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State Farm won't renew 72,000 insurance policies in California
- Zanni 3y agoThis sounds more like a wildfire management crisis than an insurance crisis.
- lukasb 3y agoIt’s potentially a state fiscal crisis if the state keeps operating as insurer of last resort.
- koolba 3y agos/potentially/eventually/ From the article: > But the enrollment surge is putting a financial strain on the state insurer as it faces a potential loss of $311 billion, up from $50 billion in 2018. For reference, the entire budget for the state of CA is $224 billion.
- euroderf 3y agode Toqueville: "The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money."
- toomuchtodo 3y agoLots of sad folks due to risk price catching up to risk reality. California, Texas, and Florida all hit hard, and inconveniently, most populous US states. Move where the risk is lower, with my apologies to Sam Kinison. https://www.wired.com/story/insurance-rates-soaring-us-homeowners-climate-danger-zones-florida-louisiana-california-hurricane-flood/ https://www.wired.com/story/insurance-rates-soaring-us-homeo... https://www.nytimes.com/2024/02/29/climate/smokehouse-creek-fire-insurance-climate.html https://www.nytimes.com/2024/02/29/climate/smokehouse-creek-... https://riskfactor.com/ https://riskfactor.com/ https://resilience.climate.gov/ https://resilience.climate.gov/
- bushbaba 3y agoThe risk IS lower in many parts of California. It's a government policy issue more than anything else.
- toomuchtodo 3y agoIf this is the case, the state of California should have no problem remaining the insurer of last resort (from a fiscal solvency perspective). From a comment koolba provided with liability numbers, this appears to not be the case (potential losses exceeding California’s entire budget). This leads me to believe that California residents have taken on risk beyond what they and the state can afford. Not great if the world’s fifth largest economy is experiencing this financial stress. https://news.ycombinator.com/item?id=39804679 https://news.ycombinator.com/item?id=39804679
- kortilla 3y agoYeah, people shouldn’t live in tinder boxes, swamps, or on the top of mud piles that slide when it rains. I absolutely hate society picking up the tab for people doing such reckless things with their own homes.
- toomuchtodo 3y agoIf there are places with lower risk, certainly, extend insurance there (when reasonable) using data driven risk models. But places where the risk is high? Prohibit building by refusing to issue a building permit, and perhaps cover existing owners in some fashion. If their house burns down, they must turn over the land to be locked up and never built on again to receive their claim payout. Similar to what FEMA does for flooding. You want to strongly discourage moral hazard (repeatedly funding rebuilds with taxpayer dollars in high risk areas) while not making housing insecurity drastically worse than it already is. I admit this is a tall order with the perpetual housing shortage. https://www.fema.gov/press-release/20230502/fact-sheet-acquisition-property-after-flood-event https://www.fema.gov/press-release/20230502/fact-sheet-acqui... > Acquisition of Property After a Flood Event > If the homeowner still owes a mortgage on the home, the balance due will be deducted and paid to the lienholder. After required payment(s) have been made, the structure is then demolished and the land is deeded to the local government with its use restricted to open space. The land must remain open in perpetuity.
- reilly3000 3y agoThere is plenty I miss, but not living in California is one of the best decisions I’ve made.
- Daub 3y agoWould you like to expand on this a bit?
- JKCalhoun 3y agoI miss plenty about not living in California. (But then I'm in Nebraska — maybe that makes a difference.) There are things I don't miss to be sure (traffic immediately comes to mind).
- deleted 3y ago[deleted]
- fbdab103 3y agoIs there a map of where these places are? I am willing to defer to State Farm and believe that they are very data driven. The nature of insurance is making smart bets. Are these all clustered in a few hot spots that are likely to go under the next time there is a fire/landslide/earthquake? Why these units and not others? What does State Farm consider the most insurable places to live?
- jgalt212 3y agoI think this is more regulatory-driven than mother nature driven.
