7 ms·
California's largest home insurer won't renew 72,000 policies
- baggy_trough 3y agoPrice controls result in supply shortages.
- zbrozek 3y agoCalifornia electeds don't believe in market economics. So we get rent control, insurance control, utility control (amusingly in the higher-than-market price direction), etc.
- lern_too_spel 3y agoCalifornia elected officials didn't give us rent control. California direct democracy got us Proposition 13, Proposition 218, and most municipal rent control statutes.
- skhunted 3y agoEvery state regulates insurance and almost all of them regulate utilities. Regulating those industries is necessary.
- zbrozek 3y agoRegulating some behaviors is important, but price controls break markets by disconnecting supply and demand.
- skhunted 3y agoRegulated insurance and utilities are not allowed to charge whatever they want. This has been the case for decades. We have decades of evidence that this part of regulation is not in and of itself bad.
- zbrozek 3y agoI think you're deliberately avoiding what I am saying, which is "price controls" and pretending that I am saying "regulation". Those are completely different concepts. The article itself is showing exactly what happens when you have price controls - supply dries up and the market falls apart.
- skhunted 3y agoI think you are deliberately missing the point. Part of the regulation of insurance companies and utilities is price controls. We have decades of experience with these price controls not causing a problem. The act of having a price control does not cause supply to dry up and the market to fall apart as you say. Of course a poorly implemented price control can cause that. Price controls in and of themselves do not cause supply problems.
- baggy_trough 3y agoYou have an incorrect understanding of price controls.
- skhunted 3y agoWe have decades of experience of insurance companies and utilities not being able to charge whatever they want without causing shortages. Now, in California there is an example where this price limitation is causing some companies to pull out of the market. Price controls can be used without causing a shortage and they can be used in a such a way to cause a shortage. Price controls in and of themselves do not cause anything. It’s how they are implemented that matters.
- baggy_trough 3y agoThe consensus of economists is that you are wrong.
- 3y ago
- baggy_trough 3y agoRegulation could be good or bad depending on how it is crafted. That doesn't change the economic fact that price controls cause supply shortages.
- skhunted 3y agoThere have been price controls on insurance and utilities for decades. There are decades of experience where it hasn’t caused a shortage.
- baggy_trough 3y agoHow bad the shortages are would depend on how draconian the controls were relative to the market price. What we can observe today in California is that the price controls are causing a shortage.
- skhunted 3y agoSo price controls, as in the concept, does not cause shortages. Bad implemented price controls contribute to shortages. It’s not the fact that there are price controls that are cussing the shortage it’s the implementation of them in the present case.
- baggy_trough 3y agoThat is not correct. A price control that sets the price to the market price will do nothing. If it sets it beneath the market price, a supply shortage will result.
- skhunted 3y agoThen we agree that price controls can be implemented that don’t cause shortages. A price control that sets a price where a sufficient number of people are willing to perform a service or make a good do not cause shortages. Such a control in such a circumstance prevents companies from having too much pricing power over essential services. Thus they do accomplish something in such a case.
- hristov 3y agoThis is not due to price controls. California does not have much price controls on insurance, and I doubt there are any on commercial apartment buildings. This is climate change.
- bombcar 3y ago> In July 2023, State Farm applied for an average 38.7% rate hike with the California Department of Insurance for commercial apartments, according to public filings. But the department ruled the hike was not supported by data, and instead approved a 23% hike at the beginning of March. If you have to apply for a price hike, and it can be modified or refused, that's a form of price controls. And climate change isn't causing PG&E to be worthless idiots; they've always been that. The change is in the climate of the courts; they're now being held responsible. Reading the article is a superpower.
- hristov 3y agoArticle is blocked for me.
- bombcar 3y agohttps://archive.ph/fmGjC https://archive.ph/fmGjC
- shalmanese 3y agoWas there a more than 23% increase in risk due to climate change happening in a single year? 23% is an insane amount for insurance to grow on an annual basis!
- baggy_trough 3y agoInflation was 10% that year. Maybe it was even more in construction / repair costs. Then add incorrect modeling of wildfire risks on top of that.
