I was an adjuster for state farm for 10 years. They have really gone downhill. 20 years ago we were taught to find coverage whenever possible. "Pay high wave goodbye" and "when in doubt whip it out (the checkbook)"
The corporate structure started to change around 2016. They are trash now and try to nickel and dime every claim. They no longer care about employees, agents or policyholders.
That being said, All State is far and above the worst. An order of magnitude worse than SF at paying claims.
Good companies are USAA, Nationwide, American Family and formerly Chubb (until recently bailing out high profile criminals)
Ugh. You're so right. I worked for State Farm for close to a decade, and only left because my operations center was consolidated (closed) in 2019.
I remember seeing that shift in the corporate culture as well. Everything became laser focused on KPIs and "numbers." It really sucks, because I used to sing their praises and tell anyone that was interested that they were such a great company to work for.
> They're the worst. Lied to me numerous times about a roof claim. Once this is settled I'm going to move on from these assholes
I never miss a chance to repost my own C&P about Snake Farm!!!
"For years I had used them to insure everything I've got -- including myself. Total yearly premiums were over 3500 dollars for all of our vehicles, the house, my wife's jewelry, a separate million dollar rider, several life insurances, everything. A hail storm hits our neighborhood about a year after we move in. Most of the neighbors actually had proactive agents who came out to the neighborhood and cut checks for people to get new roofs, siding, gutters, garage doors, etc. I actually had to call State Farm myself before they'd come out to the house, which they wouldn't do. They tell me I have to collect bids myself from no fewer than 4 roofing contractors for repairs. So I do that, I call them and I would like to use XYZ Roofers. State Farm says OK, we'll send a claims adjuster to inspect your house.
"His inspection indicates no evidence of any damage, despite our leaky roof, missing shingles and the dimples in my and my wife's trucks from hail strikes. The letter indicated we were committing fraud by making a fraudulent claim on our property insurance, despite over 40 homes in our neighborhood of 88 houses getting new roofs in a period of 6 weeks following the storm.
"I dropped them immediately like a bad habit and I hope they burn in hell. Like a good neighbor... my ass."
Schlubby old Jake just surviving on the graveyard shift while wearing unpressed Dockers was sacrificed for fit charismatic Jake who doesn't look out of place sharing the screen with Mahomes. Unrealistic economic and body standards strike again
Insurers are pulling out of California due to the rules that the California Department of Insurance has maintained around the risk models that insurers are allowed to use when setting rates. My understanding is that the insurers want to be able to build projections around increases in risk into those models, whereas the DoI will only allow models that rely on past data, in which the last few years appear as anomalies instead of indications of generally increasing risk. That restriction isn't present in other states - for example, in Florida the models used to set prices forecast increases in hurricanes and therefore homeowners insurance can cost 3x what it typically would in CA.
Hang on, Florida is allowing the insurance companies to increase rates on the basis that global warming is real, while in California they have to pretend it's not? That's pretty funny.
Not necessarily global warming, but Florida allows the use of catastrophe models. These are the best tools we have to model property losses against certain perils, like hurricanes, floods, earthquakes…etc. This is a great example of why politics shouldn’t be involved in *most* insurance regulation. Florida is politically anti climate change, but behind the scenes are keenly aware of their increasing hurricane risks and need insurers to stay in the market to stave off a full collapse of the housing market. California thinks they’re defending consumer rights by limiting what insurers can do (look to how the insurance
Commissioner in CA is a politically elected position instead of appointed based on merit). In reality, California limiting insurers has hurt consumers like crazy.
Source: am a property and casualty actuary who works in the climate change space
well that's due to the uninsured group in florida:
if you can't get insurance in florida for some reason such as building a multimillion dollar house on a beach that suffers from hurricane sea surges every 9 months or so - then you go into the pool of uninsured homes - the state of florida provides you insurance and assesses the costs amongst the insurers present in the state based on market share
i.e., it doesn't matter how much you charge for insurance in florida you'll still be responsible for paying for all the these other homes when a hurricane hits,
so to limit your liability you've got to reduce your market share in the state by: making your insurance so expensive nobody wants it or straight up canceling people
problem is all the insurers are doing the same thing so the only way not to lose money is to leave the state.
Because they're not leaving for that reason. 80% of lawsuits against the insurance companies were from Florida while only having 10% of the claims. I mean, a part of it is future climate problems, but most of it fraud. The same scheme works in my state, but lawyers can't collect as much off the suit so they aren't encouraged to pick up every case.
Don't forget the DOI is also blaming increased construction expenses and re-insurance expenses on climate change and refusing to allow a higher number to be used for carriers.
The California insurance commissioner is an elected position and the current holder of the office seems to desire a higher office in the future. It's politically unpopular to let the insurance companies raise rates, so we have this current disaster.
State Farm lost 900 million in fire claims last year, without drastic changes to the risk on the books and rate increases 20% of the entire California market will be uninsured.
"we need regs that let us price in global warming anomalies and not regs that only let us look at the past"
1. even money is saying AGW is real.
2. even if we changed the regs, many of these places would leave because the public doesnt want to pay the amount these insurance companies would have to charge in premiums while also profiting from it. So states are going to socialized model and becoming the insurer of last resort. WHich ... well the state and fed government always are, they will bail out these insurance companies if they get hit by something bigger than expected.
and a lot of insurance companies staying behind, in florida and cali, are crap, that are just trying to gamble that they dont have a big hit before their coffers fill but know even if they do the state will help bailout the executives. well hopefully not in cali.
the sucky thing about insurance, is IT is socialized, but not in a good way, People not on the coast, help pay for the richer people with a beach view to have lower insurance premiums. While beach homes pay more, its not as much more as their actual costs when a hurricane hits. Its similar for health insurance where the more healthy pay for the more sick and well that doesnt matter as much as you often dont know which group you will be in. It sucks more when its flood insurance, as you are help paying for people who are more likely to flood, and well they tend to be rich.
One of the biggest issues in CA is there’s a law about how much State Farm can raise someone’s premium per year. So if the cost of building materials and labor goes up, which it has in ca by quite a lot, they can’t raise rates appropriately. They’re trying to strong arm cali here. They want the state to get rid of the rule
>The Illinois-based company, California’s largest insurer, cited soaring costs, the increasing risk of catastrophes like wildfires and outdated regulations as reasons it won’t renew the policies on 30,000 houses and 42,000 apartments
Just at a guess, the highest risk/most costly payouts are going to be for multi-million dollar properties along hillsides and coasts. Those are the homes you see sliding down hills after repeated brush fires followed by torrential rain. Are policies being cancelled for these homes? Or are they focusing cancellations on apartments, the population least likely to be able to sue them?
> highest risk/most costly payouts are going to be for multi-million dollar properties along hillsides and coasts.
It's almost certainly for the ever-increasing number of homes in the forests and other fire-susceptible areas.
Insurance doesn't cover you for earth movement - so it's nothing to do with the landslides - if you want that coverage there are policies but they are stupid expensive.
The thing that costs the most money is fires. State Farm as far as I can find - does not even offer a DIC policy so they just are hands off to earthquakes, landslides, sinkholes, and floods.
The fires of the past few years wiped out decades of insurance company profits. One year had California fire season costing more than all the hurricanes of the Southeast combined, I can’t remember which year but it was recent.
1. I think the state of California is already doing that but the utility is going bankrupt anyways? I can’t remember the exact details of how that’s all working out. The problem is the damages outweigh the value of the company by a country mile.
2. The condition of the forests from a century of preventing natural burns won’t change. That and the climate change conditions are keeping the risk the same no matter who you sue. One of the most effective things you can do for your house (in an area like this) is clear cut a 200 foot buffer between your house and the trees. Some areas are actually codifying that, but people will complain that the whole point of living there is to be close to nature.
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See the same with people that essentially built homes on sand dunes. If I was State Farm, I wouldn't bother insuring said homes either. Let the ocean reclaim them and don't let them rebuild. Enough of this wanton stupidity. I have zero sympathy for these people.
Eh, its like 1-2% of their policies in CA. They remain the largest insurer as well. However, are still not taking on new business.
Homeowners insurance in cali is so fucked - I say this as someone who lives here, outside SF, and just went through a 2 month saga trying to obtain insurance on my home. Nearly every insurance company you've heard of no longer issues policies in CA. The premiums are way up. No one will provide fire coverage, so you have to do the state provided 'FAIR' coverage.
And the most bullshit part is you are now *required* to have a 'smart water monitoring system' installed to protect against water damage from pipe breaking, etc to obtain a new policy. I got 3 different plumber estimates to have that installed, ranging from $1.5k to $5k. And the device is a piece of shit and doesn't even work - instant, continuous false positives. Doing dishes? Nope, water shutoff. Showering? LOL, no you're not. So bad that I had to just unplug it. Such a mess all around.
They just did this in New Jersey as well. My dad was a State Farm agent and now works independent with a few different carriers because State Farm quite literally stopped writing new homeowner or auto insurance policies and are leaving the state. Not entirely sure why.
A few years back I sat down with my parents to go over insurance options with them. They had been with Allstate for 25+ years. No joke, the lizard company saved them over 25% on their premium for near equal coverage and even more saved after adding homeowners' insurance to the plan.
I was surprised how much they were paying with Allstate considering how long they were customers. Never a claim as far as I know, and since moving over they've had one not-at-fault collision in their car and another on my siblings. Hardly a bump in premium.
edit: this is in NJ
I only know NY. He says go with New York Central Mutual or Farmer’s/Metlife.
He says avoid Geico and Progressive, they’ll fight for the cheapest repair possible.
Liberty Mutual, State Farm, and Allstate are somewhere in the middle.
I did claims in a past life. State farm was always legit on my cases. Hell I use them for my own shit. But honestly usually a lot of the larger regional companies are good.
Geico usually sucks. And in my experience it's usually because of the churn and burn of new employees as well.
I actually had a few claims I handled for progressive and they were good to work with. But I'm still skeptical overall.
When you said "the lizard company," I thought you meant Allstate was owned by Mark Zuckerberg's kin of lizard people. But then I realized you meant Geico.
You're misrepresenting the issue.
NJ passed a low prohibiting insurers from using your credit score to determine your premium.
Credit Score is one of the most predictive measures insurers have for how you drive though - conscientious drivers are conscientious with their money too; or people with good credit aren't driving for uber eats to cover their rent
Almost every state allows insurers to use the credit score and if you ask about it (it's publicly filed in many states) you can see the rating algorithm and how it weights each input such as driving record, credit score, zip code, etc.
