California's largest home insurer won't renew 72,000 policies

https://www.sfchronicle.com/california/article/state-farm-insurance-nonrenewals-19357533.php

by delichon • 2 years ago

25 80 2 years ago

Price controls result in supply shortages.

zbrozek3• 2 years ago

California electeds don't believe in market economics. So we get rent control, insurance control, utility control (amusingly in the higher-than-market price direction), etc.

lern_too_spel• 2 years ago

California elected officials didn't give us rent control. California direct democracy got us Proposition 13, Proposition 218, and most municipal rent control statutes.

skhunted9• 2 years ago

Every state regulates insurance and almost all of them regulate utilities. Regulating those industries is necessary.

hristov3• 2 years ago

This is not due to price controls. California does not have much price controls on insurance, and I doubt there are any on commercial apartment buildings. This is climate change.

bombcar10• 2 years ago

In July 2023, State Farm applied for an average 38.7% rate hike with the California Department of Insurance for commercial apartments, according to public filings. But the department ruled the hike was not supported by data, and instead approved a 23% hike at the beginning of March.

If you have to apply for a price hike, and it can be modified or refused, that's a form of price controls. And climate change isn't causing PG&E to be worthless idiots; they've always been that. The change is in the climate of the courts; they're now being held responsible.

Reading the article is a superpower.

joebob42• 2 years ago

In state insurers are also responsible for bailing out the fair plan, which means they're effectively responsible for policies they didn't write unless they leave the state entirely.

baggy_trough9• 2 years ago

You're wrong. California does have price controls on insurance.

lotsofpulp5• 2 years ago

Why your simple statement taught in microeconomics 101 is downvoted is beyond me. California government refused insurance prices that made business possible, so the businesses decide to not sell rather than lose money.

commandlinefan• 2 years ago

Wow, I had always worried about not being able to afford the taxes on a home, but I never considered also not being able to afford the insurance.

SigmundA6• 2 years ago

Living in Florida nobody is talking about property taxes but homeowners insurance is driving people out. It's more than doubled for everyone we know in the last few years along with most insurer requiring a new roof if more than 15 years old, this usually comes up when trying to sell the house and new owners are trying to find insurance.

RSHEPP• 2 years ago

same in Texas. BIL told me that he has been writing policies in the $5k-$7.5k range this year. And those are the best quotes some people are getting on their cheap mansions.

bombcar10• 2 years ago

Did something change in roof building about 15 years ago? Are older roofs more susceptible to being ripped off in a tornado?

Around here they just write a roof exclusion if it's too old, and hail doesn't get you a "free roof".

KennyBlanken2• 2 years ago

Good.

My insurance premiums (and to a huge degree now, taxes) shouldn't go to pay for people who keep rebuilding in a swamp that is routinely leveled by hurricanes. Especially not when those people not only don't believe in climate science but support elected officials who attempt to ban climate science from policy, education, etc.

Just because there's land somewhere doesn't mean society has to support you building there. I'd say the same to people who put houses on seashores, or cliff faces where there is landslide risk.

matwood• 2 years ago

72k is a drop in the bucket to what happens in FL.

https://insurify.com/homeowners-insurance/news/progressive-d...

https://www.pnj.com/story/money/2023/07/12/florida-insurance...

SigmundA6• 2 years ago

Yes living in FL its ridiculous. It's not just the premium increases and lack of competition, everyone is getting hit with needing to replace their roof if more 15 years old or they will cancel you.

Citizen which is state backed makes you move to private if you get an offer thats <= 10% more expensive as they don't want people on government insurance.

bombcar10• 2 years ago

“Floridians are seeing homeowners insurance become costlier and scarcer because, for years, the state has been the home of too much litigation and too many fraudulent roof-replacement schemes”

I've often wondered about the whole roof bullshit as it seems everyone around here expects a free roof replacement anytime it hails. At some point it's unsustainable.

(The idea behind roof replacement insurance is/was a good one, as a damaged roof quickly destroys the entire building, water is the building destroyer. But when you have people driving around after a hailstorm offering homeowners free roofs if they sign over the ability to work with their insurance, obviously something is wrong.)

SigmundA6• 2 years ago

One insurance agent I know said much of it came from requiring legal fees be reimbursed, so lawyers where helping people go after insurance for even minor claims while racking up large legals fees to do so that insurance has to pay for.

There was a lot of people getting new roofs for very minor damage and roofers going around trying to facilitate the process.

tmaly• 2 years ago

Politicians should address the fraud first. Telling Farmers they can do car insurance if they are pulling out of home insurance is not going to work in my opinion.

GenerWork4• 2 years ago

The 42,000 commercial apartment non-renewals represent a complete withdrawal from California’s commercial apartment market, which covers property and liability insurance for apartment building owners.

