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I would append to these explanations, "moral hazard". Many of the people rebuilding in these areas are being subsidized by the rest of us, particularly people w
by derektank 2y ago
I would append to these explanations, "moral hazard". Many of the people rebuilding in these areas are being subsidized by the rest of us, particularly people with access to reimbursement from the national flood insurance program.
- bruce511 2y agoSure, the point of insurance is that the many subsidize the few. But I expect there comes a point where insurance companies say "enough is enough". Perhaps federal and state money will start to pay out, but the land gets bought as well.
- baq 2y agoGetting insurance is a making a bet bad stuff happens. The insurer makes a bet it doesn’t happen when it signs an agreement with you. If the bet is obviously negative expected value, it stops being a useful subsidy and it becomes instead throwing good money away.
- WalterBright 2y agoA rule of thumb is you'll pay twice in insurance premiums than you'll get in payouts. Insurance is only worth buying if you cannot afford the cost of the disaster. For example, I don't pay for collision protection on my car. I can afford losing the car. Over time I've saved far more in insurance premiums than the cost replacing the car. The same goes for insurance for appliances, etc.
- adastra22 2y agoCan you afford to replace the other guy's car?
- jmb99 2y agoCollision insurance != liability insurance.
- seanp2k2 2y agoAlso AFAIK collision and total loss is required to get financing and for leases, so you still pay / there is still an opportunity loss in other forms. I lease EVs with the federal tax credit and invest what I’d otherwise spend buying cash. You need to look very closely at the numbers for your own situations but it’s been a “better” deal than buying cash the past few cycles. Sure, you could also just buy a decade-old Honda used, but then you get to drive a used decade-old Honda. It’s like suggesting that camping is cheaper than a hotel or that luxury hotels provide no additional value beyond budget hotels. On the other hand, used Range Rovers depreciate so drastically that you can buy one less than a decade old for under $10k, just make sure to check insurance and maintenance costs and actually have it inspected before buying. The air suspension in particular is why you see so many “dropped” examples for cheap.
- olyjohn 2y agoAverage new car cost is $45,000. Liability minimums in many states are still around $50,000. Even if you're insured, there's a good chance you still won't be able to afford to replace the other guy's car.
- matwood 2y agoYep. One of the ways the rich get richer is when they can self-insure everything and invest what they would have normally paid in premiums.
- seanmcdirmid 2y agoThat really isn’t true. The rich buy insurance like anyone else, they are even more aggressive about insurance with things like umbrella policies to protect their wealth. They also hedge a lot, which is just insuring through investing.
- matwood 2y agoMaybe a better way to put it is that rich people have options. Of course if it's cheap for someone to offload the risk, they will. But if an insurer raises prices too much a people who can self insure will walk. Most people don't have that option so we continue to get squeezed with higher premiums and worse service.
- seanmcdirmid 2y agoRich people will definitely have more options so they can walk away from bad deals.
- matwood 2y agohttps://finance.yahoo.com/news/charlie-munger-said-warren-buffett-154854452.html https://finance.yahoo.com/news/charlie-munger-said-warren-bu...
- deleted 2y ago[deleted]
- tptacek 2y agoAnother way the rich get richer is simply taking their money and investing it.
- ninalanyon 2y agoYou must have astonishingly high insurance premiums or a very cheap car. I pay about 1 000 NOK (about 100 USD) per month to ensure my 2015 Tesla S here in Norway. It would take over forty years to get back the purchase price by not insuring it all and more like eighty if I were to merely drop the collision protection. And that's not even considering that they have paid out about 60 kNOK (6 kUSD) in claims for collision damage so far for this car (no other vehicle involved).
- Clubber 2y agoI pay around $120 a month for a Toyota 4Runner (much less expensive than a Tesla S). I haven't been in an accident ever and haven't had a ticket since around 2002. I guess it's just more expensive in the US.
- ninalanyon 2y agoBut why should it be more expensive? Both the purchase price and repair costs should be lower in the US because of lower purchase taxes which should surely push down the insurance premiums. Or are collisions so much more likely in the US?
- Clubber 2y agoI'm not really sure. The US has to pay liability insurance which covers medical costs, which can be very expensive. I would imagine countries with socialized healthcare wouldn't have to pay as much for that risk.
- tptacek 2y agoInsurance has an obviously negative expected value for its customers.
- baq 2y agoThe magic trick is it protects you from ruin. EV is negative for this one bet but not for the whole budget.
- tptacek 2y agoRight; there are all kinds of positive-EV bets you should never take. Heads you win $50,000,000; tails I get $500,000 and your house. Insurance isn't so much about expectation as it is about marginal utility.
- jalk 2y agoThe insurance companies did say "enough is enough", which is why the FAIR plans exist - i.e. https://www.cfpnet.com/ https://www.cfpnet.com/
- tptacek 2y agoThat is not in fact the point of insurance.
- godtoldmetodoit 2y agoAgreed on this point, I don't want to be subsidizing insurance or paying for multi millionaires homes to be rebuilt. I truly feel bad for the people who lost their homes, it's awful. But it shouldn't be the tax payer who picks up the tab. If insurance is so prohibitively expensive you can no longer afford to build there, then so be it - you can't afford to live there after all.
- metabagel 2y agoThis strikes me as not understanding the limits of private insurance. There wouldn’t be earthquake insurance across much of California if the state didn’t provide it. Private insurance isn’t generally able to withstand large calamities which result in many thousands of high dollar claims in a short period of time.
- tptacek 2y agoYou can insure against a very expensive event that is very likely to happen; it's simply that the premiums for that insurance will be very, very high. If you're "insured" for a catastrophic event that is likely --- for instance, a home in Pacific Palisades of any sort --- and your premiums look reasonable and bearable, then the odds are you're not insured, you're subsidized.
- metabagel 2y agoThis is a distinction without a difference (no insurance vs. unaffordable insurance).
- michaeljx 2y agoPrivate insurance can and generally withstands large calamities (known as natcat losses) without government intervention via the utilisation of global reinsurance organizations. Especially for earthquake, a properly reinsured insurance can cover a large earthquake loss about once every 15-20years
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- briffle 2y agoMost of them are also being rebuilt with the same inherent problems. If they were rebuilding after a fire or tornado with concrete or ICF homes, with metal roofs with ember screens and tornado straps that would be okay.
- euroderf 2y agoPass a law. Disaster insurance maxes out at 95% compensation. (Same for federal insurance of bank accounts.) Not enough of a worst-case cost to cause a run on the banks (or a collapse in property prices), but enough to get people to start using the brains they were born with.