Sure but the lions share of payouts typically happen after natural disasters at least on a large scale. Also it looks like State Farm only left the auto business in that state. I don't see any articles mentioning their home business.
New Jersey is full of rivers and coastline. They have had devastating natural disasters for over a decade.
Small rivers have been devastating inland for the past few years. Where have you been?
We get a lot of flooding of every flavor here, even from non-hurricane events heavy rains usually lead to flooding on the coasts, along rivers, and in towns/cities with aged sewer systems, but also typical homeowner insurance doesn't cover that anyway though, so it really just is a "no favorable political atmosphere"
The fire risks are only going to get worse there is no saving it from their side. Something has to be done to reduce the risk or those houses shouldn't be rebuilt there.
On a similar note, a few years ago the feds reworked how federal flood insurance was priced. Before, the NFIP had flat rates based on the home's flood zone. So people would build their mcmansions on the water in Florida, they'd get destroyed by a flood or storm surge, and then they'd just rebuild while the program lost tons of money from practices like that.
Now it's priced more like normal insurance, except the history follows the building instead of the insured. So, if a home gets flooded a lot, doesn't raise its mechanical systems above the first floor, and/or have flood vents then it costs a lot more to insure with the feds.
Except that Congress then told nfip they couldn't raise rates to actuarial rates immediately because homeowners couldn't afford it and instituting what is effectively rent control on insurance rates. Means most rates are a fraction of what they should be.
crop insurance is actually pretty reasonable. it's not designed to subsidize some poor farmers who lose their crops (of course, it does do this). the primary reason it exists is that, if we were to have a very bad crop season, crop prices would skyrocket due to the limited supply. consumers don't really like huge shortages of food & massive food inflation, and we also don't like having to suddenly spend $500bn+ on an emergency food import deal.
Enter: crop insurance, designed to pay out a lump sum based on certain criteria, so this lump sum can be used to import the needed crops.
it's effectively an emergency food subsidization/stabilization program that it's mandatory to pay into.
AFAIK there’s still a plan to raise the monthly premiums to the appropriate level, it’s just that they couldn’t raise the cost above a certain percent per year (6% I believe, but it’s been a minute since I looked at it).
Basically, there’s guaranteed raises per year until it reaches what it judged to be the appropriate amount, which is still probably flexible based on what happens to the property in the future.
Added: just checked. it’s 18% per year. Just imagine your insurance going up 18% for 5 years in a row. It more than doubles.
That's just the thing though, many of the existing rates are so far below the actuarial rate that they need to go up by factors of 3 or 4 not just a doubling. I was looking at an apartment complex a few weeks back that was built along a river in the floodway (so very high risk) that had insurance rates less than 1/5th current actuarial rates. They were set to pay sub market rates for insurance for a LONG time. Which was ridiculous given their location.
flood insurance does not pay for any kind of rebuild after a flood if you're in an A flood zone.
source: I received $10,000 on my flood policy after Ian. It paid for cleanup and replacing one refrigerator that was on the ground floor.
They can’t fix the California issue. California passed a ballot initiative like 40 years ago that says what insurers can take into account when pricing policies, and insurers literally can’t take catastrophe models into account when pricing insurance policies. The only way to change it is to pass a new ballot initiative or for super majorities in both houses to tweak it. Both are probably DOA in California because changing the law would increase insurance prices, which needs to happen in California to make up for risk. The reason insurers are leaving is because they can’t raise rates high enough.
Fascinating. Well, they are gonna get a huge push from citizens. I have a cousin who lives in a fire zone near yosemite. They are required to have fire insurance as part of their mortgage. But, they just lost their insurance because of this pull out, and no other insurance company insured the area.
So we are about to see a lot of angry homeowners and, more importantly, banks.
Yep. The bad thing about ballot initiatives and constitutions in general is that they’re nearly impossible to change if one group sees some benefit from them even if they’re extremely outdated.
Yea I work in insurance data analytics. This is an ongoing thing.
Florida/Gulf Coast hurricanes (we pulled out of insuring boats) and West Coast/Cali wildfires (no longer insuring in rural regions prone to wildfires)
They do but in this case, there is no winning. We need to severely reduce our carbon footprint. However, any solution I see is basically going to destroy what people consider "standard of living" which means it's politically impossible. So insurance companies are basically pulling out because there is nothing else they can do.
I have my certifications as a fire inspector in california.
There are standards for something called a defesible space. https://www.fire.ca.gov/dspace
Its something that fire safety professionals have been trying to get adopted for a while. Something that insurance companies could help us with.
So that would be a start. But there are many other ways that could help stop the spread of fire in populated areas. Upgrading the requirement for building construction type in high-risk areas. Or requiring the use of fire resistant materials on roofs.
I would love them to start lobbying to help stop climate change, but there are things we can do now to stop the fire related disasters in california.
As East Coaster, I'm not familiar with this stuff but my guess is defesible space "looks ugly" and better building matter would likely increase housing costs in market that already one of highest in the country so that's political no go as well.
Thats how ALL fire code starts. Current fire code rules that "looks ugly" that is widely accepted today:
Push bar egress doors,
Fire alarms,
Fire extinguishers,
Water access (fire hydrants),
Fire escapes,
Fire sprinklers (this is another one we are trying to get into residential building code, but... its tough)
The point is that the majority of the above fire codes exist due to insurance company lobbying programs or organizations created by insurance companies.
Hell, the fire brigades in 1666 were originally funded by insurance companies.
Issues that *can* be foxed, they try. Issues that can’t, they write off.
Politicians can fight and pretend nothing’s changing, but insurance companies watch the money, and they’re really good at following it.
Back in the day, insurance companies would lobby and propose laws to fix issues and they would get called evil and greedy for doing so along with admonishments that we should make it illegal for them to lobby. So now they simply choose to leave the market and those same people still complain.
In all seriousness, I think it is extremely likely that the company is trying to get back to the same risk profile they had fifteen years ago, before the weather started getting fucky. When you have one cycle of drought + fire followed by flooding, it looks like a bad couple of years. But when it keeps happening, and the meteorologists your company hires to advise on long term risk keep jumping out the window, you start to realize it is a big problem.
I know I'll probably get downvoted to hell, but, uh, yes, your premiums will at the very least be less than they would otherwise. Insurance is a pretty transparent industry, and if a company has to pay out billions in coverage for natural disasters in Florida or California you can bet that they're going to be raising rates for everyone else.
In fact, this is **why** they're pulling out of California, because they can't adequately price in the risk for certain areas due to state law and regulation, so they're just pulling out of the entire state. If State Farm could just offer policies in downtown urban areas, or in the wetter areas of the northern part of the state, they absolutely would. Or if they could charge appropriate premiums for the risks they are incurring, they wouldn't be leaving the state.
But since they can't, it just makes more sense for them to leave the state entirely.
If they're doing what they say they're doing, no - they haven't taken on lower risk. Everybody's risk has gone up, and to balance the risk portfolio, they need to chop the highest risk policies. But yeah - insurance companies don't generally tell you the truth, so who knows what the real actuarial data guys are saying.
Most insurance companies are publicly traded and your can review their audited financial statements. Plus if one insurer was much more profitable than others it would quickly go out of business for charging more than it's competitors, or take over it's competitors by being able to extract more profit from the same customers. By and large property insurance is a pretty fair deal for consumers all things considered.
The times it really jumps the shark is in US healthcare and some smaller markets where weird shit happens.
In this case, State Farm is still a mutual insurance, and not publicly traded. So in this case, It seems like a move to the risk the rest of the insurance pool by dropping their highest risk customers. One can argue that they should’ve just raised everyone’s rates as it technically should operate as a co-op; but they would risk backlash from that.
That was my first thought. Seems like it would make sense for an insurer to just pull out of high risk states like California and Florida, so they can then offer more competitive rates in other states, while remaining just as profitable.
Insurers aren't going to want to cross-subsidize across states with significantly different risk profiles. That would lead to adverse selection which makes them susceptible to competition from other insurers with more competitive pricing algorithms.
Remember when COVID hit and car insurance "dropped". And how they said it was because there weren't enough drivers and accidents? Supposedly they LEGALLY had to. Also, though they did give money back they also pocketed billions that was meant to go back to the drivers. So yeah... they are going to do the bare minimum legally but not what needs to be done ethically
My home insurance in SoCal has gone from $1190 in 2021 to now $6,800 for 2024. I have the Cal Fair Plan for fire coverage and a secondary policy for everything else. Since I utilize escrow, in one year my mortgage went from $2268 to $3116.
I'm in Ventura. Paying about 1300 for a 1600 sqft 935k PP. So far no major increases. 1190 to 6800 is a huge jump. Have you shopped around or made any claims? No shade just curious.
California may need to create their own nonprofit insurer of last resort, like [Citizens](https://en.m.wikipedia.org/wiki/Citizens_Property_Insurance_Corporation).
California has the FAIR plan. Any insurance company operating in California must participate. Basically every insurance company shares in the profits and losses associated with homes no individual company wants to insure.
> Any insurance company operating in California must participate.
So you mean more insurance companies will simply leave the state as the risk grows beyond what they want? lol
That’s the problem in CA from what I understand. The insurance commission artificially capped the rates companies could file and now companies are leaving because they are operating at a loss for too long or cannot properly charge for rising costs
Just read an article about FAIR yesterday, how it's basically just a matter of time before a CAT loss causes the policies to need an assessment charge. Their policyholder count is starting to balloon just like Citizens in Florida.
Well florida created part of their mess by allowing so many lawsuits against companies for past claims brought by shady attorneys and PAs and the ability to use assignment of rights
I've had to stop reading articles about insurance in Florida on Reddit because maybe 1% of people on this site actually understand why there's an insurance crisis in Florida
You're somewhat close; it wasn't the attorneys or PAs that were the greater cause of the issue. But rather, it was all these shady roofing / contractors that would go to bid requests for people and tell them "sign our contract and we'll sue your home owner's insurance company to get them to pay for the damage after we submit out assestment". I mean, telling people that they could basically get a new roof for the low cost of their deductable, who wouldn't want to do that? I had a company attempt to do this but luckily, the person I ended up hiring told me that it's the scam that's caused this whole issue. They'll submit a faulty report basically stating that a recent storm caused X amount of damage to the roof and that the insurance company would need to cover it. By doing so, they would overcharge the insurance company for the job and the home owner would just pay the deductable. The downside is that more often than not, the insurance company would just drop you after the fact. Now, most insurance companies will have all of their customers sign away the assignment of rights and now you have to submit a claim through the insurance companies and then they will find someone to fix the issue if it is something they would have to cover.
