4 ms·

Don't assume insurers are competent. They often sell homeowner's policies entirely online or over the phone without inspecting the property, looking at as-built

Don't assume insurers are competent. They often sell homeowner's policies entirely online or over the phone without inspecting the property, looking at as-builts, etc. My renovated up to 2015 earthquake standards house pays the same rate as the 1939 jalopy down the street despite my home having much higher quality electrical (less fire risk) and being built to a stronger standard (less likely to collapse or suffer damage from storms, earthquakes, etc). Neither private insurance nor the state chartered CA Earthquake Insurance price by actual risk. Florida and Texas are the same: insurers don't price in hurricane or hail proofing, anti-flooding measures, etc. Hail resistant and wind resistant roofs exist but they'd rather just stop writing policies. I don't know why things have gone so wrong in recent years. Insurance should be able to drive improvements in construction techniques rather than stopping policy writing. For example: instead of refusing to write policies in wildfire prone areas refuse if the home doesn't have fire-proof roofing and siding, along with a zone clear of combustibles around the house, fire screens on vents, etc. Such measures would allow far more homes to survive wildfires without damage but the insurers aren't interested. This is the opposite of vehicle insurance where the industry crash tests new vehicles and adjusts premiums for vehicles with better safety ratings.

JackFr 3y ago
You fail to account for the cost of accurately underwriting. They can do what you suggest fir cars because it involves testing a few dozen car models. If each car needed to be tested they wouldn’t do it.
airza 3y ago
The flip side of this is not simply assuming that insurers are stupid. Performing bespoke inspections of houses is an industry onto itself which i also would not rush into. It also doesn’t help you much; if 10% of houses have these countermeasures your regional risk pool will still be vaporized when the other 90% are burned to the ground. It’s just eventually impossible to insure these assets when these types of super correlated risks become as ubiquitous as they are.
- kelnos 3y ago
  > if 10% of houses have these countermeasures your regional risk pool will still be vaporized when the other 90% are burned to the ground. I think the GP's point was that the insurers just wouldn't insure the countermeasure-free 90%. Those 10% would be insured, and suffer less or no damage. Granted, reducing the risk pool to that 10% of homes isn't great either. But presumably at least some of the other 90% would be strongly incentivized to retrofit those fire countermeasures so they could get coverage.
- xenadu02 3y ago
  As the sibling reply notes I am proposing the insurer refuse to write new policies or renew existing policies unless the homes are upgraded to meet much more stringent standards. Some examples: In CA, require an engineer's report on earthquake risk. This could be done by issuing a standard form for the engineer to review with various areas of concern to avoid the need to have a bespoke report for each case. We managed to do lots of amazing things (invent computers, land on the moon)... I'm sure we could streamline this process. A lot of it is a decision tree: Is this slab, half-wall, or pier/beam construction? Half-wall: are the half-walls braced with plywood? Slab? Are shear walls built to X standard present along all major axis of the structure? Is any soft-story/garage area reinforced with footings and a beam meeting X standard? In Hurricane-prone areas: require storm shutters on windows, cat-5 rated doors, and cat-5 rated roofing materials. Also require the home be a certain height above the relevant water level. Yes this means a home built on the beach or on a river bank would need to be raised if they want a policy (which is not as impossible or expensive as it sounds). Sucks that the original builder made bad decisions but requiring corrective action would dramatically reduce (if not eliminate) the risk of water damage. Anytime a home doesn't meet these standards the premium should jump dramatically. If the state won't allow that then you don't write the policy until the structure is retrofitted to meet the standard. This would reward people who invest in renovations to make their homes safer, more accurately price risk, and avoid pulling out of the market entirely - instead sending accurate price/risk signals (where regulations allow such accurate pricing).
throw0101c 3y ago
> Hail resistant and wind resistant roofs exist but they'd rather just stop writing policies. Note that the insurance folks have developed an entire system of how roofs (and entire residential, multi-family, commercial structures) should be built: * https://ibhs.org/fortified/ https://ibhs.org/fortified/ * https://fortifiedhome.org/roof/ https://fortifiedhome.org/roof/ * https://www.youtube.com/watch?v=Zd-0yAPs6Wc https://www.youtube.com/watch?v=Zd-0yAPs6Wc * https://www.youtube.com/watch?v=proGT6AtyJc https://www.youtube.com/watch?v=proGT6AtyJc
throwaway2865 3y ago
They do understand this. It's typically politically infeasible to set rates appropriately - risk is often correlated with income, which is correlated with skin color. So a concentrated risk in an area makes the whole area uninsurable, unless you want to be called racist.
mozman 3y ago
> Florida and Texas are the same: insurers don't price in hurricane or hail proofing, anti-flooding measures, etc. Hail resistant and wind resistant roofs exist but they'd rather just stop writing policies. This is not true. You get significant policy discounts by upgrading older homes such as strengthening the roof connection to walls, impact rated doors/glass, roof age (and type). These discounts can reduce annual premiums by a non trivial amount - first hand knowledge of 30%. Since Andrew the Miami-Dade building codes have set a new standard for construction and this is reflected in policy pricing.

