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For 3 - In the case for CA if the companies are forced to charge a real price for the risk, costs would go up. Maybe the millionaires can afford it, but in a c

For 3 - In the case for CA if the companies are forced to charge a real price for the risk, costs would go up. Maybe the millionaires can afford it, but in a crunched housing market the average person will feel the strain. - If they are forced to not up their prices (or their increases are capped) and provide polices even though their risk calculations says they will lose money. The insurance company will then look to get the profits elsewhere, ie raise rates for those who are not effected. - If the insurance company goes under then the government might bail them out, which means effectively every tax payer will be forced to pay for that policy. If the state provided this insurance, then they would be incentivized to properly assess and mitigate the risk. Where in today's market insurance companies just put a yearly amount on the risk of a home. They have no direct levers to reduce the risk.

tptacek 2y ago
Average people will feel the strain. And? The one party in this situation that can't ignore externalities and risk is the insurer. If the place you're building a house is so dangerous no insurer will underwrite it, maybe you should be a millionaire to build a house there.
- blinded 2y ago
  I see your point, but isn't the government forcing the insurer into a bad deal?
  - tptacek 2y ago
    Yes, and they're exiting the market as a result, so people have a hard time finding insurance. I find this extremely reassuring.
fulafel 2y ago
As the house price thereabouts is determined by location desirability and affordability, an economist would say that higher insurance cost should just decrease the house price so that the same people will still be able to buy it after the insurance price hike.