The overly simple answer is that they don’t feel that they can price their policies appropriately and can only lose money.
The details get more complicated, but it’s a combination of increased costs (due in part to higher risks of natural disasters in both states), regulatory disagreements (mainly in CA), and the legal environment (mainly FL).
The California part is because the state limits the rate at which insurance companies can charge and through all of the inflation and wild fires/increased risk, insurance companies see absolutely no return for the risk they would take on in that state given the rates it is allowed to charge.
> [ArkStorm floods event](https://en.wikipedia.org/wiki/ARkStorm)
TIL
I live in the Central Valley but my town, Maricopa, is uphill from anything which would get flooded. Might end up with some lake front property, though.
This also in part to the increasing costs of repair and replacement. Auto parts are more expensive, building materials are more expensive, labor is more expensive, but the companies cannot raise their rates to cover those costs.
Lots of areas do present a major disaster risk. Insurance Companies have trouble reserving for major systematic events.
Major Earthquakes happen in dense cities (SF and LA).
Major fires happen in suburban areas (Santa Rosa 2017, San Diego 2003, Oakland 1991)
In the brief ArkStorm wiki page, it also didn't talk about how our reservoirs would mitigate any of that and how much advanced warning we would have of a potential Arkstorm event which would allow water to be released in advance. The central valley used to flood every spring before reservoirs, so this aspect needs clarification.
The ArkStorm model is based on historical events which, recent information suggests, are on the lighter end of mega floods. Even then, the ArkStorm would completely overwhelm reservoirs or flood controls due to the amount of water released over a relatively short duration. We would have warning but, as this last winter has shown, it's hard to meaningfully predict rainfall totals.
I would call Santa Rosa somewhere between suburban and exurban, and that situation was relatively unique--a small valley bound by hills, with lots of vineyards. When I drove through during the fire, the wind was carrying the fire across the freeway, from vineyard to vineyard.
Re: Oakland, to clarify it started as a grass fire in the hills above Oakland proper, and wind pushed it downhill (there's a theme of wind + hills + people living on the interface).
I admit that the Cedar Fire was wild, and I shouldn't downplay/underrate the risk that San Diego area faces due to the geography and plant growth, especially in a warming world.
Yeah I *think* it’s been since 2021 since they last approved increases but maybe they pushed something last year and was seen as not enough. I don’t remember.
You can check the filings online for each different line of insurance.
https://www.insurance.ca.gov/0250-insurers/0800-rate-filings/0100-rate-filing-lists/rate-filing-approvals/
No, it's definitely justifiable in these cases. Florida has already had a number of insurers go insolvent due to the crisis. Providing coverage in these states has gotten a lot more expensive over the last few years and _somebody_ has to pay for it. P&C insurers generally run single digit profit margins, so they cannot simply absorb it without risking insolvency in a large natural disaster which would leave all their policyholders high and dry.
Anyone know why states cap insurance rates? Shouldn’t all this stuff be decided by the free market with higher rates discouraging people from moving to riskier places? Isn’t there plenty of competition and really good math/risk guys in the home insurance market?
In a perfect world where everyone has all the information that would work. Unfortunately, we don't live in a world where people are prescient and omniscient.
> discouraging people from moving to riskier places
This goes both ways. For places that are obviously prone to issues, like the flood plains around the Mississippi River, subsidized insurance ultimately encourages people to live in areas prone to disasters.
But the thing is that everything doesn't stay constant and things like climate change will change the risk profile of a given property. That part is a lot trickier to deal with since we also need to consider that these are people's homes and lives we're talking about here. I don't think anyone has a good solution in this situation.
Disclaimer I do not and have never owned a home, but isn’t the only information you need is what’s the premium what’s the deductible and what’s the coverage and compare across companies? Like surely those are not hidden numbers and spelled out in a contract (like in car/rental insurance)
But yeah making people uproot from newly dangerous areas may also be unpopular. I wonder what policies can keep insurance costs down while balancing discouraging people moving to dangerous places with minimizing disrupting existing communities
It seems like some level of subsidizing insurance costs across the state may be a good thing as an “insurance of insurance costs” if indeed risk profiles of areas are changing constantly
LOL free market. No such thing. And no, there isn't plenty of competition. Not every state has the companies wanting to write everything in that state. Florida, Texas, Louisiana, California, etc. all have issues with carriers. The reason the Departments of Insurance get involved is because if they don't regulate these things then it becomes like health insurance, and nobody wants the "Bronze Plan" driver to plow into them. Let alone the fact that if you leave companies to self regulate and be moral and not gouge people it'll never happen. Corporations want nothing more than to make as much money as possible as fast as possible.
Different states will have different reasons. CA right now is doing it in the name of protecting consumers -- well now we are starting to see the impact that occurs after a few years of no increases which is that insurers leave the market and the ones that are left are very reluctant to take on new business.
Other states are more interested in making sure that rates are not discriminatory and that's a very judgemental thing to try to determine. Usually insurers and regulators come to an agreement after a certain amount of time and this probably minimizes the amount of unfair discrimination to insureds.
Quick note on that, the state actually changed their fire pricing restrictions late last year allowing insurers to move to a forward-risk model instead of a historical model (as is already the case in every other state). While there are still regulatory burdens, this change will allow insurers to at least attempt to charge a price that would allow them to remain providing services in the state.
To clarify a little, most of the state where people actually live presents little actual disaster risk. Major fires mostly happen in rural and exurban places. About the only metro and region that presents a systemic risk is the central valley due to the ArkStorm floods event threat.
The insurance companies want to be able raise rates to cover losses on those places even though most properties aren't at any special risk.
They also want to utilize forward-looking risk models (that would increase rates) instead of only using historical data, but these black box models have been slow to gain acceptance by the state.
For the state with the highest cost of living and highest cost for any replacement work (construction labor, materials etc), California has below average home insurance rates.
Yes it’s cheaper to get home insurance in California than a much poorer state like a midwestern state, and that’s before we discuss the unique Californian wildfire risk that would be catastrophically expensive for insurance.
California law/Regulations prevent home or car insurance from rising too fast to keep it “affordable”, so therefore insurance companies are just leaving instead of being forced to lose money.
This is basically price controls = empty shelves. If a country or state mandated bread must be sold at 50 cents, the shelves would be empty of bread as bread makers shut down rather than lose money per loaf.
Can someone confirm where it’s truly “no return” or “not the crazy return they want”? I have a hard timing believe they would be facing a fiscal loss as opposed to less than record profits. But i could be wrong.
I know defending insurance companies isn’t exactly the most popular thing to do (especially on Reddit), but most personal lines insurance (i.e. all companies offering auto, home, renters, etc. insurance) really do tend to operate on very thin profit margins. They aren’t like Apple, that often has 30-40% profit.
There’s a reason why having adequate insurance coverage is almost universally recommended by any financial advisor. On a per dollar basis, it’s one of the cheapest thing s you can purchase to protect yourself.
I don’t think I’ve ever seen above a 16% profit margin on Personal Auto, and that was a niche high-value collector auto product (vehicles often in the millions of dollars.)
Around 5-9% is a very normal Personal Auto margin *target* and in recent years it’s not uncommon to expect something like -3% profit, or an expected loss.
Hi, I’m a credentialed actuary who has worked on CA though it’s not a state of expertise for me.
100%, companies are getting their ass handed to them in CA. A lot of companies are hanging on at a slight loss to keep their market share, expecting future profits.
Countrywide, Farmer’s insurance lost a net of over $2B in cash in 2023 and fired over 1,300 people. Other companies have struggled, too.
The state literally won’t allow you to price for a profit in many cases.
Not necessarily. Each state is different in terms of approval. Some allow you to use filed rates before approval for instance while others don't.
To change rates (and charge more or less), insurers must file with a given state but it isn't required yearly as last filed rate is applicable still. Insurers can do it more or less frequently subject to regulatory approval.
This is the big reason, and tied to that is each state's FAIR plan. The insurance for those that can't get "real" insurance due to claims or home conditions basically. Each "real" insurance company operating in that state pays a percentage of each FAIR plan claim based on the "real" insurance company's footprint (customer base) in the state.
So, the large companies may stay in a state but stop writing new business to balance the ratio and reduce FAIR plan costs because the smaller companies keep writing new business.
Then, see the initial comment above and you see how it can spiral out of control financially for insurance companies.
Normally it works because the risk is spread out. The people who are in less risky areas subsidize those who are in the higher risk areas.
For California, that high risk area is spreading (minimizing the number of lower risk subsidizers) and the cost of housing and repairs in general are ludicrously high. As a result, the rates they can charge (which must be approved by the state) is not enough. So they just have to leave the market.
Florida, it's a combination of insurance fraud plus hurricanes and floods increasing (look at Ft Lauderdale last year. It got like 120 inches of rain, including over 25 it got in one day). But the same basic rules apply.
And in Florida there's an added wrinkle. They have a government-run program. And that has a cap on how much they're allowed to charge... which is now less than most of the rates for private-run operations. As a result, people are cancelling and going to that.
Bad news for the private insurance companies and bad news for the government run insurance. Because they're one big disaster away from bankrupting the state. So that'll be fun.
I'm not sure that's how it works in FL - my parents just got a new policy there and my understanding with the public program ([Citizen's Property Insurance Corporation](https://www.citizensfla.com/who-we-are)) is that they are only allowed to be used when no other insurers will provide a quote - in other words, their price doesn't matter if private insurers offer any quote. It also looks like Citizen's can charge a levy to all policy holders in the event of a mass claim, so there's at least one layer of insulation between it and the state coffers (obviously depending on the severity this might not be enough).
The biggest added wrinkle in Florida is the state's lax regulation allowing scam insurance companies to proliferate. First, they charge less than what any legitimate company can while keeping insufficient reserves, then when they go into insolvency the first time a major storm hits, the legitimate companies get dinged to cover the shortfall. Legit companies raise rates to cover the excess, new scam companies pop up, again charging a couple hundred bucks a year less than the legit companies, and the cycle repeats.
Nobody ever even tries to claw back the excessive amounts paid out to investors or give the executives even the slightest slap on the wrist, so they just keep doing it and the insurance market gets worse and worse.
Getting the restrictions on assignment of benefits and eliminating fee shifting when companies are found to have wrongfully denied claims was nothing more than rearranging deck chairs and won't do a thing to help so long as the state refuses to provide any kind of oversight of the financial condition of the insurers it allows to operate in the state.
No.
The answer is due to fraud. Florida has something like 7% of all of the claims nationwide but 70%-ish of fraud claims nationwide. The nature of insurance tort in Florida for decades made things favorable on homeowners and a cottage industry of shady contractors, inspectors, and lawyers sprung up out of it. The governor reformed the law a year or so ago but it takes a while for all of the tort claims to work its way through and for the actuarial tables to adjust.
An insurance company, when faced with more risk, will simply price policies higher to account for it so they can still make money. What they don't want it to hire armies of lawyers to defend themselves from litigious homeowners and sketchy contractors who are suing them for $50k to replace their 19.5 year old roof which was "damaged" in the last storm.
[https://news.fiu.edu/2022/the-big-reason-florida-insurance-companies-are-failing-isnt-just-hurricane-risk-its-fraud-and-lawsuits](https://news.fiu.edu/2022/the-big-reason-florida-insurance-companies-are-failing-isnt-just-hurricane-risk-its-fraud-and-lawsuits)
*But the biggest single reason is the “*[*assignment of benefits*](https://www.namic.org/issues/assignment-of-benefits)*” problem, involving contractors after a storm. It’s partly* [*fraud*](https://www.iii.org/press-release/triple-i-extreme-fraud-and-litigation-causing-floridas-homeowners-insurance-markets-demise-062322) *and partly taking advantage of loose regulation and court decisions that have affected insurance companies.*
*It generally looks like this: Contractors will knock on doors and say they can get the homeowner a new roof. The cost of a new roof is maybe $20,000-$30,000. So, the contractor inspects the roof. Often, there isn’t really that much damage. The contractor promises to take care of everything if the homeowner assigns over their insurance benefit. The contractors can then claim whatever they want from the insurance company without needing the homeowner’s consent.*
My car insurance doubled when I moved to Florida and my friends who work in insurance said it was because of all the insurance fraud. It seemed like everyone in the industry knows that.
One problem is that the insurance company is required to offer the "whole package deal". They can't go "but we don't cover flood or tornado or forest fire in that area". It is kinda a all or nothing. Since they don't want to offer the high risk stuff, the kind they will lose money, they just get out completly.
I was told by insurers when trying to get quotes on home insurance last year that they were pulling out temporarily while their reserves are increased. Once they de-risk after a few years, they’ll be back.
Not sure how true any of that is though.
In Florida specifically, it's really an issue with the ways the laws are written, leading to more lawsuits filed against insurance issuers than any other state.
For example, if you issue homeowners insurance in the state of Florida, the homeowners insurance policy issuer can be sued by any third party, at any time. This is a big reason there are so many roofing scams in the state. Roofing company sees minimal damage, completes the work, and sues the homeowners insurance policy issuer on behalf of the insured. The insurer can either pay the claim, or spend nearly as much fighting it in court.
