in which insurance companies have stepped away from their obligations. My understanding that this was the case in the 1906 San Francisco Earthquake and Fire, argued in part by insurers on the fact that records of both individual policyholders and of the insurance companies themselves were destroyed in the event. I don't know what the antecedents of US state-based regulation of insurance are, though I suspect that this event played a role. One view of government is that it operates where the private sector can not or will not, generally, notably in national defence, in various risk and safety-net systems (notably the modern social welfare state, in many ways born under Bismark in Germany in the late 19th century), as an establisher of standards (from money to measurement to industrial specifications), and as a provider or coordinator in the case of public goods: those whose marginal cost approaches nil, which are nonrivalrous in consumption, and/or which are non-excludable in consumption. This gives rise to the observation that the US Government is an insurance company with an army: <https://archive.nytimes.com/krugman.blogs.nytimes.com/2011/04/27/an-insurance-company-with-an-army/ https://archive.nytimes.com/krugman.blogs.nytimes.com/2011/0...>