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Why are people surprised when a company operates in its’ own best interest? Why should we expect anything else? Insurance companies are just about moving dollar

Why are people surprised when a company operates in its’ own best interest? Why should we expect anything else? Insurance companies are just about moving dollars around and hedging risk. Being perturbed about this is like being mad about your dog barking at the mailman. If someone said I’m going to start free climbing the tallest buildings in the world - but I need insurance - the company will tell you to get lost because the risk outweighs the reward. This is what insurance companies are doing all over the place (fl/ca) because those environments are truly becoming uninsurable. But then people are shocked and awed when the situation happens with them. Why? An insurance company is not a charity it’s just a profit engine. Don’t get mad at the dog for barking at the mail man :)

lifechoseme123 3y ago
Re: FL & CA becoming uninsurable-- I have almost zero knowledge in that area. I assume it's because of natural disasters such as Fires, Hurricanes, and sea level rise?
- whalesalad 3y ago
  Yes.
- aurizon 3y ago
  There are many problems in Florida in addition to heat engines getting better at what they do = huge insurance fraud problems, restrictive work practices, shortage of stuff to make/fix roofs, shortage of local roof fixers = fukkit, lets walk
- orwin 3y ago
  I think there's a price of work element too. In my mother's area, insurance is cheaper because a plumbing job will cost 60€/hour (+ 30€ for the intervention). I'm pretty sure the costs are more like 120/150 in my area.
- seanharper 3y ago
  The issue in CA is idiosyncratic to the state. In 2020 the average price of homeowners insurance in CA was $1,241 and in Illinois was $1,144. It probably doesn't make sense for California to be only 8% more expensive than Illinois. https://www.iii.org/fact-statistic/facts-statistics-homeowners-and-renters-insurance https://www.iii.org/fact-statistic/facts-statistics-homeowne... Houses are more expensive in CA, building costs are more expensive in CA and the weather is more volatile (and becoming increasingly so) in CA. The rate level in CA needs to increase. The regulator in CA makes it difficult to raise rates, so companies are responding by reducing their appetite.
- seanharper 3y ago
  The issue in Florida is also idiosyncratic to the state -- in addition to macro factors such as an increase in reinsurance costs (driven by increased cost of capital) and increased weather volatility (driven at least in part by global warming), Florida has had an issue with insurance fraud. They had a set of laws and court cases, unlike any other state in the country, that created a financial incentive for contractors to inflate (or make unnecessary) insurance claims. They would work in concert with litigation mills to further inflate the size of those claims. The way the laws were setup it often allowed the attorneys to get a 3x multiplier on their fees (which they would inflate to begin with). So you would have a situation where a roof needed to be replaced, should cost $30k. A roofer comes up with an estimate for $60k (and maybe pays the homeowner back a $10k kicker), gets the homeowner to sign over the insurance policy to him. Then he hires a lawyer who spends $50k of his time litigating the case. Let's say the court sides in favor of the insurer and awards $30k, the lawyer still gets $150k (3x multiplier on the $50k of fees). As a result you had Florida accounting for 8% of the homeowners insurance claims nationally and 75% of the lawsuits nationally. There are billboards for insurance attorneys EVERYWHERE in florida. The phenomenon impacted big national companies like State Farm that have similar claims handling procedures across their book. So State Farm would handle claims exactly the same in Florida as in Illinois and get sued 10x more often in Florida because of the financial incentive to sue. It also impacts Florida's state-owned insurer, which does compete very vigorously in the market and is the largest insurer in the state. David Altmaier, the former Commissioner of Insurance in Florida, wrote a good piece on that situation - https://floir.com/siteDocuments/ChairIngoglia04022021.pdf https://floir.com/siteDocuments/ChairIngoglia04022021.pdf Fortunately Florida took a really good stab at fixing the problem with some legislation passed last December. It will take a while to see if the legislation worked, however. Meanwhile we still have the macro factors (climate change, reinsurance costs) to contend with. https://bestsreview.ambest.com/edition/2023/february/Florida-Insurance-Reforms.html https://bestsreview.ambest.com/edition/2023/february/Florida...
uoaei 3y ago
This is an unhelpful and tone-deaf response. I don't think anyone is "surprised" that companies act in their own self-interest. If they are surprised by anything, it's that the system that made mandatory the concept of insurance for a dignified, modern life (what we name in shorthand as "the economy") continues to allow for rug-pulling of this magnitude which obviously results in net-negative outcomes for society as a whole.
- whalesalad 3y ago
  When the world is rapidly changing what do you expect to happen? Systems collapse. It’s inevitable.
  - uoaei 3y ago
    What is your angle exactly? It's hard to understand the underpinnings of your perspective here. Systems do sometimes collapse, but I would prefer to look at it as "we are smart enough to study these systems and act in the social best interest when failure is imminent or has already happened, and responsible enough to work to improve the society that makes our lives possible."
    - whalesalad 3y ago
      The world is physically changing. Weather patterns are shifting. Hot is getting hotter. Wet is getting wetter. Wildfires are becoming larger, more prevalent and more destructive. Sea levels are rising. Ocean temperatures are rising. Parts of the world are becoming inhospitable for human life. We can try as we might to terraform and engineer against it but Mother Nature will win. At some point as an insurance company or even whole industry needs to look at the data and assess whether the juice is worth the squeeze. These companies - despite marketing materials - don’t care about fixing your home. They are only interested in risk versus reward. When the operating environment becomes too risky you either raise prices astronomically (this is happening) or you pull out entirely because your customer base simply can’t afford it (this is also happening). Regarding the stance that we are smart enough to outsmart these problems - I agree but also disagree. What do you do when all signs are pointing to no and the cost of potential solutions far outweighs any benefits? You cut your losses and move.
hypeit 3y ago
> An insurance company is not a charity it’s just a profit engine. Odd then that so many forms of insurance are mandated by the government.
- Invictus0 3y ago
  Suppose you are an insurer. You model the risk for your insurance product (suppose it's car insurance) and realize you need to charge $100/mo to make money after paying out all the claims. However, you have a competitor that is bad at modeling risk. They are charging $50/mo for their car insurance, and customers are flocking to them. Should you attempt to stay in this market? If you lower your prices, you will eventually get knocked out; if you keep them high, you will not get any customers. Alternatively, suppose cars become super risky and you need to charge $10,000 a month to insure the car, and reasonably conclude that no one is going to pay that, and after you pay for marketing and overhead and payroll, you will still lose money if you try to sell the insurance product. Do you stay in the market? It's especially funny to see everyone in the comments complaining that the insurance company is "only thinking about the short term".
  - hypeit 3y ago
    > after you pay for marketing There should be no marketing if it's mandated. These companies should not be run for profit since having insurance is required by law in many situations.
    - Invictus0 3y ago
      [flagged]
      - pc86 3y ago
        [flagged]
      - hypeit 3y ago
        > Ok so your idea is to have the government be in the insurance business? Yes, I think all insurance should be nationalized. You may not agree, but accusing me of not thinking clearly is an ad hominem.
rhyme-boss 3y ago
It would be appropriate to do something about your dog barking at the mailman, like hire a professional and learn how to teach him not to do that.
- whalesalad 3y ago
  People often forget that many dog breeds were bred for work - like alerting and defense. If you have a 3 year old child crying in a restaurant, can you get mad at it? No. You can pat it on the back and take it outside to respect the space and other patrons, but you can’t get mad at a child for crying. Same analogy. Don’t get mad at nature doing nature things.
  - deleted 3y ago
    [deleted]