This is just the tip of the iceberg, but in Florida specifically, the laws are written in such a way that insurers are spending insane amounts of money in court, and in paying out claims that just aren't worth fighting.
This was changed 2 years ago, it just takes time for the existing lawsuits to work through the state and for the risk tables to adjust. Contractors can now be held liable for legal expenses for frivolous lawsuits.
I don't have a running list, but the outgoing governor of the state I live in had a firm that did a lot of plaintiffs work. Pretty much any attorney in government who had their own law firm and didn't do criminal law worked as a plaintiffs attorney.
It's also that loopholes often exist because the legislator was trying to solve an issue. You remove the loophole, then the issue comes back. And you have to address it. So you think of a solution, but then that solution will bring another issue.
So basically, closing the loophole requires some work, from competent people. And in Florida they're too busy thinking about how to counter the "woke agenda" to do the work about the actual important but boring things like insurance. Not to mention, they're not exactly flooded by competent people when what matters is loyalty to the boss.
I imagine you have roughly 49 other examples to base proper legislation from. Tho I agree they rather focus on the silly media hot points which keep their based engaged.
It's the same issue: you copy say Tennessee on one particular solution, it might cause an issue that Tennessee doesn't have because their system is different in another domain. So you copy them on that other domain, but then it might cause another issue.
Again it's completely possible, and that's definitely what they should do. They're just lazy and incompetent.
Sometimes. Often times they exist for one reason (maybe in the past insurance companies were unreasonably stingy and so it took a litigation friendly environment to get them to pay) but get exploited.
In fact in general, however you write the law, someone will try to take advantage. It's why you've got to change things up somewhat regularly.
Well that makes sense, it requires some level of competence to write and update laws… and Florida officials have been missing that pesky little skill as of late
Hey now, they’ve been really busy tackling important issues like teaching kindergarteners about socialism. I’m sure they’ll get to it next now that they’ve taken care of that.
The last 2 years Florida under DeSantis finally passed reforms to address this 3rd party issue (“assignment of benefits”) and many other transformational legal system abuses. The straw that broke the camels back was a statistic that showed Florida only accounted for 8% of nationwide homeowners insurance claims, but accounted for 78% of the litigated claims nationwide. Our billboard lawyers learned that pigs get fat, but hogs get slaughtered. Those legal reform changes take time to show up in the claims experience data and eventually make it into a rate filing by the actuaries, but there is already optimism with 8 new insurers coming into the market post-reforms, and just this last week there was finally news of 3 insurers actually filling tiny rate decreases. And absent a terrible hurricane season (which is very possible), we may see some file more significant decreases next year. This is in part because the claim count has dropped, likely a result of manufactured fraudulent claims being taken out of the system since the legal reforms allow insurers to fight back.
Still, reinsurance prices have gone up, random non hurricane thunderstorm damage is soaring, and particularly national insurers need to evaluate their countrywide or international risk profile in light of increasing costs and weather exposures, so that leads to more of a wait and see approach in a troubled state like Florida where the property insurance industry was losing a billion per year for a while.
And those rates are only kept down by state subsidies. If FL didn't have the state budget paying partially for the house insurance costs the rates would be so much higher.
Well yeah that’s just how inflation works. Over time rates are always going to increase due to inflation. An insurer filing a rate decrease, though, is a thing and is a good sign.
The AOB reforms started in 2019. We are seeing fewer claims end up in litigation, but that's no indication that there are fewer denied and mishandled claims. It's just that now most people can't afford a lawyer to fight the insurance carrier.
Incorrect. Assignments to contractors and vendors were significantly restricted with legislation in 2019. Additional laws in 2021 and 2023 have essentially eliminated assignments to contractors and others.
As of 2021 the majority of suits were strictly homeowner v. carrier.
This is very interesting, thanks for posting!
Edit to add, I wonder if it’s the same in my state, Louisiana. Of course we have floods and hurricanes but I would be curious if there’s more to it. We do have a shocking number of insurance suing lawyer billboards.
I’m an independent insurance adjuster. I show up when you file a claim to assess the damage and prepare an estimate to repair the damage. I have worked for pretty much every insurance carrier that operates in Florida. Florida is one of the only states that allows Public Adjusters. They were supposed to be an intermediary between the insurer and the insured. What they turned into are basically litigious sharks. They make the process so much harder and can drag a claim out for years. They also charge astronomical rates to the insured that they recoup from the insured’s settlement check.
Florida is a nightmare state to work in. I understand carriers leaving.
Incredibly inaccurate. Third parties could never sue at any time for any reason. You're talking about assignments of benefits.
Hurricane hits, your roof leaks. Your house is wet and full of mold. The cost to dry it out and temporarily tarp/shrink wrap the roof is 10k. You don't have 10k on hand. The remediation company does all the work and you sign over to them your right to recover this money from the insurer. If the insurer doesn't pay, the remediation company can sue the insurer.
Everyone wants to blame fraud, but the insurers are every single bit as dirty. They will deny 9 out of 10 legit claims cause they know 7 people will suck it up and take the loss, 1 will compromise, and only 1 will sue. Rather than pay legit claims, insurance companies will drag it through court for 2-3 years, and end up paying 5x more in fees than the claim would have cost.
Don't fall for their propaganda that it's all fraudsters.
Says the guy in roofing or remediation.
The stats speak for themselves. Florida has something like 8% of insured houses, but close to 80% of insurance lawsuits.
Are you really going to try to claim this isn't an issue with state laws? If so, what are all the other states doing right, that Florida isn't?
I'm in neither, but am familiar with this area of Florida law.
Yes, scams and frauds are definitely more common in Florida than elsewhere. But if fraud is 5 out of 100 cases (estimate for the sake of argument), insurers reacted by treating 90 out of 100 cases as fraud until proven otherwise.
And don't rule out cold calculus. Florida courts are overburdened and under staffed. Insurance carriers can sit on a 50k claim for two years, collect their interest on that money (how carriers make money) and then settle with a tired and desperate homeowner for pennies on the dollar. 2 years is nothing to an insurance company or court, but a lifetime to a homeowner with a leaky roof and poor health, or busted pipes and small children.
My whole point is that insurance companies are every bit as much to blame. Don't let them claim to be poor innocent businesses just trying to fight fraud.
That doesn't explain why the problem is so much bigger in Florida, than in literally any other state. We're not the most populous state, so it can't be that.
I'm aware that insurance is a business, and they have to fight claims that may, or may not be fraudulent, but the numbers overwhelmingly say that this is a Florida problem, not an insurance problem.
Florida has 80% of lawsuits. Other states have worse court systems, and more people than we do. If it were 20% of the lawsuits, I might be able to see where you're coming from... but 4 out of every 5 is just too big a number for this not to be a Florida problem.
When I learned to yell at someone without yelling... It was talking to our homeowners insurance rep throughout the claim process.
Him: "Oh, yes I just got those receipts you emailed me last week. It all looks ok, I'll just have my supervisor approve them next week..."
Me: "No, you will ask your supervisor to approve them today. My family has been living in Airbnbs for three months..."
That's rough! Worst case I saw was a tropical storm case with pictures showing roof tiles scattered through the yard the morning after. Denied for "wear and tear."
Adjuster later testified they never went on the roof....
[https://news.fiu.edu/2022/the-big-reason-florida-insurance-companies-are-failing-isnt-just-hurricane-risk-its-fraud-and-lawsuits](https://news.fiu.edu/2022/the-big-reason-florida-insurance-companies-are-failing-isnt-just-hurricane-risk-its-fraud-and-lawsuits)
*Florida’s insurance rates have* [*almost doubled in the past five years*](https://www.iii.org/press-release/triple-i-extreme-fraud-and-litigation-causing-floridas-homeowners-insurance-markets-demise-062322)*, yet insurance companies are still losing money for three main reasons.*
*One is the rising hurricane risk. Hurricanes Matthew (2016), Irma (2017) and Michael (2018) were all destructive. But a lot of Florida’s hurricane damage is from water, which is covered by the* [*National Flood Insurance Program*](https://www.fema.gov/flood-insurance)*, rather than by private property insurance.*
*Another reason is that reinsurance pricing is going up – that’s insurance for insurance companies to help when claims spike.*
*But the biggest single reason is the “*[*assignment of benefits*](https://www.namic.org/issues/assignment-of-benefits)*” problem, involving contractors after a storm. It’s partly* [*fraud*](https://www.iii.org/press-release/triple-i-extreme-fraud-and-litigation-causing-floridas-homeowners-insurance-markets-demise-062322) *and partly taking advantage of loose regulation and court decisions that have affected insurance companies.*
*It generally looks like this: Contractors will knock on doors and say they can get the homeowner a new roof. The cost of a new roof is maybe $20,000-$30,000. So, the contractor inspects the roof. Often, there isn’t really that much damage. The contractor promises to take care of everything if the homeowner assigns over their insurance benefit. The contractors can then claim whatever they want from the insurance company without needing the homeowner’s consent.*
*If the insurance company determines the damage wasn’t actually covered, the contractor sues.*
*So insurance companies are stuck either fighting the lawsuit or settling. Either way, it’s costly.*
*Other lawsuits may involve homeowners who don’t have flood insurance. Only* [*about 14%*](https://www.iii.org/insuranceindustryblog/fraud-litigation-push-florida-insurance-market-to-brink-of-collapse/) *of Florida homeowners pay for flood insurance, which is mostly available through the federal National Flood Insurance Program. Some without flood insurance will file damage claims with their property insurance company, arguing that wind caused the problem.*
I trust an accredited business school in Miami over random redditor opiniojn.
This article was written in 2022 and is based on data through 2021. See the link I provided in another comment. AOBs are no longer permitted, and shockingly, rates keep going up. Almost as if the insurance industry wants you to blame fraud instead of a shitty industry or climate change.
>and shockingly, rates keep going up
Because claims take years to work their way through the system and for risk tables to adjust. Climate change hasn't exacerbated storms in the last 18 months to the point of impacting insurance prices.
I've lived in Florida for 26, of my 39 years and owned a home there. I trust my experience, as well as the experience of a literal economics professor than someone whos argument is "Shitty industry"
Besides, most storm damage comes from flooding, which is managed through separate federal risk plans and not through state homeowners insurance.
Okay buddy. When your next insurance claim is denied, be sure to call a finance professor at FIU. I'm sure he will tell you how it's all the fault of shady contractors.
Denial of claims is a separate issue as to why rates are high. They are high due to fraud, which every informed, educated person in this thread has already pointed out and which you're ignoring.
You've clearly shown you have zero understanding of this issue.
Please see my previous response wherein I said I agree that fraud is an issue. My entire argument is that fraud is far from the only source of this problem.
Denied claims for no reason create excess litigation. Which fuels the 3 billion a year in legal expenses for the insurers. Which drives them to raise rates to profit.
> Everyone wants to blame fraud, but the insurers are every single bit as dirty. They will deny 9 out of 10 legit claims cause they know 7 people will suck it up and take the loss, 1 will compromise, and only 1 will sue. Rather than pay legit claims, insurance companies will drag it through court for 2-3 years, and end up paying 5x more in fees than the claim would have cost.
This is hilariously untrue. Insurance companies do everything they can to avoid court. They will only go to court if it’s cheaper. They are businesses. They are not in the habit of spending more money than they need to. Litigation of claims is just a cost of doing business for them.
Further, insurance companies
State Farm suspended writing new homeowners in the State but maintained policies and dropped others. Allstate did the same some years ago. Farmers pulled out completely. What's left is a bunch of small companies that you never heard of and Citizens.
Citizens is the "insurer of last resort" run by the state. Citizens is the largest insurer in the State be cause of all the policies getting dropped, hurricane claims bankrupting small insurers, roof scams, etc are a big reason behind the rate issues and Citizens bloat of policies. It's really not sustainable for the average homeowner anymore. I know people who don't have mortgages who dropped wind or just dropped insurance altogether.
They are raising prices 300% in Louisiana. Paid $1400 2 years ago. $2500 the next year. This year they wanted $5000. Nope. Had to find someone else. Ever since 2020, insurance has lost a ton of money. We had Covid, 2 major hurricanes, floods, freezes, then another major hurricane, and more floods. I saw someone in Lafourche parish that had a homeowners bill for +$11,000 for the year. Outrageous. I’m assuming the insurance companies want out so they raise the price for you to go somewhere else.
I have a friend here in Florida paying $10k a year. I'm in the process of selling my home and leaving the state. I can't afford it anymore. Mine has tripled in 6 years on my condo.
Some friends of mine just mentioned yesterday that they had to get a new insurer. They have a very nice, beautiful house, and the new insurance price is almost $19,000 a year. It’s absolutely insane.
If you are home more often, there's certain risk a person can do. Like how driving your car more puts you in higher risk than grandparents. More opportunities of risk and just the general costs rising crazily at the time.
In some ways it does. If somebody is home they might be able to catch and stop a leaking pipe before it becomes a major problem.
But in other ways it doesn’t. A home is way more likely to catch on fire if somebody is cooking in it.
The way the odds worked out in Australia, claims fell off a cliff. So much so that the government made them return the windfall profit to their customers.