- ethbr1 3y ago>> It also plans not to offer commercial apartment policies and won’t renew the 42,000 now in place. That's almost 60% of the total. I'm guessing because commercial apartments present a more geographically-concentrated fire risk (either you lose all the units or none).
- jandrese 3y agoIt seems a bit strange since you would expect the apartments to be located further away from the fire risk, closer to downtown than the outskirts of the city near the forests. If this was State Farm deciding to drop insurance on homes that are in grossly overgrown forests with no buffer then it would make a lot more sense given the likely increase in fire activity in the coming years.
- jeffbee 3y agoEh, not really. Look at this b.s. https://www.google.com/maps/@37.8270689,-122.2087796,3a,60y,91.67h,101.73t/data=!3m6!1e1!3m4!1seb4F3LLU5m2x04oY3Dc-xA!2e0!7i16384!8i8192?entry=ttu https://www.google.com/maps/@37.8270689,-122.2087796,3a,60y,...
- akira2501 3y agoYea, all that shade and wind cover, also holding down the soil and providing stability. I'll bet it's also "nice" to live there. Total B.S. that we ever allowed this to happen.
- renewedrebecca 3y agoLike a good neighbor, State Farm moved the hell out.
- ChrisArchitect 3y ago[dupe] Some more discussion a few days ago: https://news.ycombinator.com/item?id=39790505 https://news.ycombinator.com/item?id=39790505
- everybodyknows 3y agoGood for the bit at the end, where the state takes the posture that the root of the problem is incompetence at State Farm, and a gang of regulators are just the folks to remedy it: >Michael Soller, deputy insurance commissioner with the Department of Insurance, said in a statement that State Farm’s decision “raises serious questions about its financial situation — questions the company must answer to regulators.” >“As state regulators, we deal with companies that are national and multinational in scale. To be effective for Californians, we join forces with other states so we can understand the basis for insurance companies’ decisions and how they plan to recover financially,” Soller said. “In this particular situation, we have been working with State Farm’s home state of Illinois to get a full picture of its financial condition and plan for improvement. We need to be confident in State Farm’s strategy moving forward to live up to its obligations to its California customers.”
- trogdor 3y agoI wonder what obligations the State of California is referring to. It’s not like insurance companies are required to underwrite policies they are uncomfortable with.
- FabHK 3y agoSomewhat related: The book When McKinsey Comes to Town: The Hidden Influence of the World's Most Powerful Consulting Firm (by Walt Bogdanich and Michael Forsythe) exposes the short-sighted, amoral, and insidious way the firm often operates and advises. There are many instances recounted (advising oil companies, tobacco, Saudi Arabia, the Sackler family on how to sell more OxyContin, etc.). What made me most angry, though, is how they turned an insurer (AllState, if memory serves right) from a sleepy mom-and-pop shop that collected premia and paid most of them out again when a covered loss occurred into a profit-maximising entity whose bosses were "incentivised" with stock options and implemented McK's glorious plan to boost profits by making it incredibly hard for victims to get their rightful payments. Absolutely despicable.
- jjeaff 3y agoAlso frustrating is that the advice given by McKinsey, in general, seems to be rather mundane and obvious. But it is completely amoral and sometimes cruel, so executives need someone else to come in and suggest it so they can push the bad PR as well as the guilt off to the consultancy who is long gone by the time the blowback starts.
- deleted 3y ago[deleted]
- jaggs 3y agoIt's sad and kind of ironic that the thing that may end up pushing climate action the most will be insurance. Eventually the premiums will be so high in vulnerable areas (including coastal regions) that living there will become a lottery. We've already seen those poor people who tried to hold back the sea with a $350,000 sand barricade which lasted one hour. Their homes are now effectively worthless.
- sunflowerfly 3y agoI would argue those homes should never have been built.
- jaggs 3y agoAgree. For example, those people still moving to the Florida coast really should spend a bit more time thinking it through. But there are a lot of other circumstances where climate impacts could not have been clearly foreseen.