lifechoseme123 3y ago

Re: FL & CA becoming uninsurable-- I have almost zero knowledge in that area. I assume it's because of natural disasters such as Fires, Hurricanes, and sea level rise?

whalesalad 3y ago
Yes.
aurizon 3y ago
There are many problems in Florida in addition to heat engines getting better at what they do = huge insurance fraud problems, restrictive work practices, shortage of stuff to make/fix roofs, shortage of local roof fixers = fukkit, lets walk
orwin 3y ago
I think there's a price of work element too. In my mother's area, insurance is cheaper because a plumbing job will cost 60€/hour (+ 30€ for the intervention). I'm pretty sure the costs are more like 120/150 in my area.
seanharper 3y ago
The issue in CA is idiosyncratic to the state. In 2020 the average price of homeowners insurance in CA was $1,241 and in Illinois was $1,144. It probably doesn't make sense for California to be only 8% more expensive than Illinois. https://www.iii.org/fact-statistic/facts-statistics-homeowners-and-renters-insurance https://www.iii.org/fact-statistic/facts-statistics-homeowne... Houses are more expensive in CA, building costs are more expensive in CA and the weather is more volatile (and becoming increasingly so) in CA. The rate level in CA needs to increase. The regulator in CA makes it difficult to raise rates, so companies are responding by reducing their appetite.
seanharper 3y ago
The issue in Florida is also idiosyncratic to the state -- in addition to macro factors such as an increase in reinsurance costs (driven by increased cost of capital) and increased weather volatility (driven at least in part by global warming), Florida has had an issue with insurance fraud. They had a set of laws and court cases, unlike any other state in the country, that created a financial incentive for contractors to inflate (or make unnecessary) insurance claims. They would work in concert with litigation mills to further inflate the size of those claims. The way the laws were setup it often allowed the attorneys to get a 3x multiplier on their fees (which they would inflate to begin with). So you would have a situation where a roof needed to be replaced, should cost $30k. A roofer comes up with an estimate for $60k (and maybe pays the homeowner back a $10k kicker), gets the homeowner to sign over the insurance policy to him. Then he hires a lawyer who spends $50k of his time litigating the case. Let's say the court sides in favor of the insurer and awards $30k, the lawyer still gets $150k (3x multiplier on the $50k of fees). As a result you had Florida accounting for 8% of the homeowners insurance claims nationally and 75% of the lawsuits nationally. There are billboards for insurance attorneys EVERYWHERE in florida. The phenomenon impacted big national companies like State Farm that have similar claims handling procedures across their book. So State Farm would handle claims exactly the same in Florida as in Illinois and get sued 10x more often in Florida because of the financial incentive to sue. It also impacts Florida's state-owned insurer, which does compete very vigorously in the market and is the largest insurer in the state. David Altmaier, the former Commissioner of Insurance in Florida, wrote a good piece on that situation - https://floir.com/siteDocuments/ChairIngoglia04022021.pdf https://floir.com/siteDocuments/ChairIngoglia04022021.pdf Fortunately Florida took a really good stab at fixing the problem with some legislation passed last December. It will take a while to see if the legislation worked, however. Meanwhile we still have the macro factors (climate change, reinsurance costs) to contend with. https://bestsreview.ambest.com/edition/2023/february/Florida-Insurance-Reforms.html https://bestsreview.ambest.com/edition/2023/february/Florida...