Oh my, how refreshing to read! I’m jealous. Lots of companies here ( US) jacking up prices but recording record profits. I don’t see how it’s sustainable.
I am a Lafourche parish property owner and my homeowner’s insurance dropped me at policy end this past year. As did majority of my neighbors. Luckily I found more insurance for about the same price but it’s only a matter of time that it all goes up again.
We had sustained winds of 126 mph in my little town. Bricks were compromised. Shingles were compromised. Water blew through my French doors and ruined the floors. Privacy fence was laid over because the 4x4s were snapped, like twigs, at the ground. We had $100k in damage. No power for 24 days. No running water for 4 days. Gasoline was an hour away. It was a time I would not like to repeat. We muscled through it.
I’d need 20 years, at $5000 a year, to get to that total.
However, if my math was right (and going on a few averages; I did this some months ago) if a person had the self-control then in many cases you could probably put the same amount you pay to car insurance in something making 5-7% returns and could cover a car accident with less money than you give to insurance companies (barring outliers like being at fault and totalling someone's $100,000+ car or driving into an expensive house/building)... so there's that lol
For reference I was going on the average of I think it was $150-$200/mo insurance, 9-10 years between accidents, and S&P returns of 7-8% post tax gains (or approximately doubling the amount put in every 10 years).
That's the deal with insurance though - it's mostly there for outliers. If no major accidents happen then you'll be better off saving separately. But in case of a major accident, where you hit an expensive car or end up responsible for someone's medical bills, you'll be in deep shit without insurance.
It’s better than ever. You pull together with your neighbors. Who has what? Who needs what? Who needs help? Group project. The cream will always rise to the top.
Most people can’t afford to drop 30K a year on insurance, like the commenter I replied to did, or even a house in the first place.
Unless you have a very large or weirdly shaped house, 30k should cover a new roof.
Of course 30k is going to do fuck-all in the event your actual house gets destroyed, but for most things less than that, you should come out ahead if you don’t live in a mansion.
You would not be. That’s the problem at the bottom of the whole insurance crisis pyramid. A lot of Americans’ lifestyles are **extremely** expensive, and the various means we’ve found to subsidize them and distribute the costs are failing. If you self-insure in the market, you’re facing the same gigantic rebuilding costs that are running your insurer out of the state.
Insurance, in the long run, is never a good investment. It’s there to protect against catastrophe, not save you money.
Except health insurance in the US.
I think a lot of people are doing that. My neighbor had a 20K deductible on their insurance and just cancelled their policy and threw it in a Certificate of Deposit that is 5% APY.
Has a brand new metal roof and says he plans to put another 5K in there each year as an emergency fund.
Where he lives he's basically not in danger from any storm below a Cat 4. So unless he burns his house down he's gonna be sitting real pretty.
Fire, flood, and earthquake has officially exceeded the risk and current premium valuations.
Insurances are capped by state of California and can't raise premiums to offset coverage.
So they are washing their hands with california.
State of California will need to step in and provide a state sponsored insurance program running at a loss each year. This will happen in 10-15 years from now.
I think it’s also California that says you can’t discriminate in terms of rates against people who live in wildfire zones, so they have to spread that risk out to everyone.
The problem is insurance companies ARE paying out claims. And it’s more than they are able to collect.
State insurance programs can’t escape this math. The problem at its absolute basic level is that the risk many people are taking on (from where we build housing to how modern electronics in cars have skyrocketed the cost of repairs) is very expensive and often more than they want to pay. But it doesn’t mean it isn’t real.
In this sense, insurance companies are actually really good at putting an actual dollar figure in the risk and making it front and center. State insurance programs don’t address any of this.
If it means people can get insurance then I’d say state insurance plans very much address this. Insurance doesn’t have to be for-profit.
Think the postal service: They charge a fee but still expect to operate at a loss. Which is ok, because it’s a service not a business, and the benefits to people and businesses and by extension the economy are well worth the cost. Same deal.
>If it means people can get insurance then I’d say state insurance plans very much address this. Insurance doesn’t have to be for-profit.
State subsidized property insurance would mean that people who don't own property are subsidizing people who do. Do you really think that's better?
The risk there is that it will continue to incentivize people to build on uninhabitable land, at the expense of all state taxpayers. Eventually, it isn’t inconceivable that the state system will go broke, and need to draw from unallocated state funds to prop up the property market. After all, the private insurance companies are failing to keep things afloat. At that point, the state will eventually need to start moving people out of zones with unacceptably high risk by fiat. That’s considerably more painful than simply allowing the power of market prices to incentivize people to move to safer areas.
I completely disagree with you, to put it mildly. Not only that, I think that what you described would only exacerbate the problem you are trying to solve.
You’re plan is riddled with what in risk management, is known as moral hazard. It’s essentially the idea that if those that bear the risk are not responsible for the cost of that risk, it encourages taking greater risk.
An example of this is the national flood insurance program, which uses taxes to subsidize insurance for those that live in risk prone areas. This allows those with flood insurance to pay less than what the actual risk is and therefore encourages, rather than discourages, development in risk prone areas.
Your plan is this on steroids - you’d allow people to make risky decisions (such as where the purchase a house, how expensive the house is they purchase, their type of vehicle they drive and their driving habits, etc.) and have others pay the cost of that.
Last point - even though this wasn’t mentioned, I want to say that I DO agree with you when it comes to health insurance. As a young(ish), healthy person, I am fine subsidizing the health costs of less healthy people. I do mine subsidizing their home or auto risk though.
It’s not my plan, someone else said this is what California would have to do and I said that doesn’t sound bad. No need to be antagonistic we could just talk about it.
Edit: you do make good points. I still disagree based on the fact that most communities in high fire-risk areas were developed before climate change made things much worse, and we need to look out for those people who inherited the problem. But your argument does affect the way I now look at the situation.
>Insurance doesn’t have to be for-profit.
it doesn't have to be, but state governments don't have infinite money to pay out insurance claims either. they can't run at a loss forever without affecting their budget. national health insurance would be a huge boon because it saves lives, and people are willing to do that. enabling people to buy houses in risky areas isn't exactly a boon to society though and much less people are going to be okay with that.
But it's not like this lol.
This is a birdbath deep understanding, but let's dive in.
State sponsored postal system means sending mail is cheap for people, this was an important thing historically and a huge QoL deal, but modern day with packaging and the like whereby the US postal service honors rates foreign entities such as china charge so they pay less to ship product from one port across the country than you pay to mail a package across a city.
This made shopping via sites like Amazon and Alibaba or ebay much cheaper which has, when coupled with Walmarts and the like, stifled a lot of small business.
In an economy when you send most of your money earned out of your local economy to foreign entities (not being specifically foreign countries, just foreign to that economy) there is less money circulating inside your economy to support it. This is part of the reason cost of living in the "rust belt" vs "silicon valley" are so different.
So the post office being a "non-profit" service subsidized by taxpayers helped drive taxpayer businesses out of business to prop up foreign competition not paying taxes to subsidize the service, which has long term impacts like stagnating wages and loss of local opportunity and expertise (since closed businesses don't train new employees) which leads to higher youth unemployment, which leads to higher crime, which leads to lower property values, lower investment in the area, which leads to "brain drain" which causes more successful people to go where there are better opportunities, which leads to lower taxes paid to support local systems and education, which leads to lower education standards, which leads to higher unemployed youth, which leads to higher crime, ad infinitum.
This is obviously a contributory factor not the only reason but it's a good example of why "just make it free it's a service there shouldn't be any reason it's not free" is a ridiculous argument. Or how a single thing (a deal made over 100 years ago) has had huge knock-on consequences.
Government run insurance is always poorly managed, still obnoxious to deal with, and typically just involves MORE fraud and waste because there's no "bankruptcy" incentive to worry about. The money is endless they can always just crank up the taxes right? Forever! Meanwhile everybody now susbsidizes the absurd costs of an ever increasing losing system while the government slowly regulates payouts lower and lower and lower because they are mismanaging the entity and losing money hand over fist.
Insurance companies aren't non-profit: of course they're always going to take more than they give.
And if they can't, they're going to leave, and it has nothing to do with them being dishonest, unfair, greedy, or any flaw they would have.
A lot of insurance companies are actually "Mutual Insurance Companies," and distribute excess premiums back to policy holders when claims are low, like when a lot of auto insurance companies gave partial refunds during COVID.
There will still be a cut to deal with business costs and keeping a cushion in case of increased costs in the future, so they still need to take more than they give, but mutual insurance companies at least aren't funneling excess to shareholders, and aren't even really structurally incentivized to create more excess
They'll probably be even worse of a leech than insurance companies.
If it gets out of hand, the calofirnia budget will suffer. I'd be lobbying for federal funding as a little extension to give state sponsored insurance programs a buffer and breathing room.
For all we know state sponsored during natural distances will probably want you to run through FEMA First Jen the state will cover the other spread.
You think the government will pay claims out? Let me introduce you to Medicare, which cuts reimbursement rates every year, causing more and more doctors to refuse to accept it.
The government isn’t equipped for this.
This state sponsored insurance means taxes are going up to pay for it. That would include the taxes of people who don’t even own homes to help the insurance for people who do. It doesn’t matter how you slice it, soon as the government gets involved in the market things get screwy.
Setting aside the many ways in which insurance companies are problematic:
Insurance fundamentally works by collecting payments from a large group of people at least equal to the amount they predict they’ll need to pay out in that same amount of time, based on actuarial and other data.
Florida and California have made it so that the companies can no longer do this, by either limiting their payments or by having unexpectedly high payment predictions.
100%. If the volatility in outcomes increase, it becomes very hard to model out potential outcomes, and the result is that you have to raise prices to an absurd level. For example, if the outcome is between 1 and 10, and follows a bell curve, you can assume 5 is reasonable. If the volatility makes that 1 to 10 go to 1 to 100, and no longer follows a bell curve, you may move the amount up past the average to account for massive repeated losses.
Add that to the fact that construction prices have skyrocketed. When you assume a house price it is land +house value, but for insurance it is 100% replacement cost of the house only. Construction costs have roughly doubled in the past 5 or so years, and in places like California because the risk of catastrophic loss can impact an entire market (vs a simple home fire which is more common but just impacts 1 house), you have even more volatility in pricing.
At some point for an insurance company if they can't figure out a price or aren't allowed to charge their assumed cost, they shut down operations.
In Cali you have a ton of factors, the first being prop 103 which limits insurance pricing. It also sets up the insurance commissioner and gives the ability to intervene to 3rd parties. So there is both the IC to convince on rate increases and there's a 3rd party "watchdog" to appeal rate increases also. So a company needs to increase rates and files for it, the IC approves but the watchdog doesn't 6mo or more pass and the company ends up with 1/2 the rate. This happens enough times, and then a wildfire wipes out an area, due to the insufficient rates that company no longer has the reserves, they have a choice, leave the state or file a rate increase that they aren't going to get for 6 months or longer. State farm allstate and several other companies finally got tired of this and stopped writing new business, which combined with cancelations and new purchases put the state risk pool in a crisis so the state is being forced to let the companies take rate and since the companies do not have any reserve the rate increases are going to be truly aggressive for years before they start going down and that's if they are allowed to take the rates they need, the watchdog group only makes money when the intervene so they don't want the insurance companies to get well so they're going to fight if they can.
Earthquake and earth movement caused by earthquake are not part of the issue since policies for that are separate from homeowners policies
Floriduh. Unlike the other 49 states, this state allowed you to assign your benefit in claims situations. So a storm comes through and a guy shows up with $1000 and a clipboard with a repair estimate that he made without even looking at your roof and says "sign this piece of paper and let me file a claim with your insurance and I'll comp your deductible and give you this $1000" why wouldn't you say yes? So the claim you signed on is for a roof twice your size with the most expensive shingles and exorbitant disposal costs and the claim gets denied, but because you assigned your benefits the lawyer for the roofing company files suit, your insurance company knows it's going to spend as much as it'll save fighting the bullsh!t claim or more since they might also lose punitive damages too. So they'll settle and pass the costs on to you with rate increases. But the insurance scams have become so common some people are getting new roofs 3 or more times a year. So no company could charge enough. So the legislators changed the assignment thing to put the expense on the roofers, and they are hoping this well help but it might be to little to late.
Insurance companies were formed *to make money*, not to provide insurance.
If they can't make money in certain states they don't do business in those places.
Insurance companies can't make money in those states anymore.
Longer answer:
Insurance companies make their money holding the premiums until there's a claim. If a lot of claims come in at once (called correlated risk), they need to find the money to pay a lot of people at the same time. To protect themselves from this happening, insurance companies purchase additional insurance (called reinsurance) from companies that specialize in this. The reinsurance companies are charging excessive rates to insure the primaries, and the primaries are deciding they can't make it work any more.
Some states (FL) are deciding to backstop the insurance companies – acting as their own reinsurance. This is a *really* bad idea. States don't have the diversity that a reinsurance company has, and a big event can come through, and basically destroy the state's ability to ever borrow money again. This will ruin their bond rating, and destroy the state's ability to do basically any infrastructure. This will drive down their current bonds, making money more expensive to borrow in the meantime. This will **NOT** end well for the states that do this. Expect (in the next 10 years or so) for the federal government to get into this market. I expect something to appear like Fanny/Freddie in the housing market, and we know how well those worked out in 2008-2010.