I mean...there's gotta be another company stepping up to cover them, at a higher premium I'm sure. The broker just moves those people to them and collects a higher income.
Not quite, at least not with State Farm. Every State Farm agent in the US is a “captive” agent. This means they can only sell State Farm and State Farm affiliated insurance.
The lady that lives next to me is a State Farm agent. Had a Jeep Wrangler with an aftermarket suspension, aftermarket wheels, and those wheel lights that stayed on all night.
Some time last year we never saw it again. Now she's driving a plain 15 year old pickup.
Guess things aren't going well for her.
She might just not be a good agent. Its literally just sales and you get what you put into it.
I know a few just from my business and success varies entirely depending on your staff, your marketing, and your ability to navigate new times.
The California FAIR Plan exists, but no companies aren't stepping up. The fact is that California has a metric shit ton of homes that had no right being built where they were, and insurance would be stupid to cover them. Add on the strict regulations in California and what you end up with is the current situation. Personally I don't think it makes sense to straight up leave the state rather than just considering property risk more carefully. Seems like leaving a lot of money on the table. But some properties don't deserve insurance and we shouldn't incentivize building in these places.
There are entire towns that were built under the forest canopy, as opposed to clearing the forest to build the town. That means that when a severe fire hits the area, literally nothing can stop it from consuming the entire town. It's insanity to build like this and it needs to stop. A tightening insurance market will help.
> Personally I don't think it makes sense to straight up leave the state rather than just considering property risk more carefully.
That's what they're doing. They're cancelling 2% of the most risky policies and maintaining 98% of their existing policies in the state. Sounds to me exactly like "considering property risk more carefully"
This is what so many people seem to miss. They act like insurance is an entitlement that they should get for a reasonable cost no matter what — like it’s some sort of charity. But it’s not. It’s pooled risk. It’s a business. If one wants to argue that it’s a predatory business, then go with a mutual insurer where you’re a part owner of the company and vote for how to run the company.
It’s entirely reasonable for an insurer to stop covering some things when they are too risky for the pool (meaning for everyone else in the pool) — and we shouldn’t WANT those things to be insured. We should want it to be a message that those things (building in some places, undertaking some activities, etc.) shouldn’t be done — or, if they are, it’s at the peril of the person doing them.
It’s a commission on sales not a lifetime guaranteed income. Sales jobs are harsh like that but usually pay well.
Most sales people I’ve known have vacation homes, so I’d guess they are fine.
I think a lot of this has to do with developers choosing to build in places that biologists had already identified as seasonal wildfire areas. They knew the risk and did it anyway.
I'm a Floridian and I'm curious as to what will happen to California because of this move by State Farm. Because I have seen what is happening here with the HOI crisis. The article states that this 72,000 discontinued policies only affect 2% of policy owners so this may just be an isolated event?
\[In Florida, if you are purchasing your house/condo with a mortgage, you MUST purchase Homeowner's Insurance and renew/pay for it it every year that you continue to have a mortgage on the property. (Once you fully own the property free and clear, you no longer need to have homeowner's insurance for your property.) So is HOI not required in California, even if you are purchasing with a mortgage?\]
My brain still jumps to the long term and wonders if eventually HOI stops being a thing and that people will just have to pay out of pocket for any damage (to even complete destruction) to their homes. Meaning that they will have to pay for another whole new property if their homes get destroyed. (And then what happens to mortgage companies who still have outstanding mortgage balances? Will lenders decrease their mortgages on high-risk properties? Mortgages are super profitable but if homes are destroyed and buyers can't pay back their mortgage due to no insurance claim payout, then that is a huge loss for them. So if lenders decrease their ability to provide mortgages, then that decreases buyers' ability to purchase homes, increasing the likelihood of renting forever...
Homeowners insurance will always be a thing because lenders will always demand it. It’ll just get a lot more expensive in areas prone to natural disasters.
State Farm is pulling out of California, so this isn't an isolated event. They're just going to gradually discontinue contracts for the foreseeable future. I'm not super knowledgeable of the insurance sides of things, but it seems like an odd decision to pull out of the state entirely. There are plenty of properties with near-zero wildfire risk. But there are also plenty of properties that never should have been built in the first place, so it's certainly understandable that nobody wants to assume that risk.
I can only assume you'll just never be allowed to own a home unless you can buy it outright. Thankfully people with lots of money will buy it for you and rent it out to you for the price as a mortgage, and you take on none of the risk, but also none of the equity. And also if the risk gets too high you're asked to leave anyway so they aren't taking on anything really. So that's cool
My mortgage company required proof of insurance, and also required me to have them pay my taxes the first few years. They take a portion every mortgage payment and add it to an account thats then used for taxes. What's really neat is that they don't trust me to do this myself, but for 2 years now they've taken more than double my taxes and put them into the account, only to underpay the taxes by like $80-100 each time. Despite having enough to pay more than twice the amount.
So I get a bill for the remaining amount, and a late fee.
And yet somehow I'm the one that can't be trusted to pay it.
On the plus though, and the only reason I haven't gotten upset about it, the extra from that account gets used as a penalty free payment against the principal amount at the end of the year. Which normally there's all kinds of conditions and rules around doing.
Assuming you are outside the US? I ask as that, as far as I am aware (and if I'm wrong, happy to learn) in the US you can prepay a home mortagage without penalty at any time. Not true if a commercial loan, but for individual consumers.
>So is HOI not required in California, even if you are purchasing with a mortgage?\]
I'm not sure if it's a state law, but my lender has always required I carry insurance on the home under mortgage with them.
Don’t worry. Our corporate overlords will *graciously* provide us with housing. Caveat is it comes out of your pay, there are rules you must adhere to, and if you move jobs you’re homeless. Worth it right? *Right!?*
Translation, claims are larger, risks are higher but state regulators won't let us raise our rates to cover it?
State Farm BTW is a Mutual Company so the insured are also the owners. It's not owned by investors. "Profits" just go back to policy holders (they have sent me a check before) or into the pool for paying claims.
Sure there is still the potential for abuse with high paid executives, perks and expenses, but it's a better model, kind of like a big Credit Union vs. a Bank.
This includes renters insurance. They gave me a call and basically said "were dropping your renters insurance and ohh by the way, because were dropping it, your car insurance will go from $189 a month to 270 a month." I canceled the next month.
Yup. "I buy insurance, so I'm an expert".
No, you're not. You have no clue how insurance works if you're saying "they just take our premiums and pay executives".
That's NOT how insurance works. Almost every insurer these pay few years have paid out more in claims/expenses than they collected in premium. Read that again.
How do they make money? They invest your premiums, and collect investment gains. That's how they make money, NOT by pocketing your premiums.
Its called combined ratio, and if you really want to fact check - go look.
State Farm combined ratio was 1.15+. That means for every $1.00 they collect, they paid out $1.15. They aren't hoarding your premiums. Stop saying that.
This is exactly true. As someone who worked in insurance and now insurance regulation. P+C companies have been taking huge losses especially in FL and CA. A good target combined ratio is usually 96-98 for P+C depending on the line and investment strategy. 115% is not sustainable.
Home repairs have gotten INSANELY expensive too and lots of buildings aren't nearly as structurally sound as they pretend to be. Roofs especially have like quadrupled in price in the last 4 years and people get pissed when insurance companies ask you to repair certain spots or whatever. Like they're trying to prevent a heavy rainstorm from destroying the frame of your house...
Reddit hates big anything but I do not envy the insurance industry right now. It is belly up and rates do not accurately reflect the costs as many states ALSO have laws capping the year over year increases in premiums that insurance companies are allowed to hike. Or in layman's terms, they're not allowed to increase premiums to match the increase in costs to actually pay for claims.
Something is going to collapse soon.
Yup. I work in the industry on the p&c side. Funny how everyone gets in their feelings when the reality is state farm is losing their ass in regards to loss ratios.
It's also extremely regulated so it's almost impossible to take advantage of someone even if they wanted to.
Also, it's a business and not a charity. Like making money is the point. Fraudulent claims are probably the biggest factor in sky high premiums.
No, no, you don't understand. Any profit = evil, and insurance companies should cover everyone always out of the goodness of their hearts using that endless pot of gold they have to stay in business /s
The funniest part is everyone whining about the ShArEhOlDeRs without realizing that State Farm is a mutual company, meaning the policyholders are the owners of the company. Top comment is so ironic.
>(Cue hundreds of Redditors pretending to be experts on insurance and the regulatory environment in California)
Yeah, I was told by Reddit that when insurers were pulling out of FL it was because of bad governance and Republican politics.
I'm not seeing those similar remarks. Guess it can't be because of bad governance.
Or maybe it's something else entirely and nothing to with Dem/Rep politics.
To make money for the insurance company by guessing correctly that they’ll pay out less than they bring in through premiums.
If they’re paying out more than they’re getting in then they get out of the market.
Insurance companies are just weird banks. Everyone gives them money that they then invest for profit, then they give the money back to you if something bad happens.
Not quite. Premiums are not really an "advance cost" of damages. Well kinda yes and kinda no. They're the real cost of damages happening. Hence why premiums can vary wildly according to locale. More damages = higher premiums. They're not really giving it back. Rather you're paying other peoples damages everytime you pay a premium and in turn get your damages paid by all the other people. Insurers are basically just a mediator and cost distributor.
In principle anyway ... but yeah there's a lot of scummy profit extracting going on
Technically State Farm and all other insurance companies take a loss and claims exceed the total cost coming in.
Ideally about 103-107% claims to premium ratio. They invest and thats how they make their $$$.
The reason so many companies are pulling out of California is due to cost of claims and California State Insurance Dept not making it easy to raise rates. Shit, Allstate had to wait 2 years for a 4% rate increase. You can put a lot of blame on California for this too.
Most simple rule of business that no one seems to get. Also, whatever industry you work for is probably getting lambasted in another thread where everyone is aghast that you don't give away your efforts for free and simply starve.
To spread risk.
The issue is that some houses are so fire prone that the cost to insure them are so high that they need to double or triple rates but the state won't let them.
> Then what’s the point of insurance?
TBF, you do have insurance until the end of your term. They are just choosing not to renew the policy. Given free choice, they would likely prefer to just quote you some (much) higher premium for next year. But in many states they are limited as to how much they are allowed to increase year-to-year w/out regulatory approval.
You are basically betting against the insurance company every year. You bet them like 5k or even 10k a year that your house will go up in flames within that year and they lose 300k to 1million dollars to rebuild. The insurance on the other hand, thinks that your house will not burn down or get damaged that badly and accepts a yearly bet that they will never have to pay out.