- joebob42 3y ago
- lotsofpulp 3y agoWhy your simple statement taught in microeconomics 101 is downvoted is beyond me. California government refused insurance prices that made business possible, so the businesses decide to not sell rather than lose money.
- commandlinefan 3y agoWow, I had always worried about not being able to afford the taxes on a home, but I never considered also not being able to afford the insurance.
- SigmundA 3y agoLiving in Florida nobody is talking about property taxes but homeowners insurance is driving people out. It's more than doubled for everyone we know in the last few years along with most insurer requiring a new roof if more than 15 years old, this usually comes up when trying to sell the house and new owners are trying to find insurance.
- RSHEPP 3y agosame in Texas. BIL told me that he has been writing policies in the $5k-$7.5k range this year. And those are the best quotes some people are getting on their cheap mansions.
- bombcar 3y agoDid something change in roof building about 15 years ago? Are older roofs more susceptible to being ripped off in a tornado? Around here they just write a roof exclusion if it's too old, and hail doesn't get you a "free roof".
- hristov 3y agoRoofs just do not last that long in florida. Hurricanes and floods are getting worse because of global warming, so they last even less. And yes an older roof is more susceptible to leaking, damage, etc.
- deleted 3y ago[deleted]
- MichaelZuo 3y agoRoofs on airplane hangers last fine for at least 30 years in Florida… maybe not visually since they do get repainted but certainly fine enough for aircraft owners and their insurers.
- matwood 3y ago72k is a drop in the bucket to what happens in FL. https://insurify.com/homeowners-insurance/news/progressive-dropping-100k-florida-homeowners-policies/ https://insurify.com/homeowners-insurance/news/progressive-d... https://www.pnj.com/story/money/2023/07/12/florida-insurance-crisis-farmers-insurance-home-insurance-what-to-know/70407302007/ https://www.pnj.com/story/money/2023/07/12/florida-insurance...
- SigmundA 3y agoYes living in FL its ridiculous. It's not just the premium increases and lack of competition, everyone is getting hit with needing to replace their roof if more 15 years old or they will cancel you. Citizen which is state backed makes you move to private if you get an offer thats <= 10% more expensive as they don't want people on government insurance.
- bombcar 3y ago> “Floridians are seeing homeowners insurance become costlier and scarcer because, for years, the state has been the home of too much litigation and too many fraudulent roof-replacement schemes” I've often wondered about the whole roof bullshit as it seems everyone around here expects a free roof replacement anytime it hails. At some point it's unsustainable. (The idea behind roof replacement insurance is/was a good one, as a damaged roof quickly destroys the entire building, water is the building destroyer. But when you have people driving around after a hailstorm offering homeowners free roofs if they sign over the ability to work with their insurance, obviously something is wrong.)
- SigmundA 3y agoOne insurance agent I know said much of it came from requiring legal fees be reimbursed, so lawyers where helping people go after insurance for even minor claims while racking up large legals fees to do so that insurance has to pay for. There was a lot of people getting new roofs for very minor damage and roofers going around trying to facilitate the process.
- tmaly 3y agoPoliticians should address the fraud first. Telling Farmers they can do car insurance if they are pulling out of home insurance is not going to work in my opinion.
- abound 3y agoIt's interesting that it's State Farm, as I've recently seen them as the only one willing to write new policies in a fire-prone location, a "wildland-urban interface" area.
- bombcar 3y agoState Farm is doing some stuff to reduce electrical fires (see https://www.statefarm.com/insurance/home-and-property/ting-fire-safety https://www.statefarm.com/insurance/home-and-property/ting-f... ) but I suspect they don't have much they can do with wildfire suburban areas.
- GenerWork 3y ago>The 42,000 commercial apartment non-renewals represent a complete withdrawal from California’s commercial apartment market, which covers property and liability insurance for apartment building owners. Looks like rents are going to go up.
- everybodyknows 3y agoMany residential units are under some form of rent control. So we just have to make them all that way, and hire plenty of enforcement staff, and the problem will be solved, yes? ... ?
