Insurance Company - fails due to global warming

[Loren Pechtel]

That's an interesting take on the matter which I hadn't considered before. If insurance companies start raising rates in order to take these things into account (which they'll need to do), it's really going to drive up the cost of home ownership and make living in affected areas (which are a whole lot of places) much more unaffordable.

It's not that many areas. And if it makes such things less affordable is that actually a bad thing? People will be less inclined to live in the crosshairs on the assumption the insurance will bail them out.

Note that there's a second factor that will also apply which is a good thing--it will cause the insurance companies to be more careful about how disaster-resistant the things they insure are. As it stands now insurance doesn't look at the fire threat from other buildings. If they had and the insurance companies had only been willing to cover buildings with good resistance to embers (which certainly can be done--if you have nothing flammable on the outside of your house it's much less likely to go up when something like Paradise happens.) The result wouldn't be giving up on such areas, but houses built to not go up like that. Seen the conspiracy-theory pictures around showing the forest fire didn't burn the forest? That's because the houses weren't brought down by a wall of flame, but by wind-blown embers from earlier buildings that went up.

 

[Loren Pechtel]

So all of our insurance premiums will rise due to people who build on beaches, landslide-prone areas, floodplains, etc., due to poor planning and allowing developers to run rampant. I would switch in a heartbeat to an insurance company that either refused to insure in these areas or charged a huge premium.

Unfortunately, the people who live in such areas scream loudly and make the insurance commissions not allow rates to consider the risk of the area. And in many cases do not allow the insurance companies to refuse to cover the high risk areas. Thus everyone else ends up paying the costs.

 

[Axulus]

So all of our insurance premiums will rise due to people who build on beaches, landslide-prone areas, floodplains, etc., due to poor planning and allowing developers to run rampant. I would switch in a heartbeat to an insurance company that either refused to insure in these areas or charged a huge premium.

I would expect that's the future of the industry. On the one hand, insurance companies would prefer to keep everybody in the same pool so that they don't drive away customers in the high risk areas by having those costs offset by the people in low risk areas. There would, however, be competing companies who'd take the tack of not insuring the high risk areas at all and thereby undercutting the prices amongst the low risk customers.

As more and more areas become high risk and unaffordable, however, I expect that you'll see the government step in and do something like cover the first $100K or so of damage for free in order to offset the costs to the insurance companies so that people will still be able to actually live in those places.

Why do we want people to live in places at high risk for catastrophe, subsidized by those living in low risk places? Wouldn't it be better if we get more people to abandon the high risk areas? If such places are unaffordable due to obscene insurance rates, that is actually a feature, not a bug.

 

[AirPoh]

AFLAC is for individual to cover small gaps. Re insurance is for insurers to cover big gaps.

 

[AirPoh]

Supplemental is for individuals to cover small stuff. Re insurance is for insurers to cover big stuff.