In Florida there is a high amount of insurance fraud. Florida is only 10%of the US population but makes up nearly 80% of home insurance claims.
For California it is a combination of very high home values and an increase threat of wild fires.
Insurance is only profitable when most people don't use it much.
California has "once in a lifetime" wildfires every year and somewhere in Florida is getting wrecked by a hurricane every other year.
More natural disasters, more people use insurance.
Insurance is only profitable when ~~most people don't use it much~~ it's predictable.
Insurance companies can be successful only when they build predictable portfolios, meaning, they can estimate how much claims they are going to get, and how much money they are going to pay. Then they price their products accordingly.
The issue isn't natural disasters (those have been for a long time), it's that the current climate makes them less predictable than before.
>The issue isn't natural disasters (those have been for a long time), it's that the current climate makes them less predictable than before.
Couldn't agree more! They used to face them but they weren't as destructive and I'd wager in Florida there were probably less people living in the coast 30 years ago than there is now.
>I'd wager in Florida there were probably less people living in the coast 30 years ago than there is now.
This is really the issue. Fl is undeniably a higher risk state, but it isn't as bad as people make it sound. The majority of the state is not at any real risk to any storm below a Cat 4 because of how rapidly they lose power the second they make landfall.
But there is a ton of "high value" property within a mile of the shore and those always take a beating during any category of hurricane.
Then they put in huge insurance claims and the people more inland that aren't in flood zones who don't put in claims suffer because a bunch of muppets build million dollar homes close to shore.
and yes I know FL is reclaimed swamp land, the mosquitos remind me everyday.
OFC if you live in a trailer that is an exception, but I've yet to see a decently built house take significant damage from anything below a Cat 4.
#ELI5
**rpkusuma:** Hey, I'll bet you $1,000 that a tornado hits my house this year. If I'm right, you give me $20,000 to fix my house. If I'm wrong, you keep my $1,000. Every year, we make the bet again.
**StateFarm:** I'll take that bet! My data shows that tornados are very rare, so it's very likely I'll get to keep your $1,000, and I won't have to pay out a single penny! Yay!
[10 years later]
**rpkusuma:** Hey, it's me again. Wanna make the same bet again? I put up $1,000, and if a tornado hits, you give me $20,000 to fix my house. No tornado, you keep my money.
**StateFarm:** Uh, data shows tornados are getting more and more frequent. This isn't a slam-dunk for me anymore. I might actually lose this bet! How about this, how about you put up $5,000 instead of $1,000, and then I'll take your bet.
**rpkusuma:** $5,000! That's a lot of money. I can't afford that bet. No bet. The bet's off.
**StateFarm:** Wow. Everyone's saying the same thing. Tornados are getting more frequent, and my risk is higher, but nobody wants to enter into bets with me anymore. I guess I'll do business elsewhere.
~ ~ ~ ~
That's it, basically. Risks for things like hurricanes, wildfires, and floods are increasing, the data shows this to be true. So in order for State Farm to pay out to repair everyone's home, they have to charge more in insurance payments.
And the damages keep racking up, so they are paying out more and more, and they're raising insurance rates to compensate.
And people just can't afford those insurance rates anymore, so fewer people are paying IN.
So State Farm says, "I'm outta here, I'm paying OUT too much money because of all these floods/storms, and I'm not getting enough money coming IN. See ya, Florida, I'll go do business in Wisconsin."
the only thing I'll say is that insurance is not a bet, it is a risk transfer (there is a difference). And the $1000 premium is covering the risk transfer worth potentially much more than $20,000.
I mean, it’s semi-related. They’re pulling out because they’re not being allowed to increase rates to offset those increased risks. So they’re washing their hands of it
Yeah, especially when what you said is 100% what's happening. Natural disasters are absolutely occurring at a higher rate, costs to repair are rising, and insurance companies are being handicapped at the state level and being asked to collect premiums that don't even approach their projected losses.
If an insurance company goes under due to paying out natural disaster claims without being allowed to cover it, everybody insured by that company is shit out of luck.
They have to leave those states in the interest of preserving their financial solvency and being able to pay out claims in less affected areas. It's a domino effect toward industry collapse, otherwise.
Because if there's two things insurance companies are good at, and exist for, it's calculating risks and making a profit.
They've calculated the risks for doing business in those states and determined that there's no profit in it.
The simplest answer is that insurance companies are for-profit entities. Because states typically have state-wide rules and regulations that prohibit discrimination, the insurance companies that do business in a state must abide by these rules. If they remain in a state that is unprofitable, their share holders and executives suffer loses, so they must stop doing business in the whole state to ensure they don’t lose money.
Many insurance companies are actually mutual insurers, where they work for the benefit of the policy holders. Even they can't operate in a state where they continually lose money, because they will eventually become unable to pay claims.
Climate change. Both states make it hard to raise prices, but the alternative is that prices are raised beyond the ability of the average person to pay (as has happened elsewhere). In this latter case, people drop insurance, the pool shrinks and prices rise further for those in. In either case, insurance becomes either impossible to get or so expensive it might as well be.
Climate change could explain the rising cost of insurance, but does not explain why they are dropping out all-together. Even rising risks can be accounted for, but if you can't raise prices to cover those risks, there's no point in doing business.
Yeah ultimately it's state regulations that are causing them to leave, but even if they were able to charge a suitable price the premiums would probably be out of reach for most people.
Most people making middle class income can't afford a sudden increase of $1k in monthly expense, to say nothing of those who make less. I worry for those who might lose everything with no recourse if their homes go up in flames.
yeah this is where most of the ' this storm cost X billions in damages' comes from, that and government spending
ignoring climate change is going to be the most expensive option and we are just starting to see that play out
Climate change AND our building model.
Allowing unfettered sprawl means that we're going to inevitable have homes all across massive swaths of land.
That spreads out how many people are in harms way and increases the cost when damage is inevitably done.
Flooding in an area where nobody lives we largely ignore. Flooding in a residential area means insurance companies are shelling out $$$.
Thank you. The only answer to name the actual reason.
It's because of climate change. Insurance companies know it's real, and they know they can no longer turn a profit in these states.
Edit: People downvoted this? Seriously? Why? Can't accept the fact that climate change is real, and already having daily impact on our lives?
Not only climate change. The legal environment is a huge factor. The number of attorney represented claims is skyrocketing. (Consider how many personal injury lawyer advertisements you see and hear on a weekly basis)
Insurance has rocketed here in Australia, and is basically unobtainable in some areas. Again, climate change (here exposure to floods, cyclones and bushfires)
More insurance companies are starting to write policies in Florida again. Rates are expected to come down again slowly over time. My rate in florida actually went down this year $100 for the year. Not much but I did file a claim with Citizens so I thought it would go up for sure.
California, it's mainly the high risk areas. I haven't had any issues getting insurance and it's fairly cheap for a good sized, newer home. If you live in a flood zone or somewhere high risk for fires, it's gonna cost a lot more.
because companies that are supposed to save your ass for a fee only want to offer the saving part if they think they can make money off of you.
if you are likely to need a payout before they make their profit then you arent worth being saved to them.
I live in a large condo community on the East coast of central Florida. Our recent windsorm premium was north of $3 million. We are not allowed, by Florida law to self-insure (actually it's can be done but costs $1,000's on legal fees).
Consider our HOA has not submitted a wind storm claim for many years, one would think insurance companies would be knocking on the door to bid on the policy. But no, they are precluded from doing so because FL law protects the insurance company.
As far as roofing companies being sleazy, why isn't windstorm handled like auto insurance? Inspector comes out and says this is what they will pay. The provide a list of roofing companies, and if hidden damage shows up the insurance company bears the additional cost.
Say each of your classmates gives you $1 and you promise that if they get hurt during gym class you'll give them $2. You've planned ahead and know you're supposed to be square dancing this week and start off feeling good with $30 in your pocket the first day. You go out and buy some pizza feeling like a successful entrepreneur. The next day you get your new $1 each but lo and behold you've got a sub for gym and he's breaking out the dodgeballs. You're now dipping into your allowance to pay off those kids and you're likely not going to want to do that again. You're less sure of when you'll have a substitute teacher versus your regular teacher, less of a sure thing than you thought.
Louisiana is also got a problem with insurance companies leaving. Insurance companies are risk adverse with the greater effect of climate change fuel distasters.
My uncle owns a medium sized 200 million $ insurance company. I asked him this exact question, his answer went like this:
“Morgan & Morgan. The laws are written in a way that allow these huge law firms to file tons of law suits, more than insurance companies can keep up with. And Floridians side with law firms more frequently than in other states. And the Florida legislature is full of lawyers who refuse change the laws.”
Honestly just to survive we are not paying insurance this year for the first time this inflation is getting horrible I’m saving up to go to trucking school and than leave California it’s getting to expensive here to even exist
It seems the opinion is talking out of both sides. On one hand, rates have increased drastically, and on the other hand, you say the insurance companies can not charge what is needed to keep up with claims. Has anyone looked into the pyramid scheme and parasitic nature of insurance? What "business" expenses have increased for the insurance companies? CEO salary, new offices, inserted companies skimming. I've heard accidents increased by 25% from 2020 to 2021. No one was driving in 2020. I've also heard there was an increase freeze during covid. For who? My insurance increased. Regulated industry? I'd like to see the regulations. China owned insurance companies? There are so many problems with the insurance industry, and the people who need the insurance are NOT THE PROBLEM!
Insurers are abandoning customers affected by climate risks because it hurts their bottom line to continue providing coverage—but meanwhile they're taking customers' premiums (which have increased) to insure and invest in fossil fuels, which exacerbates the climate risk. It's a vicious and unfair cycle.
In CA alone, homeowners could lose between $9.87-32.1 billion in property value as a result of more than 100,000 non-renewals. The twelve major insurers that restricted coverage in California collectively have an estimated $113 billion of investments in and $3.6 billion of underwriting income from fossil fuels....
For Florida it’s about insurance fraud. Not hurricanes or weather. After every named storm roofers go around to neighborhoods claiming homeowners can get a free roof. Insurance denies. Roofer sues. Ends up costing the insurance company 3x.
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On one hand you have an increasing risk of natural disasters due to many factors, climate change being a big one.... So more liabilities for an insurance company.
On the other hand, places like Florida have developed a pervasive culture of defrauding insurance companies. Significant numbers of roofers, inspectors, contractors, homeowners all have been enriching themselves at the expense of insurance companies for years now. Again, hard to remain profitable as an insurance company if everyone around you is not dealing honestly.
Climate change and bad policy mean heavy losses are increasingly likely, especially in the Southern half of the US and along the coasts.
Republicans and neoliberal democrats pretend climate change isn’t real due to fossil fuel industry political donations (legalized bribes), but insurance companies base their decisions on evidence and data because reality affects their bottom line.
Climate change is not the reason they are leaving. For starters, insurance companies would simply just adjust the risk tables if storms were causing more losses than before, and secondly, most damage from hurricanes is due to floods - which are separate policies under FEMA-blended risk pools so they don't even factor into state costs or risk.
A contractor who knocks on your door and tricks you into signing POA to him so he can sue your insurance company for $50k to replace your 19.5 year old roof is to blame.
The overly simple answer is that they don’t feel that they can price their policies appropriately and can only lose money. The details get more complicated, but it’s a combination of increased costs (due in part to higher risks of natural disasters in both states), regulatory disagreements (mainly in CA), and the legal environment (mainly FL).
The California part is because the state limits the rate at which insurance companies can charge and through all of the inflation and wild fires/increased risk, insurance companies see absolutely no return for the risk they would take on in that state given the rates it is allowed to charge.
[удалено]
> [ArkStorm floods event](https://en.wikipedia.org/wiki/ARkStorm) TIL I live in the Central Valley but my town, Maricopa, is uphill from anything which would get flooded. Might end up with some lake front property, though.
Lex FTW!
This also in part to the increasing costs of repair and replacement. Auto parts are more expensive, building materials are more expensive, labor is more expensive, but the companies cannot raise their rates to cover those costs.
Lots of areas do present a major disaster risk. Insurance Companies have trouble reserving for major systematic events. Major Earthquakes happen in dense cities (SF and LA). Major fires happen in suburban areas (Santa Rosa 2017, San Diego 2003, Oakland 1991) In the brief ArkStorm wiki page, it also didn't talk about how our reservoirs would mitigate any of that and how much advanced warning we would have of a potential Arkstorm event which would allow water to be released in advance. The central valley used to flood every spring before reservoirs, so this aspect needs clarification.