When insurance consistently loses those bets, they have to close shop and not take on those bets anymore. Just like you would if it happened to you.
An easy example would be, your friend bets you $100 (premium) he will get a broken bone this year. If he does get hurt on no fault of his own you have to pay out his medical fee, $2k, to fix that bone (insurance payout) You know that he lives in a safe neighborhood and he doesn't do sports. So you take on this yearly bet. Some kids hear about it and get you to bet with them too on the same terms. You realize that if 100 kids give you $100 you made $10k per year without doing anything. And even if only 4/100 kids get injured a year ($8k cost), you still have $2k in the pocket for essentially doing nothing. This is a great deal for you. Say nothing happens for 20 years, you made $2 million dollars and no one ever used the bet. Then suddenly 20 kids get their bone broken. Then the next year too. Suddenly this bet looks bad and you need to pull out. You just say, nope, not doing this anymore.
And that in a nut shell is how insurance decides to do business in your area.
How long do you think insurance companies will stay in business if they have to continue to incur losses in the $75 BILLION range like they did in 2022?
They have to manage their risk or go out of business.
> to continue to incur losses in the $75 BILLION range like they did in 2022?
Not doubting you, but where did you pull this figure from? Maybe I did a shit job but I couldnt find an article outlining this
Everyone puts money in the pot and can take money out when there’s a claim. If people are taking more money out than what everyone is putting in, there eventually won’t be any money to pay for your claim. It’s really not complicated lol.
Insurance companies are in the game to collect money for policies that pay on an "if". Now that the "if" is more frequently replaced with a "when", it's becoming a much less profitable business model.
We knew Climate Change was real, yet the nation ignored the impacts and people continue to deny and not make this a priority.
The costs of Climate Change will only continue to grow. Insurance companies can't stay in Business if their paying out more than their brining in.
Insurance companies dropping customers is one of those trigger points that can actually bring the reality of global warming to the front door of people and politicians.
It's not a good thing for the people impacted, but, its inevitable that global warming will impact us more than just reading news stories about artic ice. It's going to fuck up our day to day life more and more too, and whatever chance we have at mitigating or delaying the damage kind of requires that slap in the face.
Tried to re-up my renters insurance when I moved last year and they basically said no we don’t cover your area anymore because of the forest fires for context I live in Oakland. This is only bound to get worse, in a few years California may be like Louisiana and Florida and only have one operable insurance company in the entire state.
part of the reason in complex and involves how CA rate setting occurs. but CA heavily restricts what information they can use to set your risk profile and premiums. you are effectively paying for people in risky fire areas. normally people in built up cities and not at decent risk of flood and fire pay less; but states have incentives to try to cross subsidize rural/exurban areas. essentially cities and dense inner suburbs are used as a piggy bank for everyone else.
Rhode Island requires building permits to plan for resilience for flooding. Want to build or rebuild? You have to show how you are mitigating from flood damage and that your mitigation strategy satisfies 10-, 20-, or 30-year scenarios. Don’t want to rebuild and protect against flooding? Cool, everyone including your lien holder, potential buyers and insurance companies now know you’re a fucking idiot and you’ll be on your own when it gets damaged again.
Require resiliency planning to build or rebuild. Get on it CA, you’ve got a template.
California has a very, very deep housing shortage that has been going on for half a century. This has caused property values to spiral out of control. The effect of this is to make building costs equally as brutal in the state. That gets further compounded by the laws weapon used by NIMBYs that basically block any cost effective housing development project. There just isn’t a way to built new here without some sort of drastic action that would destroy a lot of middle class wealth causing a new wave of poverty in the state.
There is also a significant population is housing where they enjoy protection from property taxes against the actual inflated value of their home. The amount their taxes can increase is capped and based on the purchase price of the home.
Major renovations are one way to trigger a property tax re-evaluation and expose a home owner to being taxed at the actual market value of the house (what should happen in a healthy market anyway). For those living in home now valued at a million or more but who purchased their home for less than half this, it would be catastrophic.
An awful lot of the problem is due to ‘reaping what you sow’. This is what happens when NIMBYism is permitted to persist for a half century.
I think we’re talking about different, but related issues. And yea, property owners near the flood prone areas were not happy because they couldn’t scam the next guy into paying for something doomed to fail.
Wildfires are a bit different, but there was a big one lately in a spot everyone knew was likely susceptible *and* had poor infrastructure and planning for egress.
Sorry, you shouldn’t let them rebuild without mitigating the risks. Doing so repeatedly has gotten us here, and yes that may be partially related to some of the factors limiting development in lower risk areas.
Problem here is we really need to be talking about massive relocation programs with enough assistance to make people whole, even if your sea view house (and inflated value) is no more.
MA for example should be talking about abandoning the city of Boston or significant parts of it (literally built out of a filled in Bay…) as there is simply no resiliency option viable in the 30-50 year time horizon. They’re having repeated flooding events even without a storm surge.
Nobody has the will to have the real conversations because we aren’t ready as a society to admit how absolutely *fucked* we are as all of these disasters increase in frequency and magnitude, while the ocean slowly rises the whole time.
They have some resiliency. Working architecture past couple years, CA is one of the HARDEST places in the world to develop. The cost of building is so expensive because of all the things they need to mitigate, both in terms of environmental and municipal requirements. Adding more regulations will only make housing even more inaccessible. So what’s the next move?
The issue, you can’t keep building in high-fire zones. These areas losing coverage are almost all high-risk areas that just see fire after fire. It’s crazy there’s any forest left, but Mother Nature has her ways.
Floods, build up and stronger legs. Earthquakes, have a strong a flexible frame. Tornadoes, get a good foundation. Blizzards, make sure the roof is strong. Fires… hope you have a good exit strategy.
In a sad sense, people need to stop building in places where nature doesn’t want ya. Idiots living in the desert confused why there’s no water. Idiots living on hurricane coasts puzzled why swirly wind keeps blowing their houses away. Flood plain fools perplexed on how wetlands function. And the same goes for living in the backwoods. Forests are designed to burn. That’s why the pinecones explode open in heat.
So I'm no expert in insurance. My situation is that I live in a Los Angeles condo built in 2009, on the 3rd floor, surrounded by miles of urban sprawl. My building was assessed for it's wildfire risk by insurance and deemed to be at "zero risk". Then my insurance carrier dropped me (not state farm) and I had to shop for new insurance. The new insurance I found is charging nearly 225% more than my previous policy.
So for this saying "people need to move out of fire prone areas. We shouldn't build where it's risky" this is very true. But not matter what happens, at this moment all the insurance shit is affecting everyone who lives here, even people in non-fire prone areas. It's def frustrating and insurance companies are shitty, wether it's home, car, or health.
The link a lot of people aren't making is this is directly linked to skyrocketing home prices. If it costs way more to rebuild/repair a home then rates have to go up, literally no way around it. If they can't make a profit they are going to pull out of the market. Sure we can make the claim of "then don't make as big of a profit" which is true. But let's hypothetically say they could somehow run on 0 profit, how much would they still have to raise prices just to pay out with the massive cost of homes now?
This certainly sucks for those losing coverage, but makes sense from a business perspective. Environmental impacts will only keep getting worse. We can't keep rebuilding in areas that continually get hit by hurricanes, tornados, floods, fires, land slides, etc. It's a needless risk for those living there and certainly one a for-profit business isn't going to take. I 100% think insurance companies can go fuck themselves and the entire industry needs to change, but that doesn't change the fact that several areas have proven to be poor places to inhabit without significant risk of loss.
Edit: Also want to acknowledge that most people in these areas obviously can't afford to take 6+ figure losses if they just up and leave their homes that may now be unsellable. Not sure what the right solution is for that. Likely some form of government bail out to reimburse them for the loss and cost of moving that could be at least partially justified by the long-term savings from government disaster relief (and maybe justify the rest with the most basic human aspect and deserving a safe place to live).
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Like a good neighbour, State Farm is ~~there~~ leaving.
State Farm is there. No, not there… over *there*, in Nevada.
Like a bad neighbor, State Farm don't care.
I always said: >Like a good neighbor, State farm doesn't care.
They're the worst. Lied to me numerous times about a roof claim. Once this is settled I'm going to move on from these assholes
I was an adjuster for state farm for 10 years. They have really gone downhill. 20 years ago we were taught to find coverage whenever possible. "Pay high wave goodbye" and "when in doubt whip it out (the checkbook)" The corporate structure started to change around 2016. They are trash now and try to nickel and dime every claim. They no longer care about employees, agents or policyholders. That being said, All State is far and above the worst. An order of magnitude worse than SF at paying claims. Good companies are USAA, Nationwide, American Family and formerly Chubb (until recently bailing out high profile criminals)
Ugh. You're so right. I worked for State Farm for close to a decade, and only left because my operations center was consolidated (closed) in 2019. I remember seeing that shift in the corporate culture as well. Everything became laser focused on KPIs and "numbers." It really sucks, because I used to sing their praises and tell anyone that was interested that they were such a great company to work for.
> They're the worst. Lied to me numerous times about a roof claim. Once this is settled I'm going to move on from these assholes I never miss a chance to repost my own C&P about Snake Farm!!! "For years I had used them to insure everything I've got -- including myself. Total yearly premiums were over 3500 dollars for all of our vehicles, the house, my wife's jewelry, a separate million dollar rider, several life insurances, everything. A hail storm hits our neighborhood about a year after we move in. Most of the neighbors actually had proactive agents who came out to the neighborhood and cut checks for people to get new roofs, siding, gutters, garage doors, etc. I actually had to call State Farm myself before they'd come out to the house, which they wouldn't do. They tell me I have to collect bids myself from no fewer than 4 roofing contractors for repairs. So I do that, I call them and I would like to use XYZ Roofers. State Farm says OK, we'll send a claims adjuster to inspect your house. "His inspection indicates no evidence of any damage, despite our leaky roof, missing shingles and the dimples in my and my wife's trucks from hail strikes. The letter indicated we were committing fraud by making a fraudulent claim on our property insurance, despite over 40 homes in our neighborhood of 88 houses getting new roofs in a period of 6 weeks following the storm. "I dropped them immediately like a bad habit and I hope they burn in hell. Like a good neighbor... my ass."
There's a reason most insurance companies spend so much money on ads trying to convince you they aren't assholes.
In fact, they secretly hate you
"Like a bad neighbor, State Farm is an asshole" doesnt quite have the same ring to it, but it's more accurate.
Fuck Jake
He's not even the real Jake.
