3 ms·

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 no

by 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).

by airza 3y ago

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).