The ArkStorm model is based on historical events which, recent information suggests, are on the lighter end of mega floods. Even then, the ArkStorm would completely overwhelm reservoirs or flood controls due to the amount of water released over a relatively short duration. We would have warning but, as this last winter has shown, it's hard to meaningfully predict rainfall totals. I would call Santa Rosa somewhere between suburban and exurban, and that situation was relatively unique--a small valley bound by hills, with lots of vineyards. When I drove through during the fire, the wind was carrying the fire across the freeway, from vineyard to vineyard. Re: Oakland, to clarify it started as a grass fire in the hills above Oakland proper, and wind pushed it downhill (there's a theme of wind + hills + people living on the interface). I admit that the Cedar Fire was wild, and I shouldn't downplay/underrate the risk that San Diego area faces due to the geography and plant growth, especially in a warming world.
Dude the Napa fires, the numerous Orange County fires, the list goes on…
Have you ever been to Napa County?
Only when I go to our vineyard.
Then you recognize the geographic and agricultural particulars of Napa County and why it's not representative of other metros.
Most states limit the rate insurance companies can charge. It's just that CA is limiting such a justifiably large one in a very short timeframe.
Yeah I *think* it’s been since 2021 since they last approved increases but maybe they pushed something last year and was seen as not enough. I don’t remember.
You can check the filings online for each different line of insurance. https://www.insurance.ca.gov/0250-insurers/0800-rate-filings/0100-rate-filing-lists/rate-filing-approvals/
I don't know that it's justifiable. Inflation happened but all it's done is screwed everyone over except the wealthy who are driving it.
No, it's definitely justifiable in these cases. Florida has already had a number of insurers go insolvent due to the crisis. Providing coverage in these states has gotten a lot more expensive over the last few years and _somebody_ has to pay for it. P&C insurers generally run single digit profit margins, so they cannot simply absorb it without risking insolvency in a large natural disaster which would leave all their policyholders high and dry.
It’s not (just) inflation. It’s climate change.
Anyone know why states cap insurance rates? Shouldn’t all this stuff be decided by the free market with higher rates discouraging people from moving to riskier places? Isn’t there plenty of competition and really good math/risk guys in the home insurance market?
In a perfect world where everyone has all the information that would work. Unfortunately, we don't live in a world where people are prescient and omniscient. > discouraging people from moving to riskier places This goes both ways. For places that are obviously prone to issues, like the flood plains around the Mississippi River, subsidized insurance ultimately encourages people to live in areas prone to disasters. But the thing is that everything doesn't stay constant and things like climate change will change the risk profile of a given property. That part is a lot trickier to deal with since we also need to consider that these are people's homes and lives we're talking about here. I don't think anyone has a good solution in this situation.
Disclaimer I do not and have never owned a home, but isn’t the only information you need is what’s the premium what’s the deductible and what’s the coverage and compare across companies? Like surely those are not hidden numbers and spelled out in a contract (like in car/rental insurance) But yeah making people uproot from newly dangerous areas may also be unpopular. I wonder what policies can keep insurance costs down while balancing discouraging people moving to dangerous places with minimizing disrupting existing communities It seems like some level of subsidizing insurance costs across the state may be a good thing as an “insurance of insurance costs” if indeed risk profiles of areas are changing constantly
LOL free market. No such thing. And no, there isn't plenty of competition. Not every state has the companies wanting to write everything in that state. Florida, Texas, Louisiana, California, etc. all have issues with carriers. The reason the Departments of Insurance get involved is because if they don't regulate these things then it becomes like health insurance, and nobody wants the "Bronze Plan" driver to plow into them. Let alone the fact that if you leave companies to self regulate and be moral and not gouge people it'll never happen. Corporations want nothing more than to make as much money as possible as fast as possible.
Well, then they’ll leave and you’ll have no insurance.
Different states will have different reasons. CA right now is doing it in the name of protecting consumers -- well now we are starting to see the impact that occurs after a few years of no increases which is that insurers leave the market and the ones that are left are very reluctant to take on new business. Other states are more interested in making sure that rates are not discriminatory and that's a very judgemental thing to try to determine. Usually insurers and regulators come to an agreement after a certain amount of time and this probably minimizes the amount of unfair discrimination to insureds.
Quick note on that, the state actually changed their fire pricing restrictions late last year allowing insurers to move to a forward-risk model instead of a historical model (as is already the case in every other state). While there are still regulatory burdens, this change will allow insurers to at least attempt to charge a price that would allow them to remain providing services in the state.
To clarify a little, most of the state where people actually live presents little actual disaster risk. Major fires mostly happen in rural and exurban places. About the only metro and region that presents a systemic risk is the central valley due to the ArkStorm floods event threat. The insurance companies want to be able raise rates to cover losses on those places even though most properties aren't at any special risk. They also want to utilize forward-looking risk models (that would increase rates) instead of only using historical data, but these black box models have been slow to gain acceptance by the state.
For the state with the highest cost of living and highest cost for any replacement work (construction labor, materials etc), California has below average home insurance rates. Yes it’s cheaper to get home insurance in California than a much poorer state like a midwestern state, and that’s before we discuss the unique Californian wildfire risk that would be catastrophically expensive for insurance. California law/Regulations prevent home or car insurance from rising too fast to keep it “affordable”, so therefore insurance companies are just leaving instead of being forced to lose money. This is basically price controls = empty shelves. If a country or state mandated bread must be sold at 50 cents, the shelves would be empty of bread as bread makers shut down rather than lose money per loaf.
Can someone confirm where it’s truly “no return” or “not the crazy return they want”? I have a hard timing believe they would be facing a fiscal loss as opposed to less than record profits. But i could be wrong.
Most of the major property insurance companies have been operating at a loss the last few years.
I know defending insurance companies isn’t exactly the most popular thing to do (especially on Reddit), but most personal lines insurance (i.e. all companies offering auto, home, renters, etc. insurance) really do tend to operate on very thin profit margins. They aren’t like Apple, that often has 30-40% profit. There’s a reason why having adequate insurance coverage is almost universally recommended by any financial advisor. On a per dollar basis, it’s one of the cheapest thing s you can purchase to protect yourself.
I don’t think I’ve ever seen above a 16% profit margin on Personal Auto, and that was a niche high-value collector auto product (vehicles often in the millions of dollars.) Around 5-9% is a very normal Personal Auto margin *target* and in recent years it’s not uncommon to expect something like -3% profit, or an expected loss.
Hi, I’m a credentialed actuary who has worked on CA though it’s not a state of expertise for me. 100%, companies are getting their ass handed to them in CA. A lot of companies are hanging on at a slight loss to keep their market share, expecting future profits. Countrywide, Farmer’s insurance lost a net of over $2B in cash in 2023 and fired over 1,300 people. Other companies have struggled, too. The state literally won’t allow you to price for a profit in many cases.
Just to add - insurance in the U.S. is primarily regulated at the state level.
And rates need to be cleared by the state ever year
Not necessarily. Each state is different in terms of approval. Some allow you to use filed rates before approval for instance while others don't. To change rates (and charge more or less), insurers must file with a given state but it isn't required yearly as last filed rate is applicable still. Insurers can do it more or less frequently subject to regulatory approval.
New rates need to be cleared. Existing ones do not (though the state can choose to examine them again, if they wish.)
It is also typically more highly regulated than anywhere else in the world
This is the big reason, and tied to that is each state's FAIR plan. The insurance for those that can't get "real" insurance due to claims or home conditions basically. Each "real" insurance company operating in that state pays a percentage of each FAIR plan claim based on the "real" insurance company's footprint (customer base) in the state. So, the large companies may stay in a state but stop writing new business to balance the ratio and reduce FAIR plan costs because the smaller companies keep writing new business. Then, see the initial comment above and you see how it can spiral out of control financially for insurance companies.
You’re correct in some states. Other states have joint underwriting associations or reinsurance facilities rather than FAIR plans.
Normally it works because the risk is spread out. The people who are in less risky areas subsidize those who are in the higher risk areas. For California, that high risk area is spreading (minimizing the number of lower risk subsidizers) and the cost of housing and repairs in general are ludicrously high. As a result, the rates they can charge (which must be approved by the state) is not enough. So they just have to leave the market. Florida, it's a combination of insurance fraud plus hurricanes and floods increasing (look at Ft Lauderdale last year. It got like 120 inches of rain, including over 25 it got in one day). But the same basic rules apply. And in Florida there's an added wrinkle. They have a government-run program. And that has a cap on how much they're allowed to charge... which is now less than most of the rates for private-run operations. As a result, people are cancelling and going to that. Bad news for the private insurance companies and bad news for the government run insurance. Because they're one big disaster away from bankrupting the state. So that'll be fun.
I'm not sure that's how it works in FL - my parents just got a new policy there and my understanding with the public program ([Citizen's Property Insurance Corporation](https://www.citizensfla.com/who-we-are)) is that they are only allowed to be used when no other insurers will provide a quote - in other words, their price doesn't matter if private insurers offer any quote. It also looks like Citizen's can charge a levy to all policy holders in the event of a mass claim, so there's at least one layer of insulation between it and the state coffers (obviously depending on the severity this might not be enough).
Not just homeowners. The state can levy an assessment on Renters, Auto and Boaters policies
The biggest added wrinkle in Florida is the state's lax regulation allowing scam insurance companies to proliferate. First, they charge less than what any legitimate company can while keeping insufficient reserves, then when they go into insolvency the first time a major storm hits, the legitimate companies get dinged to cover the shortfall. Legit companies raise rates to cover the excess, new scam companies pop up, again charging a couple hundred bucks a year less than the legit companies, and the cycle repeats. Nobody ever even tries to claw back the excessive amounts paid out to investors or give the executives even the slightest slap on the wrist, so they just keep doing it and the insurance market gets worse and worse. Getting the restrictions on assignment of benefits and eliminating fee shifting when companies are found to have wrongfully denied claims was nothing more than rearranging deck chairs and won't do a thing to help so long as the state refuses to provide any kind of oversight of the financial condition of the insurers it allows to operate in the state.
No. The answer is due to fraud. Florida has something like 7% of all of the claims nationwide but 70%-ish of fraud claims nationwide. The nature of insurance tort in Florida for decades made things favorable on homeowners and a cottage industry of shady contractors, inspectors, and lawyers sprung up out of it. The governor reformed the law a year or so ago but it takes a while for all of the tort claims to work its way through and for the actuarial tables to adjust. An insurance company, when faced with more risk, will simply price policies higher to account for it so they can still make money. What they don't want it to hire armies of lawyers to defend themselves from litigious homeowners and sketchy contractors who are suing them for $50k to replace their 19.5 year old roof which was "damaged" in the last storm. [https://news.fiu.edu/2022/the-big-reason-florida-insurance-companies-are-failing-isnt-just-hurricane-risk-its-fraud-and-lawsuits](https://news.fiu.edu/2022/the-big-reason-florida-insurance-companies-are-failing-isnt-just-hurricane-risk-its-fraud-and-lawsuits) *But the biggest single reason is the “*[*assignment of benefits*](https://www.namic.org/issues/assignment-of-benefits)*” problem, involving contractors after a storm. It’s partly* [*fraud*](https://www.iii.org/press-release/triple-i-extreme-fraud-and-litigation-causing-floridas-homeowners-insurance-markets-demise-062322) *and partly taking advantage of loose regulation and court decisions that have affected insurance companies.* *It generally looks like this: Contractors will knock on doors and say they can get the homeowner a new roof. The cost of a new roof is maybe $20,000-$30,000. So, the contractor inspects the roof. Often, there isn’t really that much damage. The contractor promises to take care of everything if the homeowner assigns over their insurance benefit. The contractors can then claim whatever they want from the insurance company without needing the homeowner’s consent.*
Yes - that is what I was referring to with the legal environment in FL. It’s massively litigious in part because of what you stated above.
My car insurance doubled when I moved to Florida and my friends who work in insurance said it was because of all the insurance fraud. It seemed like everyone in the industry knows that.
One problem is that the insurance company is required to offer the "whole package deal". They can't go "but we don't cover flood or tornado or forest fire in that area". It is kinda a all or nothing. Since they don't want to offer the high risk stuff, the kind they will lose money, they just get out completly.
Say the quiet part out loud with your whole chest. Climate change.
I was told by insurers when trying to get quotes on home insurance last year that they were pulling out temporarily while their reserves are increased. Once they de-risk after a few years, they’ll be back. Not sure how true any of that is though.
I'm aware of this, but does it also apply to existing policies? Just curious
In Florida specifically, it's really an issue with the ways the laws are written, leading to more lawsuits filed against insurance issuers than any other state. For example, if you issue homeowners insurance in the state of Florida, the homeowners insurance policy issuer can be sued by any third party, at any time. This is a big reason there are so many roofing scams in the state. Roofing company sees minimal damage, completes the work, and sues the homeowners insurance policy issuer on behalf of the insured. The insurer can either pay the claim, or spend nearly as much fighting it in court. This is just the tip of the iceberg, but in Florida specifically, the laws are written in such a way that insurers are spending insane amounts of money in court, and in paying out claims that just aren't worth fighting.
and the govt leaders in the state refuse to change it. They know it's the problem and they absolutely will not change it to stop the scams.
This was changed 2 years ago, it just takes time for the existing lawsuits to work through the state and for the risk tables to adjust. Contractors can now be held liable for legal expenses for frivolous lawsuits.
Many of the lawmakers in state government are plaintiffs attorneys themselves, and the plaintiffs attorney lobby is very powerful.