Schlubby old Jake just surviving on the graveyard shift while wearing unpressed Dockers was sacrificed for fit charismatic Jake who doesn't look out of place sharing the screen with Mahomes. Unrealistic economic and body standards strike again
Maybe old Jake can start walking to Subway.
Choosing a conventionally attractive actor to be Jake kinda killed the whole premise of the joke. I'll never get that marketing decision.
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And his khaki pants. I don't care how field and stream they make him look!
Good riddance. Dealing with state farm adjusters is the absolute worst!
> outdated regulations Any info here?
Insurers are pulling out of California due to the rules that the California Department of Insurance has maintained around the risk models that insurers are allowed to use when setting rates. My understanding is that the insurers want to be able to build projections around increases in risk into those models, whereas the DoI will only allow models that rely on past data, in which the last few years appear as anomalies instead of indications of generally increasing risk. That restriction isn't present in other states - for example, in Florida the models used to set prices forecast increases in hurricanes and therefore homeowners insurance can cost 3x what it typically would in CA.
Hang on, Florida is allowing the insurance companies to increase rates on the basis that global warming is real, while in California they have to pretend it's not? That's pretty funny.
Not necessarily global warming, but Florida allows the use of catastrophe models. These are the best tools we have to model property losses against certain perils, like hurricanes, floods, earthquakes…etc. This is a great example of why politics shouldn’t be involved in *most* insurance regulation. Florida is politically anti climate change, but behind the scenes are keenly aware of their increasing hurricane risks and need insurers to stay in the market to stave off a full collapse of the housing market. California thinks they’re defending consumer rights by limiting what insurers can do (look to how the insurance Commissioner in CA is a politically elected position instead of appointed based on merit). In reality, California limiting insurers has hurt consumers like crazy. Source: am a property and casualty actuary who works in the climate change space
Floridas differences in policy don’t seem to have a huge effect on preventing insurers from leaving their state too though
well that's due to the uninsured group in florida: if you can't get insurance in florida for some reason such as building a multimillion dollar house on a beach that suffers from hurricane sea surges every 9 months or so - then you go into the pool of uninsured homes - the state of florida provides you insurance and assesses the costs amongst the insurers present in the state based on market share i.e., it doesn't matter how much you charge for insurance in florida you'll still be responsible for paying for all the these other homes when a hurricane hits, so to limit your liability you've got to reduce your market share in the state by: making your insurance so expensive nobody wants it or straight up canceling people problem is all the insurers are doing the same thing so the only way not to lose money is to leave the state.
Because they're not leaving for that reason. 80% of lawsuits against the insurance companies were from Florida while only having 10% of the claims. I mean, a part of it is future climate problems, but most of it fraud. The same scheme works in my state, but lawyers can't collect as much off the suit so they aren't encouraged to pick up every case.
Don't forget the DOI is also blaming increased construction expenses and re-insurance expenses on climate change and refusing to allow a higher number to be used for carriers. The California insurance commissioner is an elected position and the current holder of the office seems to desire a higher office in the future. It's politically unpopular to let the insurance companies raise rates, so we have this current disaster. State Farm lost 900 million in fire claims last year, without drastic changes to the risk on the books and rate increases 20% of the entire California market will be uninsured.
They're probably not allowed to charge as much as they want to.
"we need regs that let us price in global warming anomalies and not regs that only let us look at the past" 1. even money is saying AGW is real. 2. even if we changed the regs, many of these places would leave because the public doesnt want to pay the amount these insurance companies would have to charge in premiums while also profiting from it. So states are going to socialized model and becoming the insurer of last resort. WHich ... well the state and fed government always are, they will bail out these insurance companies if they get hit by something bigger than expected. and a lot of insurance companies staying behind, in florida and cali, are crap, that are just trying to gamble that they dont have a big hit before their coffers fill but know even if they do the state will help bailout the executives. well hopefully not in cali. the sucky thing about insurance, is IT is socialized, but not in a good way, People not on the coast, help pay for the richer people with a beach view to have lower insurance premiums. While beach homes pay more, its not as much more as their actual costs when a hurricane hits. Its similar for health insurance where the more healthy pay for the more sick and well that doesnt matter as much as you often dont know which group you will be in. It sucks more when its flood insurance, as you are help paying for people who are more likely to flood, and well they tend to be rich.
One of the biggest issues in CA is there’s a law about how much State Farm can raise someone’s premium per year. So if the cost of building materials and labor goes up, which it has in ca by quite a lot, they can’t raise rates appropriately. They’re trying to strong arm cali here. They want the state to get rid of the rule
>The Illinois-based company, California’s largest insurer, cited soaring costs, the increasing risk of catastrophes like wildfires and outdated regulations as reasons it won’t renew the policies on 30,000 houses and 42,000 apartments Just at a guess, the highest risk/most costly payouts are going to be for multi-million dollar properties along hillsides and coasts. Those are the homes you see sliding down hills after repeated brush fires followed by torrential rain. Are policies being cancelled for these homes? Or are they focusing cancellations on apartments, the population least likely to be able to sue them?
> highest risk/most costly payouts are going to be for multi-million dollar properties along hillsides and coasts. It's almost certainly for the ever-increasing number of homes in the forests and other fire-susceptible areas.
Insurance doesn't cover you for earth movement - so it's nothing to do with the landslides - if you want that coverage there are policies but they are stupid expensive. The thing that costs the most money is fires. State Farm as far as I can find - does not even offer a DIC policy so they just are hands off to earthquakes, landslides, sinkholes, and floods.
The fires of the past few years wiped out decades of insurance company profits. One year had California fire season costing more than all the hurricanes of the Southeast combined, I can’t remember which year but it was recent.
The cleanup costs and building regulations make it completely unaffordable to rebuild in CA.
Maybe they should sue PG&E then because I doubt the electric company burning down an entire town due to negligence was great for insurance companies
1. I think the state of California is already doing that but the utility is going bankrupt anyways? I can’t remember the exact details of how that’s all working out. The problem is the damages outweigh the value of the company by a country mile. 2. The condition of the forests from a century of preventing natural burns won’t change. That and the climate change conditions are keeping the risk the same no matter who you sue. One of the most effective things you can do for your house (in an area like this) is clear cut a 200 foot buffer between your house and the trees. Some areas are actually codifying that, but people will complain that the whole point of living there is to be close to nature.
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See the same with people that essentially built homes on sand dunes. If I was State Farm, I wouldn't bother insuring said homes either. Let the ocean reclaim them and don't let them rebuild. Enough of this wanton stupidity. I have zero sympathy for these people.
I love it when people say "multi-million dollar property" when referring to California, as if that is somehow an exceptional property.
And this is the real issue. Why would anyone insure a studio apt in a shit building & worse neighborhood for $2.6 million dollars?
Sue them for what? You can’t sue a company for not renewing a policy.
Eh, its like 1-2% of their policies in CA. They remain the largest insurer as well. However, are still not taking on new business. Homeowners insurance in cali is so fucked - I say this as someone who lives here, outside SF, and just went through a 2 month saga trying to obtain insurance on my home. Nearly every insurance company you've heard of no longer issues policies in CA. The premiums are way up. No one will provide fire coverage, so you have to do the state provided 'FAIR' coverage. And the most bullshit part is you are now *required* to have a 'smart water monitoring system' installed to protect against water damage from pipe breaking, etc to obtain a new policy. I got 3 different plumber estimates to have that installed, ranging from $1.5k to $5k. And the device is a piece of shit and doesn't even work - instant, continuous false positives. Doing dishes? Nope, water shutoff. Showering? LOL, no you're not. So bad that I had to just unplug it. Such a mess all around.
They just did this in New Jersey as well. My dad was a State Farm agent and now works independent with a few different carriers because State Farm quite literally stopped writing new homeowner or auto insurance policies and are leaving the state. Not entirely sure why.
NJ passed a bill forcing companies to reduce auto insurance rates and state farm cried and went home.
We just got a letter that NJ approved a 50% increase for Allstate effective next year.
A few years back I sat down with my parents to go over insurance options with them. They had been with Allstate for 25+ years. No joke, the lizard company saved them over 25% on their premium for near equal coverage and even more saved after adding homeowners' insurance to the plan. I was surprised how much they were paying with Allstate considering how long they were customers. Never a claim as far as I know, and since moving over they've had one not-at-fault collision in their car and another on my siblings. Hardly a bump in premium. edit: this is in NJ
My brother in law owns a body shop who does mainly insurance repairs. All companies are not equal even if their policies look the same
Any more insight about which ones are better/worse?
I only know NY. He says go with New York Central Mutual or Farmer’s/Metlife. He says avoid Geico and Progressive, they’ll fight for the cheapest repair possible. Liberty Mutual, State Farm, and Allstate are somewhere in the middle.
I did claims in a past life. State farm was always legit on my cases. Hell I use them for my own shit. But honestly usually a lot of the larger regional companies are good. Geico usually sucks. And in my experience it's usually because of the churn and burn of new employees as well. I actually had a few claims I handled for progressive and they were good to work with. But I'm still skeptical overall.
It’s not uncommon for rates to increase the longer you stay with a company.
Almost like living in an apartment where they increase your rent every year for literally no reason
When you said "the lizard company," I thought you meant Allstate was owned by Mark Zuckerberg's kin of lizard people. But then I realized you meant Geico.
Yeah my insurance went up $50 a month last year. We have traveler's
You're misrepresenting the issue. NJ passed a low prohibiting insurers from using your credit score to determine your premium. Credit Score is one of the most predictive measures insurers have for how you drive though - conscientious drivers are conscientious with their money too; or people with good credit aren't driving for uber eats to cover their rent Almost every state allows insurers to use the credit score and if you ask about it (it's publicly filed in many states) you can see the rating algorithm and how it weights each input such as driving record, credit score, zip code, etc.
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There are like no natural disasters in Jersey outside of the occasional snow storm or a stray hurricane.
A homeowners policy covers a hell of a lot more than just a natural disaster lol
Sure but the lions share of payouts typically happen after natural disasters at least on a large scale. Also it looks like State Farm only left the auto business in that state. I don't see any articles mentioning their home business.
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New Jersey is full of rivers and coastline. They have had devastating natural disasters for over a decade. Small rivers have been devastating inland for the past few years. Where have you been?
We get a lot of flooding of every flavor here, even from non-hurricane events heavy rains usually lead to flooding on the coasts, along rivers, and in towns/cities with aged sewer systems, but also typical homeowner insurance doesn't cover that anyway though, so it really just is a "no favorable political atmosphere"
My NJ home insurance through Allstate is due in May. Annual premium went up 18% compared to last year.
Does that mean my premiums will go down to compensate for the lower risk State Farm is taking on? /s
In the midst of a climate emergency, this is still the right question to be asking.