Looks like rents are going to go up.

everybodyknows• 2 years ago

Many residential units are under some form of rent control. So we just have to make them all that way, and hire plenty of enforcement staff, and the problem will be solved, yes? ... ?

abound• 2 years ago

It's interesting that it's State Farm, as I've recently seen them as the only one willing to write new policies in a fire-prone location, a "wildland-urban interface" area.

bombcar10• 2 years ago

State Farm is doing some stuff to reduce electrical fires (see https://www.statefarm.com/insurance/home-and-property/ting-f... ) but I suspect they don't have much they can do with wildfire suburban areas.

bombcar10• 2 years ago

the most substantial wildfire or fire following earthquake hazards

The key here, and what insurance companies really don't like dealing with, is coordinated payouts.

If you insure 10,000 homes, and 10 burn down every year, that's quite manageable. If instead you have years with nothing and then a thousand burn down at the same time, that's much harder to manage. It's also harder to build the actuarial tables, because there's too many unknowns.

And wildfires and earthquakes almost by definition affect large areas.

silverquiet• 2 years ago

The industry came up with reinsurance for this reason.

bombcar10• 2 years ago

I think the main disconnect is the state believes "incident X" will happen Y% of the time, and the insurance companies believe it will be Y+X%, and they're not willing (or can't find a reinsurance backer) to roll it.

The state, of course, can be the reinsurance issuer of last resort if they really believe their numbers are correct. Or do something like the California Earthquake Authority which everyone knows is vastly underfunded, but at least there's the hint of a promise that when the Big One™ comes, they'll get emergency funding: https://www.earthquakeauthority.com

bkberry352• 2 years ago

Reinsurance doesn't make the problem go away. Sure it caps State Farm's exposure to these correlated events, but it won't bring their combined ratio into balance. State Farm would still be on the hook for the first $XXX million in losses. I would also expect it to be harder (read: more expensive) to buy the reinsurance given the increasing risk.

lotsofpulp5• 2 years ago

Step 1: purchase reinsurance

Step 2: use reinsurance to cover losses

Step 3: reinsurance premiums go up or reinsurer refuses to insure you

Helmut100013• 2 years ago

Trying to get insurance in CA since 1 year, after state farm won't renew the insurance of my family (the property just changed owner due to inheritance). Even paying double (6k per year) won't get you insurance.

bombcar10• 2 years ago

Have you reached out to an insurance broker? Mine was able to find policies relatively easily.

Not an agent, but a company that works with multiple insurance companies to find options.

Helmut100013• 2 years ago

Yes, I was with a company for one year. They just forwarded me to another company where they think I have a higher chance.

nradov• 2 years ago

Yes, when the government fixes prices at below the market price then that tends to cause shortages.

scruple• 2 years ago

Terrifying. We're in SoCal, and we've been evacuated for fires that were threatening some of the home in the trac we live in. Our home and auto is insured through Costco with Connect and I'm curious to see what happens this year when we come up for renewal.

Helmut100013• 2 years ago

That is really sad. I am not in a fire area or flooding endangered, I am in the middle of San Francisco on a rocky hill. There are much more dangerous areas than ours.

rvba• 2 years ago

Is insurance obligatory in USA? A. For owners? B. Is it obligatory if the owner rents the house?

redserk• 2 years ago

I don't live in CA so I'm not sure what's exactly required there. In most cases though, you are required to keep insurance if you have a mortgage.

If you rent, your landlord is responsible for insurance for the structure, but you can/should get insurance for your belongings and in the event that your actions cause damage to the house or to people.

bombcar10• 2 years ago

Technically, no. Practically, yes.

It is nearly impossible to get a mortgage on a habitable house without getting home insurance, because the bank doesn't want to loan you $400k on a $500k house, have the house burn down, and since the land is only worth $100k and you still owe $400k, you just walk.

Even if you own the house outright, home insurance is one of those "good idea" unless you can take a complete structure loss on the teeth and keep moving. And if you're renting it, you want it for the liability protection, too, because tenants can and will sue, and if your policy is big enough, the insurance company lawyers will defend.

But if you own a house in the sticks outright and don't want insurance, you don't have to have it, I don't know of any state that requires it the same way car insurance is required (and even car insurance isn't required if you never drive your car off your land).

dragonwriter• 2 years ago

Is insurance obligatory in USA? A. For owners?

Usually for a mortgage it is. If you want to be uninsured on property you buy without a mortgage, that’s generally legally allowed, even if not necessarily desirable.

techdmn• 2 years ago

Climate change -> Previously hospitable places become less so -> Living there becomes more expensive.

clarity20• 2 years ago

Citing "climate change" doesn't make you sound profound. It's a generalized justification for totalitarian controls.

California's largest home insurer won't renew 72,000 policies

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