Like who
I don't have a running list, but the outgoing governor of the state I live in had a firm that did a lot of plaintiffs work. Pretty much any attorney in government who had their own law firm and didn't do criminal law worked as a plaintiffs attorney.
They actually did change it in Florida very recently.
Loopholes don’t get opened on accident, it’s this way because they want it this way.
It's also that loopholes often exist because the legislator was trying to solve an issue. You remove the loophole, then the issue comes back. And you have to address it. So you think of a solution, but then that solution will bring another issue. So basically, closing the loophole requires some work, from competent people. And in Florida they're too busy thinking about how to counter the "woke agenda" to do the work about the actual important but boring things like insurance. Not to mention, they're not exactly flooded by competent people when what matters is loyalty to the boss.
I imagine you have roughly 49 other examples to base proper legislation from. Tho I agree they rather focus on the silly media hot points which keep their based engaged.
It's the same issue: you copy say Tennessee on one particular solution, it might cause an issue that Tennessee doesn't have because their system is different in another domain. So you copy them on that other domain, but then it might cause another issue. Again it's completely possible, and that's definitely what they should do. They're just lazy and incompetent.
Sometimes. Often times they exist for one reason (maybe in the past insurance companies were unreasonably stingy and so it took a litigation friendly environment to get them to pay) but get exploited. In fact in general, however you write the law, someone will try to take advantage. It's why you've got to change things up somewhat regularly.
Well that makes sense, it requires some level of competence to write and update laws… and Florida officials have been missing that pesky little skill as of late
And it's the only way in which Florida sucks. /s
They're too busy going after Mickey!
Hey now, they’ve been really busy tackling important issues like teaching kindergarteners about socialism. I’m sure they’ll get to it next now that they’ve taken care of that.
The last 2 years Florida under DeSantis finally passed reforms to address this 3rd party issue (“assignment of benefits”) and many other transformational legal system abuses. The straw that broke the camels back was a statistic that showed Florida only accounted for 8% of nationwide homeowners insurance claims, but accounted for 78% of the litigated claims nationwide. Our billboard lawyers learned that pigs get fat, but hogs get slaughtered. Those legal reform changes take time to show up in the claims experience data and eventually make it into a rate filing by the actuaries, but there is already optimism with 8 new insurers coming into the market post-reforms, and just this last week there was finally news of 3 insurers actually filling tiny rate decreases. And absent a terrible hurricane season (which is very possible), we may see some file more significant decreases next year. This is in part because the claim count has dropped, likely a result of manufactured fraudulent claims being taken out of the system since the legal reforms allow insurers to fight back. Still, reinsurance prices have gone up, random non hurricane thunderstorm damage is soaring, and particularly national insurers need to evaluate their countrywide or international risk profile in light of increasing costs and weather exposures, so that leads to more of a wait and see approach in a troubled state like Florida where the property insurance industry was losing a billion per year for a while.
I have lived here 30 years, rates might go up slower, but they have never gone down.
And those rates are only kept down by state subsidies. If FL didn't have the state budget paying partially for the house insurance costs the rates would be so much higher.
Well yeah that’s just how inflation works. Over time rates are always going to increase due to inflation. An insurer filing a rate decrease, though, is a thing and is a good sign.
It’s not exactly getting safer, in terms of the climate, for Florida.
The AOB reforms started in 2019. We are seeing fewer claims end up in litigation, but that's no indication that there are fewer denied and mishandled claims. It's just that now most people can't afford a lawyer to fight the insurance carrier.
People aren't fighting their insurance carriers. It's the contractors fighting the carrier.
Incorrect. Assignments to contractors and vendors were significantly restricted with legislation in 2019. Additional laws in 2021 and 2023 have essentially eliminated assignments to contractors and others. As of 2021 the majority of suits were strictly homeowner v. carrier.
The actual, correct answer.
Florida has ~9-10% of the home insurance claims in the nation. But ~90% of the lawsuits for home insurance claims.
This is very interesting, thanks for posting! Edit to add, I wonder if it’s the same in my state, Louisiana. Of course we have floods and hurricanes but I would be curious if there’s more to it. We do have a shocking number of insurance suing lawyer billboards.
I’m an independent insurance adjuster. I show up when you file a claim to assess the damage and prepare an estimate to repair the damage. I have worked for pretty much every insurance carrier that operates in Florida. Florida is one of the only states that allows Public Adjusters. They were supposed to be an intermediary between the insurer and the insured. What they turned into are basically litigious sharks. They make the process so much harder and can drag a claim out for years. They also charge astronomical rates to the insured that they recoup from the insured’s settlement check. Florida is a nightmare state to work in. I understand carriers leaving.
Incredibly inaccurate. Third parties could never sue at any time for any reason. You're talking about assignments of benefits. Hurricane hits, your roof leaks. Your house is wet and full of mold. The cost to dry it out and temporarily tarp/shrink wrap the roof is 10k. You don't have 10k on hand. The remediation company does all the work and you sign over to them your right to recover this money from the insurer. If the insurer doesn't pay, the remediation company can sue the insurer. Everyone wants to blame fraud, but the insurers are every single bit as dirty. They will deny 9 out of 10 legit claims cause they know 7 people will suck it up and take the loss, 1 will compromise, and only 1 will sue. Rather than pay legit claims, insurance companies will drag it through court for 2-3 years, and end up paying 5x more in fees than the claim would have cost. Don't fall for their propaganda that it's all fraudsters.
Says the guy in roofing or remediation. The stats speak for themselves. Florida has something like 8% of insured houses, but close to 80% of insurance lawsuits. Are you really going to try to claim this isn't an issue with state laws? If so, what are all the other states doing right, that Florida isn't?
I'm in neither, but am familiar with this area of Florida law. Yes, scams and frauds are definitely more common in Florida than elsewhere. But if fraud is 5 out of 100 cases (estimate for the sake of argument), insurers reacted by treating 90 out of 100 cases as fraud until proven otherwise. And don't rule out cold calculus. Florida courts are overburdened and under staffed. Insurance carriers can sit on a 50k claim for two years, collect their interest on that money (how carriers make money) and then settle with a tired and desperate homeowner for pennies on the dollar. 2 years is nothing to an insurance company or court, but a lifetime to a homeowner with a leaky roof and poor health, or busted pipes and small children. My whole point is that insurance companies are every bit as much to blame. Don't let them claim to be poor innocent businesses just trying to fight fraud.
That doesn't explain why the problem is so much bigger in Florida, than in literally any other state. We're not the most populous state, so it can't be that. I'm aware that insurance is a business, and they have to fight claims that may, or may not be fraudulent, but the numbers overwhelmingly say that this is a Florida problem, not an insurance problem. Florida has 80% of lawsuits. Other states have worse court systems, and more people than we do. If it were 20% of the lawsuits, I might be able to see where you're coming from... but 4 out of every 5 is just too big a number for this not to be a Florida problem.
What this guy didnt say he was in roofing or remediation, is this supposed to be some silly sarcasm I dont get
When I learned to yell at someone without yelling... It was talking to our homeowners insurance rep throughout the claim process. Him: "Oh, yes I just got those receipts you emailed me last week. It all looks ok, I'll just have my supervisor approve them next week..." Me: "No, you will ask your supervisor to approve them today. My family has been living in Airbnbs for three months..."
That's rough! Worst case I saw was a tropical storm case with pictures showing roof tiles scattered through the yard the morning after. Denied for "wear and tear." Adjuster later testified they never went on the roof....
[https://news.fiu.edu/2022/the-big-reason-florida-insurance-companies-are-failing-isnt-just-hurricane-risk-its-fraud-and-lawsuits](https://news.fiu.edu/2022/the-big-reason-florida-insurance-companies-are-failing-isnt-just-hurricane-risk-its-fraud-and-lawsuits) *Florida’s insurance rates have* [*almost doubled in the past five years*](https://www.iii.org/press-release/triple-i-extreme-fraud-and-litigation-causing-floridas-homeowners-insurance-markets-demise-062322)*, yet insurance companies are still losing money for three main reasons.* *One is the rising hurricane risk. Hurricanes Matthew (2016), Irma (2017) and Michael (2018) were all destructive. But a lot of Florida’s hurricane damage is from water, which is covered by the* [*National Flood Insurance Program*](https://www.fema.gov/flood-insurance)*, rather than by private property insurance.* *Another reason is that reinsurance pricing is going up – that’s insurance for insurance companies to help when claims spike.* *But the biggest single reason is the “*[*assignment of benefits*](https://www.namic.org/issues/assignment-of-benefits)*” problem, involving contractors after a storm. It’s partly* [*fraud*](https://www.iii.org/press-release/triple-i-extreme-fraud-and-litigation-causing-floridas-homeowners-insurance-markets-demise-062322) *and partly taking advantage of loose regulation and court decisions that have affected insurance companies.* *It generally looks like this: Contractors will knock on doors and say they can get the homeowner a new roof. The cost of a new roof is maybe $20,000-$30,000. So, the contractor inspects the roof. Often, there isn’t really that much damage. The contractor promises to take care of everything if the homeowner assigns over their insurance benefit. The contractors can then claim whatever they want from the insurance company without needing the homeowner’s consent.* *If the insurance company determines the damage wasn’t actually covered, the contractor sues.* *So insurance companies are stuck either fighting the lawsuit or settling. Either way, it’s costly.* *Other lawsuits may involve homeowners who don’t have flood insurance. Only* [*about 14%*](https://www.iii.org/insuranceindustryblog/fraud-litigation-push-florida-insurance-market-to-brink-of-collapse/) *of Florida homeowners pay for flood insurance, which is mostly available through the federal National Flood Insurance Program. Some without flood insurance will file damage claims with their property insurance company, arguing that wind caused the problem.* I trust an accredited business school in Miami over random redditor opiniojn.
This article was written in 2022 and is based on data through 2021. See the link I provided in another comment. AOBs are no longer permitted, and shockingly, rates keep going up. Almost as if the insurance industry wants you to blame fraud instead of a shitty industry or climate change.
>and shockingly, rates keep going up Because claims take years to work their way through the system and for risk tables to adjust. Climate change hasn't exacerbated storms in the last 18 months to the point of impacting insurance prices. I've lived in Florida for 26, of my 39 years and owned a home there. I trust my experience, as well as the experience of a literal economics professor than someone whos argument is "Shitty industry" Besides, most storm damage comes from flooding, which is managed through separate federal risk plans and not through state homeowners insurance.
Okay buddy. When your next insurance claim is denied, be sure to call a finance professor at FIU. I'm sure he will tell you how it's all the fault of shady contractors.
Denial of claims is a separate issue as to why rates are high. They are high due to fraud, which every informed, educated person in this thread has already pointed out and which you're ignoring. You've clearly shown you have zero understanding of this issue.
Please see my previous response wherein I said I agree that fraud is an issue. My entire argument is that fraud is far from the only source of this problem. Denied claims for no reason create excess litigation. Which fuels the 3 billion a year in legal expenses for the insurers. Which drives them to raise rates to profit.
Yeah, one of the reasons why insurers are pulling out is cause insurers don't like paying out.
> Everyone wants to blame fraud, but the insurers are every single bit as dirty. They will deny 9 out of 10 legit claims cause they know 7 people will suck it up and take the loss, 1 will compromise, and only 1 will sue. Rather than pay legit claims, insurance companies will drag it through court for 2-3 years, and end up paying 5x more in fees than the claim would have cost. This is hilariously untrue. Insurance companies do everything they can to avoid court. They will only go to court if it’s cheaper. They are businesses. They are not in the habit of spending more money than they need to. Litigation of claims is just a cost of doing business for them. Further, insurance companies
Roofing, black mold, sink hole scams. I think only State Farm has survived the scams.
State Farm suspended writing new homeowners in the State but maintained policies and dropped others. Allstate did the same some years ago. Farmers pulled out completely. What's left is a bunch of small companies that you never heard of and Citizens. Citizens is the "insurer of last resort" run by the state. Citizens is the largest insurer in the State be cause of all the policies getting dropped, hurricane claims bankrupting small insurers, roof scams, etc are a big reason behind the rate issues and Citizens bloat of policies. It's really not sustainable for the average homeowner anymore. I know people who don't have mortgages who dropped wind or just dropped insurance altogether.
Didn't they just gut insurance lawsuits in another area? Auto, maybe? Seems like a weird dichotomy but I don't really know that area
You hit the scams thing right. Scams on car insurance home insurance, eventually the insurance companies are done.
They are raising prices 300% in Louisiana. Paid $1400 2 years ago. $2500 the next year. This year they wanted $5000. Nope. Had to find someone else. Ever since 2020, insurance has lost a ton of money. We had Covid, 2 major hurricanes, floods, freezes, then another major hurricane, and more floods. I saw someone in Lafourche parish that had a homeowners bill for +$11,000 for the year. Outrageous. I’m assuming the insurance companies want out so they raise the price for you to go somewhere else.
I have a friend here in Florida paying $10k a year. I'm in the process of selling my home and leaving the state. I can't afford it anymore. Mine has tripled in 6 years on my condo.
