Given much of the climate change risk that certain places like Florida and California are experiencing are the cause of national policy, I disagree. I think we should have a national catastrophe charge that all homeowners pay equally into to cover this type of risks. Insurance rates should be based on policyholder controllable variables, not things like fire protection zones (which are often the result of racist government policies) or weather risks. Insurance should be spreading that risk to society as a whole.
So youâre saying a New Yorker (possibly low income) should pay higher home insurance so that a Floridian (possibly high income) can pay lower home insurance? That doesnât make any sense to me.
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That seems completely wrong on many levels unless you can clarify that you mean something not-so-obvious.
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Funny you use NY as an example given they are one of the primary beneficaries of a national pricing of risk that was deemed to be fair to be spread nationally, even though it only affected a couple of cities significantly.
Details?
Obviously âequallyâ on a percentage of premium basis, not on a dollar basis.
Iâll give you a hint. There is an anniversary of what started it tomorrow.
The word for that is terrorism, not catastrophe.
I donât even understand where this is coming from. 9/11 was tragic but in the end the US response did what it is naturally good at: spending a lot of money it doesnât have to go to war.
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Completely ignoring weather related risks in insurance pricing will incentivize building even more in hazard prone areas. No reason not to build a house right on a sand bar, as someone else has to pay for any damage. NFIP had been creating some perverse incentives for years, which are finally being rectified. Risky development shouldnât get a special subsidy.
We absolutely do have personal choice when choosing to live in high hazard areas.
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ok, so terrorism risk⌠yeah, if NY has a higher risk of that, NY-ers should pay more. I doubt NY is a terrorist target any more than DC or other really large landmarks though. Regardless of the choices of Osama bin Laden. It doesnât seem to me to be an indicator of risk. Population density and landmark presence is though. Regardless, if NY really was higher risk just for being NY, yes, it should pay for it. When you start subsidizing you create all sorts of messed up incentives.
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You have a choice where you live. Most of the country does not. They canât afford to move, they canât afford to not work while they were moving.
I very much doubt this. People can and do move all the time. Completely poverty stricken people change locations in addition to wealthy people.
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Canât afford your home insurance? Sorry, we should have charged you more a long time ago but we are only finally getting closer to the appropriate cost of risk. If itâs that bad, sell your house and find somewhere else you can afford to live.
Donât get me started on gas prices and vehicle choicesâŚ
Someone will go insured, have a disaster, end up in the news, and the insurance carriers will be made to look like the bad guysâŚ
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The problem of FL is that it has a very healthy industry of lawyers and contractors (and fraud) and a completely disproportionate amount of litigation compared to its size. Theyâve done some legislative work to stop this so things should get better. But actuaries wonât react until they see the lower losses. Actuaries arenât known for their quick reactions to stuff like this. The other problem of FL is the hurricanes, which canât be helped, but makes the margin of error smaller, so it makes the litigation and fraud issues harder to work around.
The problem of CA is the attitude the DOI has, which is it basically refuses rate increases (or else delays them for years). You control the price, you decrease the supply, basic economics.
Yes itâs hard to move, but you know whatâs harder? Other struggling families having to pay more money to subsidize someone living in a seaside town in FL or in sunny California.
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I work in farmowners, and we have taken steps to limit the amount of wildfire risk we write. If someone has a farm in a high risk area I guarantee you they will not want to pay what we will charge. It seems to me that this business might end up going to any number of companies that have less mechanisms (if any) for charging for risk and itâs only a matter of time before the tide goes out and we find out who has been swimming nekkid and there will be a wave of wildfire bankruptcies someday.
Nationwide was kind enough to put some wildfire loss experience in one of their filings which included the disastrous 2017 year, helping me justify my rates, but like hurricane pricing there are models exist but accurate pricing is still anybodyâs guess.
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Most of the country living in beachfront property has that freedom, even more so than I do. In general, these are high net worth individuals.
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Citation needed.
Ditto on no one can ever move but me.
Fire protection classes are technically under the control of policyholders who are voters. Questions of the benefits of a lower PC vs the cost of staffing up a fire department have played a role in local discussions about taxes. Voters can influence the outcome of such discussions in the obvious way.
As to the other elements â policyholders absolutely can, to a certain extent, influence the amount of risk they face from catastrophe: Do I choose to live in beachfront property, or several miles inland? Do I choose to live in a flimsy frame dwelling, or a structure designed to be resistive towards catastrophes that might afflict it?
People who make decisions to reduce their risk should not be required to subsidize those who choose to live in harmâs wayâŚor if there is to be a subsidy, it should be handled through government mechanisms, not private insurance.
I moved to working with commercial lines shortly after the event youâre referencing. However, in the products I supported after the adoption of TRIA and its successors, we absolutely did vary our pricing and underwriting appetites based on the perceived hazard and concentration of risks.
And TRIA/TRIPRA is actually a pretty good example of what I meant when I wrote âif there is to be a subsidy, it should be handled through government mechanisms, not private insuranceâ.
Moving is hard and expensive. However, the folks who are likely to find moving unaffordable are also the ones least likely to be property owners.
The increased cost of insurance sucks from a consumerâs perspective, especially if you are of limited means. However, for-profit insurers are not charities. The investors supplying the capital to support the underwriting risk expect a rate of return on their investment commensurate to the risk.
To the extent that there is a social need contrary to that realityâŚthatâs something for government to address, not private industry.
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