uoaei 3y ago

This is an unhelpful and tone-deaf response. I don't think anyone is "surprised" that companies act in their own self-interest. If they are surprised by anything, it's that the system that made mandatory the concept of insurance for a dignified, modern life (what we name in shorthand as "the economy") continues to allow for rug-pulling of this magnitude which obviously results in net-negative outcomes for society as a whole.

whalesalad 3y ago
When the world is rapidly changing what do you expect to happen? Systems collapse. It’s inevitable.
- uoaei 3y ago
  What is your angle exactly? It's hard to understand the underpinnings of your perspective here. Systems do sometimes collapse, but I would prefer to look at it as "we are smart enough to study these systems and act in the social best interest when failure is imminent or has already happened, and responsible enough to work to improve the society that makes our lives possible."
  - whalesalad 3y ago
    The world is physically changing. Weather patterns are shifting. Hot is getting hotter. Wet is getting wetter. Wildfires are becoming larger, more prevalent and more destructive. Sea levels are rising. Ocean temperatures are rising. Parts of the world are becoming inhospitable for human life. We can try as we might to terraform and engineer against it but Mother Nature will win. At some point as an insurance company or even whole industry needs to look at the data and assess whether the juice is worth the squeeze. These companies - despite marketing materials - don’t care about fixing your home. They are only interested in risk versus reward. When the operating environment becomes too risky you either raise prices astronomically (this is happening) or you pull out entirely because your customer base simply can’t afford it (this is also happening). Regarding the stance that we are smart enough to outsmart these problems - I agree but also disagree. What do you do when all signs are pointing to no and the cost of potential solutions far outweighs any benefits? You cut your losses and move.

hypeit 3y ago

> An insurance company is not a charity it’s just a profit engine. Odd then that so many forms of insurance are mandated by the government.

Invictus0 3y ago
Suppose you are an insurer. You model the risk for your insurance product (suppose it's car insurance) and realize you need to charge $100/mo to make money after paying out all the claims. However, you have a competitor that is bad at modeling risk. They are charging $50/mo for their car insurance, and customers are flocking to them. Should you attempt to stay in this market? If you lower your prices, you will eventually get knocked out; if you keep them high, you will not get any customers. Alternatively, suppose cars become super risky and you need to charge $10,000 a month to insure the car, and reasonably conclude that no one is going to pay that, and after you pay for marketing and overhead and payroll, you will still lose money if you try to sell the insurance product. Do you stay in the market? It's especially funny to see everyone in the comments complaining that the insurance company is "only thinking about the short term".
- hypeit 3y ago
  > after you pay for marketing There should be no marketing if it's mandated. These companies should not be run for profit since having insurance is required by law in many situations.
  - Invictus0 3y ago
    [flagged]
    - pc86 3y ago
      [flagged]
    - hypeit 3y ago
      > Ok so your idea is to have the government be in the insurance business? Yes, I think all insurance should be nationalized. You may not agree, but accusing me of not thinking clearly is an ad hominem.

rhyme-boss 3y ago

It would be appropriate to do something about your dog barking at the mailman, like hire a professional and learn how to teach him not to do that.

whalesalad 3y ago
People often forget that many dog breeds were bred for work - like alerting and defense. If you have a 3 year old child crying in a restaurant, can you get mad at it? No. You can pat it on the back and take it outside to respect the space and other patrons, but you can’t get mad at a child for crying. Same analogy. Don’t get mad at nature doing nature things.
- deleted 3y ago
  [deleted]