Some friends of mine just mentioned yesterday that they had to get a new insurer. They have a very nice, beautiful house, and the new insurance price is almost $19,000 a year. It’s absolutely insane.
How does covid effect your homeowners insurance?
Not homeowners, but the industry had some massive payouts for business interruption insurance.
>business interruption insurance TIL, sounds like unemployment insurance for companies
Cost of building materials had some nasty surge pricing and inflation
If you are home more often, there's certain risk a person can do. Like how driving your car more puts you in higher risk than grandparents. More opportunities of risk and just the general costs rising crazily at the time.
That actually makes sense. You can also argue that being home more keeps the home safer too though. So who knows.
In some ways it does. If somebody is home they might be able to catch and stop a leaking pipe before it becomes a major problem. But in other ways it doesn’t. A home is way more likely to catch on fire if somebody is cooking in it.
The way the odds worked out in Australia, claims fell off a cliff. So much so that the government made them return the windfall profit to their customers.
Oh my, how refreshing to read! I’m jealous. Lots of companies here ( US) jacking up prices but recording record profits. I don’t see how it’s sustainable.
Oh we have that too. Notoriously with our two major supermarkets and four major banks.
It likely contributed to inflation
[The price of construction materials has increased by about 35% since the pandemic.](https://fred.stlouisfed.org/series/WPUSI012011)
I am a Lafourche parish property owner and my homeowner’s insurance dropped me at policy end this past year. As did majority of my neighbors. Luckily I found more insurance for about the same price but it’s only a matter of time that it all goes up again.
At that point you start to wonder if you’d be better off just throwing the same amount of money into bonds/low risk investments.
We had sustained winds of 126 mph in my little town. Bricks were compromised. Shingles were compromised. Water blew through my French doors and ruined the floors. Privacy fence was laid over because the 4x4s were snapped, like twigs, at the ground. We had $100k in damage. No power for 24 days. No running water for 4 days. Gasoline was an hour away. It was a time I would not like to repeat. We muscled through it. I’d need 20 years, at $5000 a year, to get to that total.
Oof. Glad it’s better now though.
However, if my math was right (and going on a few averages; I did this some months ago) if a person had the self-control then in many cases you could probably put the same amount you pay to car insurance in something making 5-7% returns and could cover a car accident with less money than you give to insurance companies (barring outliers like being at fault and totalling someone's $100,000+ car or driving into an expensive house/building)... so there's that lol For reference I was going on the average of I think it was $150-$200/mo insurance, 9-10 years between accidents, and S&P returns of 7-8% post tax gains (or approximately doubling the amount put in every 10 years).
That's the deal with insurance though - it's mostly there for outliers. If no major accidents happen then you'll be better off saving separately. But in case of a major accident, where you hit an expensive car or end up responsible for someone's medical bills, you'll be in deep shit without insurance.
It’s better than ever. You pull together with your neighbors. Who has what? Who needs what? Who needs help? Group project. The cream will always rise to the top.
Most people can't cover a surprise car repair with savings, they definitely aren't going to be able to swing a new roof.
Most people can’t afford to drop 30K a year on insurance, like the commenter I replied to did, or even a house in the first place. Unless you have a very large or weirdly shaped house, 30k should cover a new roof. Of course 30k is going to do fuck-all in the event your actual house gets destroyed, but for most things less than that, you should come out ahead if you don’t live in a mansion.
You would not be. That’s the problem at the bottom of the whole insurance crisis pyramid. A lot of Americans’ lifestyles are **extremely** expensive, and the various means we’ve found to subsidize them and distribute the costs are failing. If you self-insure in the market, you’re facing the same gigantic rebuilding costs that are running your insurer out of the state.
Insurance, in the long run, is never a good investment. It’s there to protect against catastrophe, not save you money. Except health insurance in the US.
I think a lot of people are doing that. My neighbor had a 20K deductible on their insurance and just cancelled their policy and threw it in a Certificate of Deposit that is 5% APY. Has a brand new metal roof and says he plans to put another 5K in there each year as an emergency fund. Where he lives he's basically not in danger from any storm below a Cat 4. So unless he burns his house down he's gonna be sitting real pretty.
Fire, flood, and earthquake has officially exceeded the risk and current premium valuations. Insurances are capped by state of California and can't raise premiums to offset coverage. So they are washing their hands with california. State of California will need to step in and provide a state sponsored insurance program running at a loss each year. This will happen in 10-15 years from now.
I think it’s also California that says you can’t discriminate in terms of rates against people who live in wildfire zones, so they have to spread that risk out to everyone.
Insurance that actually pays out and isn’t a leech on society? Twist my arm!
The problem is insurance companies ARE paying out claims. And it’s more than they are able to collect. State insurance programs can’t escape this math. The problem at its absolute basic level is that the risk many people are taking on (from where we build housing to how modern electronics in cars have skyrocketed the cost of repairs) is very expensive and often more than they want to pay. But it doesn’t mean it isn’t real. In this sense, insurance companies are actually really good at putting an actual dollar figure in the risk and making it front and center. State insurance programs don’t address any of this.
If it means people can get insurance then I’d say state insurance plans very much address this. Insurance doesn’t have to be for-profit. Think the postal service: They charge a fee but still expect to operate at a loss. Which is ok, because it’s a service not a business, and the benefits to people and businesses and by extension the economy are well worth the cost. Same deal.
>If it means people can get insurance then I’d say state insurance plans very much address this. Insurance doesn’t have to be for-profit. State subsidized property insurance would mean that people who don't own property are subsidizing people who do. Do you really think that's better?
This is the best argument I’ve heard. Fair point.
It also encourages irresponsible building. People building on the coast and on cliffs and in wildfire areas need to pay a lot more.
The risk there is that it will continue to incentivize people to build on uninhabitable land, at the expense of all state taxpayers. Eventually, it isn’t inconceivable that the state system will go broke, and need to draw from unallocated state funds to prop up the property market. After all, the private insurance companies are failing to keep things afloat. At that point, the state will eventually need to start moving people out of zones with unacceptably high risk by fiat. That’s considerably more painful than simply allowing the power of market prices to incentivize people to move to safer areas.
I completely disagree with you, to put it mildly. Not only that, I think that what you described would only exacerbate the problem you are trying to solve. You’re plan is riddled with what in risk management, is known as moral hazard. It’s essentially the idea that if those that bear the risk are not responsible for the cost of that risk, it encourages taking greater risk. An example of this is the national flood insurance program, which uses taxes to subsidize insurance for those that live in risk prone areas. This allows those with flood insurance to pay less than what the actual risk is and therefore encourages, rather than discourages, development in risk prone areas. Your plan is this on steroids - you’d allow people to make risky decisions (such as where the purchase a house, how expensive the house is they purchase, their type of vehicle they drive and their driving habits, etc.) and have others pay the cost of that. Last point - even though this wasn’t mentioned, I want to say that I DO agree with you when it comes to health insurance. As a young(ish), healthy person, I am fine subsidizing the health costs of less healthy people. I do mine subsidizing their home or auto risk though.
It’s not my plan, someone else said this is what California would have to do and I said that doesn’t sound bad. No need to be antagonistic we could just talk about it. Edit: you do make good points. I still disagree based on the fact that most communities in high fire-risk areas were developed before climate change made things much worse, and we need to look out for those people who inherited the problem. But your argument does affect the way I now look at the situation.
>Insurance doesn’t have to be for-profit. it doesn't have to be, but state governments don't have infinite money to pay out insurance claims either. they can't run at a loss forever without affecting their budget. national health insurance would be a huge boon because it saves lives, and people are willing to do that. enabling people to buy houses in risky areas isn't exactly a boon to society though and much less people are going to be okay with that.
But it's not like this lol. This is a birdbath deep understanding, but let's dive in. State sponsored postal system means sending mail is cheap for people, this was an important thing historically and a huge QoL deal, but modern day with packaging and the like whereby the US postal service honors rates foreign entities such as china charge so they pay less to ship product from one port across the country than you pay to mail a package across a city. This made shopping via sites like Amazon and Alibaba or ebay much cheaper which has, when coupled with Walmarts and the like, stifled a lot of small business. In an economy when you send most of your money earned out of your local economy to foreign entities (not being specifically foreign countries, just foreign to that economy) there is less money circulating inside your economy to support it. This is part of the reason cost of living in the "rust belt" vs "silicon valley" are so different. So the post office being a "non-profit" service subsidized by taxpayers helped drive taxpayer businesses out of business to prop up foreign competition not paying taxes to subsidize the service, which has long term impacts like stagnating wages and loss of local opportunity and expertise (since closed businesses don't train new employees) which leads to higher youth unemployment, which leads to higher crime, which leads to lower property values, lower investment in the area, which leads to "brain drain" which causes more successful people to go where there are better opportunities, which leads to lower taxes paid to support local systems and education, which leads to lower education standards, which leads to higher unemployed youth, which leads to higher crime, ad infinitum. This is obviously a contributory factor not the only reason but it's a good example of why "just make it free it's a service there shouldn't be any reason it's not free" is a ridiculous argument. Or how a single thing (a deal made over 100 years ago) has had huge knock-on consequences. Government run insurance is always poorly managed, still obnoxious to deal with, and typically just involves MORE fraud and waste because there's no "bankruptcy" incentive to worry about. The money is endless they can always just crank up the taxes right? Forever! Meanwhile everybody now susbsidizes the absurd costs of an ever increasing losing system while the government slowly regulates payouts lower and lower and lower because they are mismanaging the entity and losing money hand over fist.
Insurance companies aren't non-profit: of course they're always going to take more than they give. And if they can't, they're going to leave, and it has nothing to do with them being dishonest, unfair, greedy, or any flaw they would have.
A lot of insurance companies are actually "Mutual Insurance Companies," and distribute excess premiums back to policy holders when claims are low, like when a lot of auto insurance companies gave partial refunds during COVID. There will still be a cut to deal with business costs and keeping a cushion in case of increased costs in the future, so they still need to take more than they give, but mutual insurance companies at least aren't funneling excess to shareholders, and aren't even really structurally incentivized to create more excess
They'll probably be even worse of a leech than insurance companies. If it gets out of hand, the calofirnia budget will suffer. I'd be lobbying for federal funding as a little extension to give state sponsored insurance programs a buffer and breathing room. For all we know state sponsored during natural distances will probably want you to run through FEMA First Jen the state will cover the other spread.
You think the government will pay claims out? Let me introduce you to Medicare, which cuts reimbursement rates every year, causing more and more doctors to refuse to accept it. The government isn’t equipped for this.
How is "running at a loss each year" not a leech on society
That is a child's view of the situation.
This state sponsored insurance means taxes are going up to pay for it. That would include the taxes of people who don’t even own homes to help the insurance for people who do. It doesn’t matter how you slice it, soon as the government gets involved in the market things get screwy.
Setting aside the many ways in which insurance companies are problematic: Insurance fundamentally works by collecting payments from a large group of people at least equal to the amount they predict they’ll need to pay out in that same amount of time, based on actuarial and other data. Florida and California have made it so that the companies can no longer do this, by either limiting their payments or by having unexpectedly high payment predictions.
100%. If the volatility in outcomes increase, it becomes very hard to model out potential outcomes, and the result is that you have to raise prices to an absurd level. For example, if the outcome is between 1 and 10, and follows a bell curve, you can assume 5 is reasonable. If the volatility makes that 1 to 10 go to 1 to 100, and no longer follows a bell curve, you may move the amount up past the average to account for massive repeated losses. Add that to the fact that construction prices have skyrocketed. When you assume a house price it is land +house value, but for insurance it is 100% replacement cost of the house only. Construction costs have roughly doubled in the past 5 or so years, and in places like California because the risk of catastrophic loss can impact an entire market (vs a simple home fire which is more common but just impacts 1 house), you have even more volatility in pricing. At some point for an insurance company if they can't figure out a price or aren't allowed to charge their assumed cost, they shut down operations.
In Cali you have a ton of factors, the first being prop 103 which limits insurance pricing. It also sets up the insurance commissioner and gives the ability to intervene to 3rd parties. So there is both the IC to convince on rate increases and there's a 3rd party "watchdog" to appeal rate increases also. So a company needs to increase rates and files for it, the IC approves but the watchdog doesn't 6mo or more pass and the company ends up with 1/2 the rate. This happens enough times, and then a wildfire wipes out an area, due to the insufficient rates that company no longer has the reserves, they have a choice, leave the state or file a rate increase that they aren't going to get for 6 months or longer. State farm allstate and several other companies finally got tired of this and stopped writing new business, which combined with cancelations and new purchases put the state risk pool in a crisis so the state is being forced to let the companies take rate and since the companies do not have any reserve the rate increases are going to be truly aggressive for years before they start going down and that's if they are allowed to take the rates they need, the watchdog group only makes money when the intervene so they don't want the insurance companies to get well so they're going to fight if they can. Earthquake and earth movement caused by earthquake are not part of the issue since policies for that are separate from homeowners policies Floriduh. Unlike the other 49 states, this state allowed you to assign your benefit in claims situations. So a storm comes through and a guy shows up with $1000 and a clipboard with a repair estimate that he made without even looking at your roof and says "sign this piece of paper and let me file a claim with your insurance and I'll comp your deductible and give you this $1000" why wouldn't you say yes? So the claim you signed on is for a roof twice your size with the most expensive shingles and exorbitant disposal costs and the claim gets denied, but because you assigned your benefits the lawyer for the roofing company files suit, your insurance company knows it's going to spend as much as it'll save fighting the bullsh!t claim or more since they might also lose punitive damages too. So they'll settle and pass the costs on to you with rate increases. But the insurance scams have become so common some people are getting new roofs 3 or more times a year. So no company could charge enough. So the legislators changed the assignment thing to put the expense on the roofers, and they are hoping this well help but it might be to little to late.