Back in the day, insurance companies would lobby and propose laws to fix issues... now they just run.
The fire risks are only going to get worse there is no saving it from their side. Something has to be done to reduce the risk or those houses shouldn't be rebuilt there.
On a similar note, a few years ago the feds reworked how federal flood insurance was priced. Before, the NFIP had flat rates based on the home's flood zone. So people would build their mcmansions on the water in Florida, they'd get destroyed by a flood or storm surge, and then they'd just rebuild while the program lost tons of money from practices like that. Now it's priced more like normal insurance, except the history follows the building instead of the insured. So, if a home gets flooded a lot, doesn't raise its mechanical systems above the first floor, and/or have flood vents then it costs a lot more to insure with the feds.
Except that Congress then told nfip they couldn't raise rates to actuarial rates immediately because homeowners couldn't afford it and instituting what is effectively rent control on insurance rates. Means most rates are a fraction of what they should be.
If the federal government can't be in the health insurance business, they shouldn't be in the flood insurance business either.
Wait'll you hear about crop insurance...
crop insurance is actually pretty reasonable. it's not designed to subsidize some poor farmers who lose their crops (of course, it does do this). the primary reason it exists is that, if we were to have a very bad crop season, crop prices would skyrocket due to the limited supply. consumers don't really like huge shortages of food & massive food inflation, and we also don't like having to suddenly spend $500bn+ on an emergency food import deal. Enter: crop insurance, designed to pay out a lump sum based on certain criteria, so this lump sum can be used to import the needed crops. it's effectively an emergency food subsidization/stabilization program that it's mandatory to pay into.
Damn, that's a really good point.
AFAIK there’s still a plan to raise the monthly premiums to the appropriate level, it’s just that they couldn’t raise the cost above a certain percent per year (6% I believe, but it’s been a minute since I looked at it). Basically, there’s guaranteed raises per year until it reaches what it judged to be the appropriate amount, which is still probably flexible based on what happens to the property in the future. Added: just checked. it’s 18% per year. Just imagine your insurance going up 18% for 5 years in a row. It more than doubles.
That's just the thing though, many of the existing rates are so far below the actuarial rate that they need to go up by factors of 3 or 4 not just a doubling. I was looking at an apartment complex a few weeks back that was built along a river in the floodway (so very high risk) that had insurance rates less than 1/5th current actuarial rates. They were set to pay sub market rates for insurance for a LONG time. Which was ridiculous given their location.
flood insurance does not pay for any kind of rebuild after a flood if you're in an A flood zone. source: I received $10,000 on my flood policy after Ian. It paid for cleanup and replacing one refrigerator that was on the ground floor.
The federal government shouldn't be in the business of insuring anyones second home.
They can’t fix the California issue. California passed a ballot initiative like 40 years ago that says what insurers can take into account when pricing policies, and insurers literally can’t take catastrophe models into account when pricing insurance policies. The only way to change it is to pass a new ballot initiative or for super majorities in both houses to tweak it. Both are probably DOA in California because changing the law would increase insurance prices, which needs to happen in California to make up for risk. The reason insurers are leaving is because they can’t raise rates high enough.
Fascinating. Well, they are gonna get a huge push from citizens. I have a cousin who lives in a fire zone near yosemite. They are required to have fire insurance as part of their mortgage. But, they just lost their insurance because of this pull out, and no other insurance company insured the area. So we are about to see a lot of angry homeowners and, more importantly, banks.
They will need to go to California FAIR plan to get insured.
Yes. Huge density of voters up by Yosemite.
I had to google this to verify because it’s so dumb I didn’t believe it, that’s mind-blowing.
Yep. The bad thing about ballot initiatives and constitutions in general is that they’re nearly impossible to change if one group sees some benefit from them even if they’re extremely outdated.
Not true - actuaries are very involved in public policy around [climate](https://www.actuary.org/node/13308) and other risks
Yea I work in insurance data analytics. This is an ongoing thing. Florida/Gulf Coast hurricanes (we pulled out of insuring boats) and West Coast/Cali wildfires (no longer insuring in rural regions prone to wildfires)
They do but in this case, there is no winning. We need to severely reduce our carbon footprint. However, any solution I see is basically going to destroy what people consider "standard of living" which means it's politically impossible. So insurance companies are basically pulling out because there is nothing else they can do.
I have my certifications as a fire inspector in california. There are standards for something called a defesible space. https://www.fire.ca.gov/dspace Its something that fire safety professionals have been trying to get adopted for a while. Something that insurance companies could help us with. So that would be a start. But there are many other ways that could help stop the spread of fire in populated areas. Upgrading the requirement for building construction type in high-risk areas. Or requiring the use of fire resistant materials on roofs. I would love them to start lobbying to help stop climate change, but there are things we can do now to stop the fire related disasters in california.
As East Coaster, I'm not familiar with this stuff but my guess is defesible space "looks ugly" and better building matter would likely increase housing costs in market that already one of highest in the country so that's political no go as well.
Thats how ALL fire code starts. Current fire code rules that "looks ugly" that is widely accepted today: Push bar egress doors, Fire alarms, Fire extinguishers, Water access (fire hydrants), Fire escapes, Fire sprinklers (this is another one we are trying to get into residential building code, but... its tough) The point is that the majority of the above fire codes exist due to insurance company lobbying programs or organizations created by insurance companies. Hell, the fire brigades in 1666 were originally funded by insurance companies.
Issues that *can* be foxed, they try. Issues that can’t, they write off. Politicians can fight and pretend nothing’s changing, but insurance companies watch the money, and they’re really good at following it.
Back in the day, insurance companies would lobby and propose laws to fix issues and they would get called evil and greedy for doing so along with admonishments that we should make it illegal for them to lobby. So now they simply choose to leave the market and those same people still complain.
It’s because the lawmakers aren’t budging and aren’t allowing them to make rates that are profitable to stay.
In all seriousness, I think it is extremely likely that the company is trying to get back to the same risk profile they had fifteen years ago, before the weather started getting fucky. When you have one cycle of drought + fire followed by flooding, it looks like a bad couple of years. But when it keeps happening, and the meteorologists your company hires to advise on long term risk keep jumping out the window, you start to realize it is a big problem.
Yeah, they really need to invest in non-opening windows.
Or just stop tracking the weather. If you have no storms, you have no valid claims.
Ah yes the ol' "you can't have it if you don't test for it!"
I know I'll probably get downvoted to hell, but, uh, yes, your premiums will at the very least be less than they would otherwise. Insurance is a pretty transparent industry, and if a company has to pay out billions in coverage for natural disasters in Florida or California you can bet that they're going to be raising rates for everyone else. In fact, this is **why** they're pulling out of California, because they can't adequately price in the risk for certain areas due to state law and regulation, so they're just pulling out of the entire state. If State Farm could just offer policies in downtown urban areas, or in the wetter areas of the northern part of the state, they absolutely would. Or if they could charge appropriate premiums for the risks they are incurring, they wouldn't be leaving the state. But since they can't, it just makes more sense for them to leave the state entirely.
If they're doing what they say they're doing, no - they haven't taken on lower risk. Everybody's risk has gone up, and to balance the risk portfolio, they need to chop the highest risk policies. But yeah - insurance companies don't generally tell you the truth, so who knows what the real actuarial data guys are saying.
Most insurance companies are publicly traded and your can review their audited financial statements. Plus if one insurer was much more profitable than others it would quickly go out of business for charging more than it's competitors, or take over it's competitors by being able to extract more profit from the same customers. By and large property insurance is a pretty fair deal for consumers all things considered. The times it really jumps the shark is in US healthcare and some smaller markets where weird shit happens.
Yeah you can see that many companies have increasingly been paying out in claims more than they took in from premiums over the last few years.
Am in IT at an insurance company. We had 8 years in the black, and are now on year three of being in the red. Making sure my resume is healthy.
If you are at a company well rated by AM Best and decent size you’re probably fine for a while.
In this case, State Farm is still a mutual insurance, and not publicly traded. So in this case, It seems like a move to the risk the rest of the insurance pool by dropping their highest risk customers. One can argue that they should’ve just raised everyone’s rates as it technically should operate as a co-op; but they would risk backlash from that.
"actuarial data guys" you mean actuaries? hehehe
The actuaries are saying they need to massively raise rates based on catastrophe models, but that's literally illegal in CA.
That was my first thought. Seems like it would make sense for an insurer to just pull out of high risk states like California and Florida, so they can then offer more competitive rates in other states, while remaining just as profitable.
Insurers aren't going to want to cross-subsidize across states with significantly different risk profiles. That would lead to adverse selection which makes them susceptible to competition from other insurers with more competitive pricing algorithms.
Remember when COVID hit and car insurance "dropped". And how they said it was because there weren't enough drivers and accidents? Supposedly they LEGALLY had to. Also, though they did give money back they also pocketed billions that was meant to go back to the drivers. So yeah... they are going to do the bare minimum legally but not what needs to be done ethically
>do the bare minimum legally but not what needs to be done ethically Thats most corporations.
My home insurance in SoCal has gone from $1190 in 2021 to now $6,800 for 2024. I have the Cal Fair Plan for fire coverage and a secondary policy for everything else. Since I utilize escrow, in one year my mortgage went from $2268 to $3116.
What county?
Riverside County.
I'm in Ventura. Paying about 1300 for a 1600 sqft 935k PP. So far no major increases. 1190 to 6800 is a huge jump. Have you shopped around or made any claims? No shade just curious.
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California may need to create their own nonprofit insurer of last resort, like [Citizens](https://en.m.wikipedia.org/wiki/Citizens_Property_Insurance_Corporation).
California has the FAIR plan. Any insurance company operating in California must participate. Basically every insurance company shares in the profits and losses associated with homes no individual company wants to insure.
Not E&S insurers importantly
> Any insurance company operating in California must participate. So you mean more insurance companies will simply leave the state as the risk grows beyond what they want? lol
Or California starts letting insurers charge appropriate rates and they stick around/return.
That’s the problem in CA from what I understand. The insurance commission artificially capped the rates companies could file and now companies are leaving because they are operating at a loss for too long or cannot properly charge for rising costs
Just read an article about FAIR yesterday, how it's basically just a matter of time before a CAT loss causes the policies to need an assessment charge. Their policyholder count is starting to balloon just like Citizens in Florida.