- deleted 3y ago[deleted]
- bombcar 3y ago> the most substantial wildfire or fire following earthquake hazards The key here, and what insurance companies really don't like dealing with, is coordinated payouts. If you insure 10,000 homes, and 10 burn down every year, that's quite manageable. If instead you have years with nothing and then a thousand burn down at the same time, that's much harder to manage. It's also harder to build the actuarial tables, because there's too many unknowns. And wildfires and earthquakes almost by definition affect large areas.
- silverquiet 3y agoThe industry came up with reinsurance for this reason.
- bombcar 3y agoI think the main disconnect is the state believes "incident X" will happen Y% of the time, and the insurance companies believe it will be Y+X%, and they're not willing (or can't find a reinsurance backer) to roll it. The state, of course, can be the reinsurance issuer of last resort if they really believe their numbers are correct. Or do something like the California Earthquake Authority which everyone knows is vastly underfunded, but at least there's the hint of a promise that when the Big One™ comes, they'll get emergency funding: https://www.earthquakeauthority.com https://www.earthquakeauthority.com
- bkberry352 3y agoReinsurance doesn't make the problem go away. Sure it caps State Farm's exposure to these correlated events, but it won't bring their combined ratio into balance. State Farm would still be on the hook for the first $XXX million in losses. I would also expect it to be harder (read: more expensive) to buy the reinsurance given the increasing risk.
- lotsofpulp 3y agoStep 1: purchase reinsurance Step 2: use reinsurance to cover losses Step 3: reinsurance premiums go up or reinsurer refuses to insure you
- Helmut10001 3y agoTrying to get insurance in CA since 1 year, after state farm won't renew the insurance of my family (the property just changed owner due to inheritance). Even paying double (6k per year) won't get you insurance.
- bombcar 3y agoHave you reached out to an insurance broker? Mine was able to find policies relatively easily. Not an agent, but a company that works with multiple insurance companies to find options.
- Helmut10001 3y agoYes, I was with a company for one year. They just forwarded me to another company where they think I have a higher chance.
- nradov 3y agoYes, when the government fixes prices at below the market price then that tends to cause shortages.
- scruple 3y agoTerrifying. We're in SoCal, and we've been evacuated for fires that were threatening some of the home in the trac we live in. Our home and auto is insured through Costco with Connect and I'm curious to see what happens this year when we come up for renewal.
- Helmut10001 3y agoThat is really sad. I am not in a fire area or flooding endangered, I am in the middle of San Francisco on a rocky hill. There are much more dangerous areas than ours.
- rvba 3y agoIs insurance obligatory in USA? A. For owners? B. Is it obligatory if the owner rents the house?
- redserk 3y agoI don't live in CA so I'm not sure what's exactly required there. In most cases though, you are required to keep insurance if you have a mortgage. If you rent, your landlord is responsible for insurance for the structure, but you can/should get insurance for your belongings and in the event that your actions cause damage to the house or to people.
- bombcar 3y agoTechnically, no. Practically, yes. It is nearly impossible to get a mortgage on a habitable house without getting home insurance, because the bank doesn't want to loan you $400k on a $500k house, have the house burn down, and since the land is only worth $100k and you still owe $400k, you just walk. Even if you own the house outright, home insurance is one of those "good idea" unless you can take a complete structure loss on the teeth and keep moving. And if you're renting it, you want it for the liability protection, too, because tenants can and will sue, and if your policy is big enough, the insurance company lawyers will defend. But if you own a house in the sticks outright and don't want insurance, you don't have to have it, I don't know of any state that requires it the same way car insurance is required (and even car insurance isn't required if you never drive your car off your land).
- deleted 3y ago[deleted]
- dragonwriter 3y ago> Is insurance obligatory in USA? A. For owners? Usually for a mortgage it is. If you want to be uninsured on property you buy without a mortgage, that’s generally legally allowed, even if not necessarily desirable.
- techdmn 3y agoClimate change -> Previously hospitable places become less so -> Living there becomes more expensive.
- clarity20 3y agoCiting "climate change" doesn't make you sound profound. It's a generalized justification for totalitarian controls.