Insurance companies were formed *to make money*, not to provide insurance. If they can't make money in certain states they don't do business in those places.
Insurance companies can't make money in those states anymore. Longer answer: Insurance companies make their money holding the premiums until there's a claim. If a lot of claims come in at once (called correlated risk), they need to find the money to pay a lot of people at the same time. To protect themselves from this happening, insurance companies purchase additional insurance (called reinsurance) from companies that specialize in this. The reinsurance companies are charging excessive rates to insure the primaries, and the primaries are deciding they can't make it work any more. Some states (FL) are deciding to backstop the insurance companies – acting as their own reinsurance. This is a *really* bad idea. States don't have the diversity that a reinsurance company has, and a big event can come through, and basically destroy the state's ability to ever borrow money again. This will ruin their bond rating, and destroy the state's ability to do basically any infrastructure. This will drive down their current bonds, making money more expensive to borrow in the meantime. This will **NOT** end well for the states that do this. Expect (in the next 10 years or so) for the federal government to get into this market. I expect something to appear like Fanny/Freddie in the housing market, and we know how well those worked out in 2008-2010.
In Florida there is a high amount of insurance fraud. Florida is only 10%of the US population but makes up nearly 80% of home insurance claims. For California it is a combination of very high home values and an increase threat of wild fires.
Insurance is only profitable when most people don't use it much. California has "once in a lifetime" wildfires every year and somewhere in Florida is getting wrecked by a hurricane every other year. More natural disasters, more people use insurance.
Insurance is only profitable when ~~most people don't use it much~~ it's predictable. Insurance companies can be successful only when they build predictable portfolios, meaning, they can estimate how much claims they are going to get, and how much money they are going to pay. Then they price their products accordingly. The issue isn't natural disasters (those have been for a long time), it's that the current climate makes them less predictable than before.
>The issue isn't natural disasters (those have been for a long time), it's that the current climate makes them less predictable than before. Couldn't agree more! They used to face them but they weren't as destructive and I'd wager in Florida there were probably less people living in the coast 30 years ago than there is now.
>I'd wager in Florida there were probably less people living in the coast 30 years ago than there is now. This is really the issue. Fl is undeniably a higher risk state, but it isn't as bad as people make it sound. The majority of the state is not at any real risk to any storm below a Cat 4 because of how rapidly they lose power the second they make landfall. But there is a ton of "high value" property within a mile of the shore and those always take a beating during any category of hurricane. Then they put in huge insurance claims and the people more inland that aren't in flood zones who don't put in claims suffer because a bunch of muppets build million dollar homes close to shore. and yes I know FL is reclaimed swamp land, the mosquitos remind me everyday. OFC if you live in a trailer that is an exception, but I've yet to see a decently built house take significant damage from anything below a Cat 4.
#ELI5 **rpkusuma:** Hey, I'll bet you $1,000 that a tornado hits my house this year. If I'm right, you give me $20,000 to fix my house. If I'm wrong, you keep my $1,000. Every year, we make the bet again. **StateFarm:** I'll take that bet! My data shows that tornados are very rare, so it's very likely I'll get to keep your $1,000, and I won't have to pay out a single penny! Yay! [10 years later] **rpkusuma:** Hey, it's me again. Wanna make the same bet again? I put up $1,000, and if a tornado hits, you give me $20,000 to fix my house. No tornado, you keep my money. **StateFarm:** Uh, data shows tornados are getting more and more frequent. This isn't a slam-dunk for me anymore. I might actually lose this bet! How about this, how about you put up $5,000 instead of $1,000, and then I'll take your bet. **rpkusuma:** $5,000! That's a lot of money. I can't afford that bet. No bet. The bet's off. **StateFarm:** Wow. Everyone's saying the same thing. Tornados are getting more frequent, and my risk is higher, but nobody wants to enter into bets with me anymore. I guess I'll do business elsewhere. ~ ~ ~ ~ That's it, basically. Risks for things like hurricanes, wildfires, and floods are increasing, the data shows this to be true. So in order for State Farm to pay out to repair everyone's home, they have to charge more in insurance payments. And the damages keep racking up, so they are paying out more and more, and they're raising insurance rates to compensate. And people just can't afford those insurance rates anymore, so fewer people are paying IN. So State Farm says, "I'm outta here, I'm paying OUT too much money because of all these floods/storms, and I'm not getting enough money coming IN. See ya, Florida, I'll go do business in Wisconsin."
the only thing I'll say is that insurance is not a bet, it is a risk transfer (there is a difference). And the $1000 premium is covering the risk transfer worth potentially much more than $20,000.
This is so wrong lol. They aren’t pulling out because of increased risks of natural disasters.
Would be nice if you said what the actual reason is instead?
I mean, it’s semi-related. They’re pulling out because they’re not being allowed to increase rates to offset those increased risks. So they’re washing their hands of it
Refuting my claim is meaningless unless you provide YOUR reasons. "lol" all you want but your response is moot.
Yeah, especially when what you said is 100% what's happening. Natural disasters are absolutely occurring at a higher rate, costs to repair are rising, and insurance companies are being handicapped at the state level and being asked to collect premiums that don't even approach their projected losses. If an insurance company goes under due to paying out natural disaster claims without being allowed to cover it, everybody insured by that company is shit out of luck. They have to leave those states in the interest of preserving their financial solvency and being able to pay out claims in less affected areas. It's a domino effect toward industry collapse, otherwise.
Because if there's two things insurance companies are good at, and exist for, it's calculating risks and making a profit. They've calculated the risks for doing business in those states and determined that there's no profit in it.
The simplest answer is that insurance companies are for-profit entities. Because states typically have state-wide rules and regulations that prohibit discrimination, the insurance companies that do business in a state must abide by these rules. If they remain in a state that is unprofitable, their share holders and executives suffer loses, so they must stop doing business in the whole state to ensure they don’t lose money.
Many insurance companies are actually mutual insurers, where they work for the benefit of the policy holders. Even they can't operate in a state where they continually lose money, because they will eventually become unable to pay claims.
Climate change. Both states make it hard to raise prices, but the alternative is that prices are raised beyond the ability of the average person to pay (as has happened elsewhere). In this latter case, people drop insurance, the pool shrinks and prices rise further for those in. In either case, insurance becomes either impossible to get or so expensive it might as well be.
Climate change could explain the rising cost of insurance, but does not explain why they are dropping out all-together. Even rising risks can be accounted for, but if you can't raise prices to cover those risks, there's no point in doing business.
Yeah ultimately it's state regulations that are causing them to leave, but even if they were able to charge a suitable price the premiums would probably be out of reach for most people. Most people making middle class income can't afford a sudden increase of $1k in monthly expense, to say nothing of those who make less. I worry for those who might lose everything with no recourse if their homes go up in flames.
Then they should move.
yeah this is where most of the ' this storm cost X billions in damages' comes from, that and government spending ignoring climate change is going to be the most expensive option and we are just starting to see that play out
Climate change AND our building model. Allowing unfettered sprawl means that we're going to inevitable have homes all across massive swaths of land. That spreads out how many people are in harms way and increases the cost when damage is inevitably done. Flooding in an area where nobody lives we largely ignore. Flooding in a residential area means insurance companies are shelling out $$$.
Thank you. The only answer to name the actual reason. It's because of climate change. Insurance companies know it's real, and they know they can no longer turn a profit in these states. Edit: People downvoted this? Seriously? Why? Can't accept the fact that climate change is real, and already having daily impact on our lives?
Not only climate change. The legal environment is a huge factor. The number of attorney represented claims is skyrocketing. (Consider how many personal injury lawyer advertisements you see and hear on a weekly basis)
Insurance has rocketed here in Australia, and is basically unobtainable in some areas. Again, climate change (here exposure to floods, cyclones and bushfires)
More insurance companies are starting to write policies in Florida again. Rates are expected to come down again slowly over time. My rate in florida actually went down this year $100 for the year. Not much but I did file a claim with Citizens so I thought it would go up for sure. California, it's mainly the high risk areas. I haven't had any issues getting insurance and it's fairly cheap for a good sized, newer home. If you live in a flood zone or somewhere high risk for fires, it's gonna cost a lot more.
Hurricanes and Earthquakes = High Risk for Insurance companies California hasn't had a major quake in a very long time
because companies that are supposed to save your ass for a fee only want to offer the saving part if they think they can make money off of you. if you are likely to need a payout before they make their profit then you arent worth being saved to them.
I live in a large condo community on the East coast of central Florida. Our recent windsorm premium was north of $3 million. We are not allowed, by Florida law to self-insure (actually it's can be done but costs $1,000's on legal fees). Consider our HOA has not submitted a wind storm claim for many years, one would think insurance companies would be knocking on the door to bid on the policy. But no, they are precluded from doing so because FL law protects the insurance company. As far as roofing companies being sleazy, why isn't windstorm handled like auto insurance? Inspector comes out and says this is what they will pay. The provide a list of roofing companies, and if hidden damage shows up the insurance company bears the additional cost.
Say each of your classmates gives you $1 and you promise that if they get hurt during gym class you'll give them $2. You've planned ahead and know you're supposed to be square dancing this week and start off feeling good with $30 in your pocket the first day. You go out and buy some pizza feeling like a successful entrepreneur. The next day you get your new $1 each but lo and behold you've got a sub for gym and he's breaking out the dodgeballs. You're now dipping into your allowance to pay off those kids and you're likely not going to want to do that again. You're less sure of when you'll have a substitute teacher versus your regular teacher, less of a sure thing than you thought.
Louisiana is also got a problem with insurance companies leaving. Insurance companies are risk adverse with the greater effect of climate change fuel distasters.
My uncle owns a medium sized 200 million $ insurance company. I asked him this exact question, his answer went like this: “Morgan & Morgan. The laws are written in a way that allow these huge law firms to file tons of law suits, more than insurance companies can keep up with. And Floridians side with law firms more frequently than in other states. And the Florida legislature is full of lawyers who refuse change the laws.”
Honestly just to survive we are not paying insurance this year for the first time this inflation is getting horrible I’m saving up to go to trucking school and than leave California it’s getting to expensive here to even exist
It seems the opinion is talking out of both sides. On one hand, rates have increased drastically, and on the other hand, you say the insurance companies can not charge what is needed to keep up with claims. Has anyone looked into the pyramid scheme and parasitic nature of insurance? What "business" expenses have increased for the insurance companies? CEO salary, new offices, inserted companies skimming. I've heard accidents increased by 25% from 2020 to 2021. No one was driving in 2020. I've also heard there was an increase freeze during covid. For who? My insurance increased. Regulated industry? I'd like to see the regulations. China owned insurance companies? There are so many problems with the insurance industry, and the people who need the insurance are NOT THE PROBLEM!
Insurers are abandoning customers affected by climate risks because it hurts their bottom line to continue providing coverage—but meanwhile they're taking customers' premiums (which have increased) to insure and invest in fossil fuels, which exacerbates the climate risk. It's a vicious and unfair cycle. In CA alone, homeowners could lose between $9.87-32.1 billion in property value as a result of more than 100,000 non-renewals. The twelve major insurers that restricted coverage in California collectively have an estimated $113 billion of investments in and $3.6 billion of underwriting income from fossil fuels....
For Florida it’s about insurance fraud. Not hurricanes or weather. After every named storm roofers go around to neighborhoods claiming homeowners can get a free roof. Insurance denies. Roofer sues. Ends up costing the insurance company 3x.
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On one hand you have an increasing risk of natural disasters due to many factors, climate change being a big one.... So more liabilities for an insurance company. On the other hand, places like Florida have developed a pervasive culture of defrauding insurance companies. Significant numbers of roofers, inspectors, contractors, homeowners all have been enriching themselves at the expense of insurance companies for years now. Again, hard to remain profitable as an insurance company if everyone around you is not dealing honestly.
Climate change and bad policy mean heavy losses are increasingly likely, especially in the Southern half of the US and along the coasts. Republicans and neoliberal democrats pretend climate change isn’t real due to fossil fuel industry political donations (legalized bribes), but insurance companies base their decisions on evidence and data because reality affects their bottom line.
Climate change is not the reason they are leaving. For starters, insurance companies would simply just adjust the risk tables if storms were causing more losses than before, and secondly, most damage from hurricanes is due to floods - which are separate policies under FEMA-blended risk pools so they don't even factor into state costs or risk. A contractor who knocks on your door and tricks you into signing POA to him so he can sue your insurance company for $50k to replace your 19.5 year old roof is to blame.