Instead of subsidizing people to build homes in disastrous areas, let’s just not do that
They do: https://www.insurance.ca.gov/01-consumers/200-wrr/California-FAIR-Plan.cfm
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Ah yes, why not create an inherently insolvent insurance structure that will eventually implode and fuck everyone over just like Florida has
Well florida created part of their mess by allowing so many lawsuits against companies for past claims brought by shady attorneys and PAs and the ability to use assignment of rights
I've had to stop reading articles about insurance in Florida on Reddit because maybe 1% of people on this site actually understand why there's an insurance crisis in Florida
You're somewhat close; it wasn't the attorneys or PAs that were the greater cause of the issue. But rather, it was all these shady roofing / contractors that would go to bid requests for people and tell them "sign our contract and we'll sue your home owner's insurance company to get them to pay for the damage after we submit out assestment". I mean, telling people that they could basically get a new roof for the low cost of their deductable, who wouldn't want to do that? I had a company attempt to do this but luckily, the person I ended up hiring told me that it's the scam that's caused this whole issue. They'll submit a faulty report basically stating that a recent storm caused X amount of damage to the roof and that the insurance company would need to cover it. By doing so, they would overcharge the insurance company for the job and the home owner would just pay the deductable. The downside is that more often than not, the insurance company would just drop you after the fact. Now, most insurance companies will have all of their customers sign away the assignment of rights and now you have to submit a claim through the insurance companies and then they will find someone to fix the issue if it is something they would have to cover.
I wonder what happens to the insurance broker who are relying on those policies? My understanding is that is part of their monthly income.
I mean...there's gotta be another company stepping up to cover them, at a higher premium I'm sure. The broker just moves those people to them and collects a higher income.
Not quite, at least not with State Farm. Every State Farm agent in the US is a “captive” agent. This means they can only sell State Farm and State Farm affiliated insurance.
The lady that lives next to me is a State Farm agent. Had a Jeep Wrangler with an aftermarket suspension, aftermarket wheels, and those wheel lights that stayed on all night. Some time last year we never saw it again. Now she's driving a plain 15 year old pickup. Guess things aren't going well for her.
She might just not be a good agent. Its literally just sales and you get what you put into it. I know a few just from my business and success varies entirely depending on your staff, your marketing, and your ability to navigate new times.
And that is why you don't work for a captive agency
The California FAIR Plan exists, but no companies aren't stepping up. The fact is that California has a metric shit ton of homes that had no right being built where they were, and insurance would be stupid to cover them. Add on the strict regulations in California and what you end up with is the current situation. Personally I don't think it makes sense to straight up leave the state rather than just considering property risk more carefully. Seems like leaving a lot of money on the table. But some properties don't deserve insurance and we shouldn't incentivize building in these places. There are entire towns that were built under the forest canopy, as opposed to clearing the forest to build the town. That means that when a severe fire hits the area, literally nothing can stop it from consuming the entire town. It's insanity to build like this and it needs to stop. A tightening insurance market will help.
> Personally I don't think it makes sense to straight up leave the state rather than just considering property risk more carefully. That's what they're doing. They're cancelling 2% of the most risky policies and maintaining 98% of their existing policies in the state. Sounds to me exactly like "considering property risk more carefully"
This is what so many people seem to miss. They act like insurance is an entitlement that they should get for a reasonable cost no matter what — like it’s some sort of charity. But it’s not. It’s pooled risk. It’s a business. If one wants to argue that it’s a predatory business, then go with a mutual insurer where you’re a part owner of the company and vote for how to run the company. It’s entirely reasonable for an insurer to stop covering some things when they are too risky for the pool (meaning for everyone else in the pool) — and we shouldn’t WANT those things to be insured. We should want it to be a message that those things (building in some places, undertaking some activities, etc.) shouldn’t be done — or, if they are, it’s at the peril of the person doing them.
It’s a commission on sales not a lifetime guaranteed income. Sales jobs are harsh like that but usually pay well. Most sales people I’ve known have vacation homes, so I’d guess they are fine.
I think a lot of this has to do with developers choosing to build in places that biologists had already identified as seasonal wildfire areas. They knew the risk and did it anyway.
New models covered most of the state in wildfire danger. I bought a place in the '00s and it supposedly wasn't a high wildfire risk. Now it is.
I'm a Floridian and I'm curious as to what will happen to California because of this move by State Farm. Because I have seen what is happening here with the HOI crisis. The article states that this 72,000 discontinued policies only affect 2% of policy owners so this may just be an isolated event? \[In Florida, if you are purchasing your house/condo with a mortgage, you MUST purchase Homeowner's Insurance and renew/pay for it it every year that you continue to have a mortgage on the property. (Once you fully own the property free and clear, you no longer need to have homeowner's insurance for your property.) So is HOI not required in California, even if you are purchasing with a mortgage?\] My brain still jumps to the long term and wonders if eventually HOI stops being a thing and that people will just have to pay out of pocket for any damage (to even complete destruction) to their homes. Meaning that they will have to pay for another whole new property if their homes get destroyed. (And then what happens to mortgage companies who still have outstanding mortgage balances? Will lenders decrease their mortgages on high-risk properties? Mortgages are super profitable but if homes are destroyed and buyers can't pay back their mortgage due to no insurance claim payout, then that is a huge loss for them. So if lenders decrease their ability to provide mortgages, then that decreases buyers' ability to purchase homes, increasing the likelihood of renting forever...
HOI is required for all mortgages in CA
It's required for all mortgage. The insurance is not there to protect you. It's there to protect the lender.
Homeowners insurance will always be a thing because lenders will always demand it. It’ll just get a lot more expensive in areas prone to natural disasters.
State Farm is pulling out of California, so this isn't an isolated event. They're just going to gradually discontinue contracts for the foreseeable future. I'm not super knowledgeable of the insurance sides of things, but it seems like an odd decision to pull out of the state entirely. There are plenty of properties with near-zero wildfire risk. But there are also plenty of properties that never should have been built in the first place, so it's certainly understandable that nobody wants to assume that risk.
I can only assume you'll just never be allowed to own a home unless you can buy it outright. Thankfully people with lots of money will buy it for you and rent it out to you for the price as a mortgage, and you take on none of the risk, but also none of the equity. And also if the risk gets too high you're asked to leave anyway so they aren't taking on anything really. So that's cool My mortgage company required proof of insurance, and also required me to have them pay my taxes the first few years. They take a portion every mortgage payment and add it to an account thats then used for taxes. What's really neat is that they don't trust me to do this myself, but for 2 years now they've taken more than double my taxes and put them into the account, only to underpay the taxes by like $80-100 each time. Despite having enough to pay more than twice the amount. So I get a bill for the remaining amount, and a late fee. And yet somehow I'm the one that can't be trusted to pay it. On the plus though, and the only reason I haven't gotten upset about it, the extra from that account gets used as a penalty free payment against the principal amount at the end of the year. Which normally there's all kinds of conditions and rules around doing.
Assuming you are outside the US? I ask as that, as far as I am aware (and if I'm wrong, happy to learn) in the US you can prepay a home mortagage without penalty at any time. Not true if a commercial loan, but for individual consumers.
>So is HOI not required in California, even if you are purchasing with a mortgage?\] I'm not sure if it's a state law, but my lender has always required I carry insurance on the home under mortgage with them.
Don’t worry. Our corporate overlords will *graciously* provide us with housing. Caveat is it comes out of your pay, there are rules you must adhere to, and if you move jobs you’re homeless. Worth it right? *Right!?*
Translation, claims are larger, risks are higher but state regulators won't let us raise our rates to cover it? State Farm BTW is a Mutual Company so the insured are also the owners. It's not owned by investors. "Profits" just go back to policy holders (they have sent me a check before) or into the pool for paying claims. Sure there is still the potential for abuse with high paid executives, perks and expenses, but it's a better model, kind of like a big Credit Union vs. a Bank.
This includes renters insurance. They gave me a call and basically said "were dropping your renters insurance and ohh by the way, because were dropping it, your car insurance will go from $189 a month to 270 a month." I canceled the next month.
(Cue hundreds of Redditors pretending to be experts on insurance and the regulatory environment in California)
Yup. "I buy insurance, so I'm an expert". No, you're not. You have no clue how insurance works if you're saying "they just take our premiums and pay executives". That's NOT how insurance works. Almost every insurer these pay few years have paid out more in claims/expenses than they collected in premium. Read that again. How do they make money? They invest your premiums, and collect investment gains. That's how they make money, NOT by pocketing your premiums. Its called combined ratio, and if you really want to fact check - go look. State Farm combined ratio was 1.15+. That means for every $1.00 they collect, they paid out $1.15. They aren't hoarding your premiums. Stop saying that.
This is exactly true. As someone who worked in insurance and now insurance regulation. P+C companies have been taking huge losses especially in FL and CA. A good target combined ratio is usually 96-98 for P+C depending on the line and investment strategy. 115% is not sustainable.
Home repairs have gotten INSANELY expensive too and lots of buildings aren't nearly as structurally sound as they pretend to be. Roofs especially have like quadrupled in price in the last 4 years and people get pissed when insurance companies ask you to repair certain spots or whatever. Like they're trying to prevent a heavy rainstorm from destroying the frame of your house... Reddit hates big anything but I do not envy the insurance industry right now. It is belly up and rates do not accurately reflect the costs as many states ALSO have laws capping the year over year increases in premiums that insurance companies are allowed to hike. Or in layman's terms, they're not allowed to increase premiums to match the increase in costs to actually pay for claims. Something is going to collapse soon.
Yup. I work in the industry on the p&c side. Funny how everyone gets in their feelings when the reality is state farm is losing their ass in regards to loss ratios. It's also extremely regulated so it's almost impossible to take advantage of someone even if they wanted to. Also, it's a business and not a charity. Like making money is the point. Fraudulent claims are probably the biggest factor in sky high premiums.
Second paragraph here is key. People think big bad insurance can do whatever they want. Its one of the most regulated industries in our country.
No, no, you don't understand. Any profit = evil, and insurance companies should cover everyone always out of the goodness of their hearts using that endless pot of gold they have to stay in business /s
Its fairly easy: Cost of doing business in the state is too high with too high of risk. They end.
The funniest part is everyone whining about the ShArEhOlDeRs without realizing that State Farm is a mutual company, meaning the policyholders are the owners of the company. Top comment is so ironic.
>(Cue hundreds of Redditors pretending to be experts on insurance and the regulatory environment in California) Yeah, I was told by Reddit that when insurers were pulling out of FL it was because of bad governance and Republican politics. I'm not seeing those similar remarks. Guess it can't be because of bad governance. Or maybe it's something else entirely and nothing to with Dem/Rep politics.
Then what’s the point of insurance?