JackFr 3y ago

You fail to account for the cost of accurately underwriting. They can do what you suggest fir cars because it involves testing a few dozen car models. If each car needed to be tested they wouldn’t do it.

airza 3y ago

The flip side of this is not simply assuming that insurers are stupid. Performing bespoke inspections of houses is an industry onto itself which i also would not rush into. It also doesn’t help you much; if 10% of houses have these countermeasures your regional risk pool will still be vaporized when the other 90% are burned to the ground. It’s just eventually impossible to insure these assets when these types of super correlated risks become as ubiquitous as they are.

kelnos 3y ago
> if 10% of houses have these countermeasures your regional risk pool will still be vaporized when the other 90% are burned to the ground. I think the GP's point was that the insurers just wouldn't insure the countermeasure-free 90%. Those 10% would be insured, and suffer less or no damage. Granted, reducing the risk pool to that 10% of homes isn't great either. But presumably at least some of the other 90% would be strongly incentivized to retrofit those fire countermeasures so they could get coverage.
xenadu02 3y ago
As the sibling reply notes I am proposing the insurer refuse to write new policies or renew existing policies unless the homes are upgraded to meet much more stringent standards. Some examples: In CA, require an engineer's report on earthquake risk. This could be done by issuing a standard form for the engineer to review with various areas of concern to avoid the need to have a bespoke report for each case. We managed to do lots of amazing things (invent computers, land on the moon)... I'm sure we could streamline this process. A lot of it is a decision tree: Is this slab, half-wall, or pier/beam construction? Half-wall: are the half-walls braced with plywood? Slab? Are shear walls built to X standard present along all major axis of the structure? Is any soft-story/garage area reinforced with footings and a beam meeting X standard? In Hurricane-prone areas: require storm shutters on windows, cat-5 rated doors, and cat-5 rated roofing materials. Also require the home be a certain height above the relevant water level. Yes this means a home built on the beach or on a river bank would need to be raised if they want a policy (which is not as impossible or expensive as it sounds). Sucks that the original builder made bad decisions but requiring corrective action would dramatically reduce (if not eliminate) the risk of water damage. Anytime a home doesn't meet these standards the premium should jump dramatically. If the state won't allow that then you don't write the policy until the structure is retrofitted to meet the standard. This would reward people who invest in renovations to make their homes safer, more accurately price risk, and avoid pulling out of the market entirely - instead sending accurate price/risk signals (where regulations allow such accurate pricing).

throw0101c 3y ago

> Hail resistant and wind resistant roofs exist but they'd rather just stop writing policies. Note that the insurance folks have developed an entire system of how roofs (and entire residential, multi-family, commercial structures) should be built: * https://ibhs.org/fortified/ https://ibhs.org/fortified/ * https://fortifiedhome.org/roof/ https://fortifiedhome.org/roof/ * https://www.youtube.com/watch?v=Zd-0yAPs6Wc https://www.youtube.com/watch?v=Zd-0yAPs6Wc * https://www.youtube.com/watch?v=proGT6AtyJc https://www.youtube.com/watch?v=proGT6AtyJc

throwaway2865 3y ago

They do understand this. It's typically politically infeasible to set rates appropriately - risk is often correlated with income, which is correlated with skin color. So a concentrated risk in an area makes the whole area uninsurable, unless you want to be called racist.

mozman 3y ago

> Florida and Texas are the same: insurers don't price in hurricane or hail proofing, anti-flooding measures, etc. Hail resistant and wind resistant roofs exist but they'd rather just stop writing policies. This is not true. You get significant policy discounts by upgrading older homes such as strengthening the roof connection to walls, impact rated doors/glass, roof age (and type). These discounts can reduce annual premiums by a non trivial amount - first hand knowledge of 30%. Since Andrew the Miami-Dade building codes have set a new standard for construction and this is reflected in policy pricing.