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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 lev

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...

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...