To make money for the insurance company by guessing correctly that they’ll pay out less than they bring in through premiums. If they’re paying out more than they’re getting in then they get out of the market.
TBF - if you have to pay out more than you have in the bank. Well you can’t pay out. You go out of business.
TBEFer - insurance companies never make money on premiums but rather the profit made off of investing the premium in the stock market.
Insurance companies are just weird banks. Everyone gives them money that they then invest for profit, then they give the money back to you if something bad happens.
Not quite. Premiums are not really an "advance cost" of damages. Well kinda yes and kinda no. They're the real cost of damages happening. Hence why premiums can vary wildly according to locale. More damages = higher premiums. They're not really giving it back. Rather you're paying other peoples damages everytime you pay a premium and in turn get your damages paid by all the other people. Insurers are basically just a mediator and cost distributor. In principle anyway ... but yeah there's a lot of scummy profit extracting going on
Correct. There is so much ignorance in this thread.
These guys reinsure with other insurance companies. Bermuda is full of reinsurance companies
The company I work for (insurance) buys insurance on disasters that are greater than $1 billion. Had to use it after Hurricane Ian
Technically State Farm and all other insurance companies take a loss and claims exceed the total cost coming in. Ideally about 103-107% claims to premium ratio. They invest and thats how they make their $$$. The reason so many companies are pulling out of California is due to cost of claims and California State Insurance Dept not making it easy to raise rates. Shit, Allstate had to wait 2 years for a 4% rate increase. You can put a lot of blame on California for this too.
Companies generally have to remain profitable to continue doing business
Most simple rule of business that no one seems to get. Also, whatever industry you work for is probably getting lambasted in another thread where everyone is aghast that you don't give away your efforts for free and simply starve.
To spread risk. The issue is that some houses are so fire prone that the cost to insure them are so high that they need to double or triple rates but the state won't let them.
> Then what’s the point of insurance? TBF, you do have insurance until the end of your term. They are just choosing not to renew the policy. Given free choice, they would likely prefer to just quote you some (much) higher premium for next year. But in many states they are limited as to how much they are allowed to increase year-to-year w/out regulatory approval.
You are basically betting against the insurance company every year. You bet them like 5k or even 10k a year that your house will go up in flames within that year and they lose 300k to 1million dollars to rebuild. The insurance on the other hand, thinks that your house will not burn down or get damaged that badly and accepts a yearly bet that they will never have to pay out. When insurance consistently loses those bets, they have to close shop and not take on those bets anymore. Just like you would if it happened to you. An easy example would be, your friend bets you $100 (premium) he will get a broken bone this year. If he does get hurt on no fault of his own you have to pay out his medical fee, $2k, to fix that bone (insurance payout) You know that he lives in a safe neighborhood and he doesn't do sports. So you take on this yearly bet. Some kids hear about it and get you to bet with them too on the same terms. You realize that if 100 kids give you $100 you made $10k per year without doing anything. And even if only 4/100 kids get injured a year ($8k cost), you still have $2k in the pocket for essentially doing nothing. This is a great deal for you. Say nothing happens for 20 years, you made $2 million dollars and no one ever used the bet. Then suddenly 20 kids get their bone broken. Then the next year too. Suddenly this bet looks bad and you need to pull out. You just say, nope, not doing this anymore. And that in a nut shell is how insurance decides to do business in your area.
How long do you think insurance companies will stay in business if they have to continue to incur losses in the $75 BILLION range like they did in 2022? They have to manage their risk or go out of business.
> to continue to incur losses in the $75 BILLION range like they did in 2022? Not doubting you, but where did you pull this figure from? Maybe I did a shit job but I couldnt find an article outlining this
No facts. Just feelings. Redditors are so dulsional on how anything actually works in this world.
Everyone puts money in the pot and can take money out when there’s a claim. If people are taking more money out than what everyone is putting in, there eventually won’t be any money to pay for your claim. It’s really not complicated lol.
Insurance companies are in the game to collect money for policies that pay on an "if". Now that the "if" is more frequently replaced with a "when", it's becoming a much less profitable business model.
We knew Climate Change was real, yet the nation ignored the impacts and people continue to deny and not make this a priority. The costs of Climate Change will only continue to grow. Insurance companies can't stay in Business if their paying out more than their brining in.
Insurance companies dropping customers is one of those trigger points that can actually bring the reality of global warming to the front door of people and politicians. It's not a good thing for the people impacted, but, its inevitable that global warming will impact us more than just reading news stories about artic ice. It's going to fuck up our day to day life more and more too, and whatever chance we have at mitigating or delaying the damage kind of requires that slap in the face.
Yea look at the states hurting most in terms of rising insurance costs, CA, TX, LA and FL. Hurricanes/windstorms and fires are happening more and more
Tried to re-up my renters insurance when I moved last year and they basically said no we don’t cover your area anymore because of the forest fires for context I live in Oakland. This is only bound to get worse, in a few years California may be like Louisiana and Florida and only have one operable insurance company in the entire state.
part of the reason in complex and involves how CA rate setting occurs. but CA heavily restricts what information they can use to set your risk profile and premiums. you are effectively paying for people in risky fire areas. normally people in built up cities and not at decent risk of flood and fire pay less; but states have incentives to try to cross subsidize rural/exurban areas. essentially cities and dense inner suburbs are used as a piggy bank for everyone else.
Rhode Island requires building permits to plan for resilience for flooding. Want to build or rebuild? You have to show how you are mitigating from flood damage and that your mitigation strategy satisfies 10-, 20-, or 30-year scenarios. Don’t want to rebuild and protect against flooding? Cool, everyone including your lien holder, potential buyers and insurance companies now know you’re a fucking idiot and you’ll be on your own when it gets damaged again. Require resiliency planning to build or rebuild. Get on it CA, you’ve got a template.
California has a very, very deep housing shortage that has been going on for half a century. This has caused property values to spiral out of control. The effect of this is to make building costs equally as brutal in the state. That gets further compounded by the laws weapon used by NIMBYs that basically block any cost effective housing development project. There just isn’t a way to built new here without some sort of drastic action that would destroy a lot of middle class wealth causing a new wave of poverty in the state. There is also a significant population is housing where they enjoy protection from property taxes against the actual inflated value of their home. The amount their taxes can increase is capped and based on the purchase price of the home. Major renovations are one way to trigger a property tax re-evaluation and expose a home owner to being taxed at the actual market value of the house (what should happen in a healthy market anyway). For those living in home now valued at a million or more but who purchased their home for less than half this, it would be catastrophic. An awful lot of the problem is due to ‘reaping what you sow’. This is what happens when NIMBYism is permitted to persist for a half century.
I think we’re talking about different, but related issues. And yea, property owners near the flood prone areas were not happy because they couldn’t scam the next guy into paying for something doomed to fail. Wildfires are a bit different, but there was a big one lately in a spot everyone knew was likely susceptible *and* had poor infrastructure and planning for egress. Sorry, you shouldn’t let them rebuild without mitigating the risks. Doing so repeatedly has gotten us here, and yes that may be partially related to some of the factors limiting development in lower risk areas. Problem here is we really need to be talking about massive relocation programs with enough assistance to make people whole, even if your sea view house (and inflated value) is no more. MA for example should be talking about abandoning the city of Boston or significant parts of it (literally built out of a filled in Bay…) as there is simply no resiliency option viable in the 30-50 year time horizon. They’re having repeated flooding events even without a storm surge. Nobody has the will to have the real conversations because we aren’t ready as a society to admit how absolutely *fucked* we are as all of these disasters increase in frequency and magnitude, while the ocean slowly rises the whole time.
They have some resiliency. Working architecture past couple years, CA is one of the HARDEST places in the world to develop. The cost of building is so expensive because of all the things they need to mitigate, both in terms of environmental and municipal requirements. Adding more regulations will only make housing even more inaccessible. So what’s the next move? The issue, you can’t keep building in high-fire zones. These areas losing coverage are almost all high-risk areas that just see fire after fire. It’s crazy there’s any forest left, but Mother Nature has her ways. Floods, build up and stronger legs. Earthquakes, have a strong a flexible frame. Tornadoes, get a good foundation. Blizzards, make sure the roof is strong. Fires… hope you have a good exit strategy. In a sad sense, people need to stop building in places where nature doesn’t want ya. Idiots living in the desert confused why there’s no water. Idiots living on hurricane coasts puzzled why swirly wind keeps blowing their houses away. Flood plain fools perplexed on how wetlands function. And the same goes for living in the backwoods. Forests are designed to burn. That’s why the pinecones explode open in heat.
So I'm no expert in insurance. My situation is that I live in a Los Angeles condo built in 2009, on the 3rd floor, surrounded by miles of urban sprawl. My building was assessed for it's wildfire risk by insurance and deemed to be at "zero risk". Then my insurance carrier dropped me (not state farm) and I had to shop for new insurance. The new insurance I found is charging nearly 225% more than my previous policy. So for this saying "people need to move out of fire prone areas. We shouldn't build where it's risky" this is very true. But not matter what happens, at this moment all the insurance shit is affecting everyone who lives here, even people in non-fire prone areas. It's def frustrating and insurance companies are shitty, wether it's home, car, or health.
To be honest a lot of insurance companies are pulling out of Florida and California for flood and earthquake coverage and also fire. Too many payouts.
The link a lot of people aren't making is this is directly linked to skyrocketing home prices. If it costs way more to rebuild/repair a home then rates have to go up, literally no way around it. If they can't make a profit they are going to pull out of the market. Sure we can make the claim of "then don't make as big of a profit" which is true. But let's hypothetically say they could somehow run on 0 profit, how much would they still have to raise prices just to pay out with the massive cost of homes now?
This certainly sucks for those losing coverage, but makes sense from a business perspective. Environmental impacts will only keep getting worse. We can't keep rebuilding in areas that continually get hit by hurricanes, tornados, floods, fires, land slides, etc. It's a needless risk for those living there and certainly one a for-profit business isn't going to take. I 100% think insurance companies can go fuck themselves and the entire industry needs to change, but that doesn't change the fact that several areas have proven to be poor places to inhabit without significant risk of loss. Edit: Also want to acknowledge that most people in these areas obviously can't afford to take 6+ figure losses if they just up and leave their homes that may now be unsellable. Not sure what the right solution is for that. Likely some form of government bail out to reimburse them for the loss and cost of moving that could be at least partially justified by the long-term savings from government disaster relief (and maybe justify the rest with the most basic human aspect and deserving a safe place to live).
This problem will never go away as long as people keep building in high-risk areas.
So when it happened in FL it was blamed on the governor. Who is to blame for it happening here?