Is the Insurance Commissioner going to pay for the claims that insurers will have to absorb while the state figures out to get power companies to stop starting disastrous fires in the meantime? Or rescue small carriers who get driven into insolvency because they can’t charge enough premium to cover the risk? TANSTAAFL.
Typical Leftist Authoritarian Move: scare insurance companies into refusing to write new business for fear of never being able to get off a risk. Genius.
Yeah, totally. Those leftists, putting small regional insurers out of business because of the fires. It’s all part of the plan? What a joke. OK Boomer.
The property insurance in the state was partially created by the Department due to requirements to cover mudslides and additional payouts during catastrophic events without proper adjustments to price and coverage. In political office, it is easy to mandate how other people spend their money if it costs you nothing but benefits your vote count.
One way the state could rescue the market is to have the California State Employee Retirement System (CalPers) provide insurance companies with reinsurance to cover PMLs from 50 years to 500 years at 2016 prices. To all, it would be a sign that DOI management and employees are so sure of their policies that their willing to risk a small amount of their own retirement that their policies are correct. The amount would actually be a very small portion of the CalPERS total and would allow small markets to remain in the game. Any change against insurance companies would be shared with legislators and regulators which might force them to understand risk to a greater degree.
He’s doing this to “help the people” but at the same time damage insurers. At the end of the day this will backfire. Insurers will pay out losses after they’re forced to stay on policies. After the one-year moratorium is over – the insurance companies are going to charge even MORE premium to make up for losses from Insured’s they never wanted to cover. This is going to drive rate in an already hard market.
Adam, you’d feel different if you were cancelled like we were and the only replacement coverage is tripled, to $6k. The insurance co’s are ripping their customers off and want no risk. Insurance has always been about risk. It’s about time the ins. commissioner did something!
Sorry, Robert, but nobody is ripping you off. You choose to live in a place with high risk, so you have to pay for that. I live 4.5 miles from the ocean on the east coast and I pay a lot for Homeowner insurance. I understand why and accepted that cost when I chose to move here. If you don’t like what it costs to live there, then move.
Hi Robert: The challenge that most primary insurers encounter is that they need to purchase reinsurance from other markets. Those investors from other markets want a significant return for the great risk they face for insuring catastrophe prone areas. This great risk is causing the price to be high.
The question you might ask yourself is whether you would put your own money to insure properties in risky areas with little return. The other question is whether people who reside in safer areas should subsidize those who elect to live in riskier areas. Is that fair? Should safe and sober drivers pay the same insurance premium as those who choose to continue to drink and drive?
My challenge to the state legislators and DOI employees is whether they might risk their own retirement money through CalPERS catastrophe insurance bonds to insure these fire prone areas at 2016 prices, The answer is most likely no, but it is fine to them if it is other people’s money.
Your wonkish CalPERS thought exercise doesn’t help the average person understand how insurance should function and instead helps people like Ricardo Lara make their point more appealing.
Hi CO-yeti: My intent was not to be “wonkish” or unclear. My theme was whether the regulators were ready to risk their own pocketbooks with their own actions. My assumption is that most of the impacted homeowners are financially successful given the affordability challenge in California and have some investments of their own either in a 401K/IRA plan or some other plan and can relate to the risk challenges of insurers.
I do not live in CA, but you can read all day long about how underfunded the pension fund is there. It’s the 3rd worst in the Nation, but by far, the most underfunded in terms of actual dollars. While I agree they need to have some skin in the game, it has to be real skin. Offering up pension funds they already do not have is no different than lying. When less than half of the pension money is even available, and will eventually hit crisis proportions, they can’t afford to risk a dollar. It’s a great idea, just not a feasible one. At some point, CA is already going to have to ask for a large tax increase to get that fund fully funded. Or, they can do what many other States and Companies have done, dramatically cut the benefits. I’m sure some are grandfathered in that are already retired, but I saw what General Motors did to my Uncle. 30 years of service. Upon retirement, after his very first year in fact, he pension was slashed by 2/3rds. That shouldn’t even be legal, but I watched it happen. It’s happening to my dad, who is 76, with the company he worked for as well.
I guess some CA risk areas are getting to be like writing the habitual drunk driver – how much can you charge for the (almost known) risk and you know they can’t afford it?
Obviously, you can’t ask the insurance companies to absorb all this unknown/known risk; otherwise, as noted on other comments, you’re going to run into insolvency and insurers leaving the state. Its somewhat like the flood insurance black hole as there’s little chance of a company being able to charge enough without subsidy or blind luck.
I do feel for the people with the increases and cancellations, you’ve got the sales side of an insurance company telling the prospect and insured “come with us to cover your family’s future” and then when the chit hits the fan “you have no future with us.”
This whole discussion is an exercise in futility. The Ins. Commissioner is ignoring the basic tenets of insurance for base political gain. If he is really serious, let the state step in as the reinsurer for all policies written in these high risk areas. And, let the insurance companies charge an actuarially sound rate. Or ….. prohibit construction in the woods, in unprotected areas. Just like those who whine about the windstorm rates on the Texas coast, don’t build there if you cannot afford the premiums. I have NO sympathy for those so foolish.
The issue is not limited to pure non-renewals. Insurance companies are setting unrealistic cost prohibitive conditions to renewal – examples: remove all the trees around your house, add sprinklers on your roof, conditions that cost 20-30K, before the premium. One friend with a small home in a residential subdivision in El Dorado was told to clear 100 feet around her home, far outside her property lines, and into the land of neighbors and the town. People are being forced to sell because they can’t afford insurance, and mortgages go into default if property is not insured. Homes are for sale all over Truckee and Donner as a result. With homes in Sonoma and Truckee I dread the coming renewals. Thanks to Cal legislature for protecting our homes.
Cali: If you could, would you insure a house in these areas? I doubt it. So why the righteous indignation when the insurance companies seek to mitigate the exposures?
Due to re-insurance, I can’t imagine many Carriers are going to keep offering coverage on homes in these areas, regardless of the premium they collect. It isn’t insurance carriers trying rip anyone off, or take advantage of a situation. They are facing higher costs to insure the home and passing it along to the homeowner. It’s pretty normal.
I know people hate to hear this, but if you live in one of these areas, it’s time to move. Insurance carriers already dislike the system in CA. This is only going to make it worse. If you can find coverage, it will likely be 3 to 4 times higher than what you’ve been paying. I had friends just move from Novato to Las Vegas. It was 100% because of the cost of their home insurance and taxes. The only complaint they have now is that they didn’t do this years ago.
The bigwigs in Sacramento, along with the regional and local politicians, enjoy the taxes and fees that development provides and the full support of developers, builders, the real estate industry, etc., to open new tracts and areas that were previously not developed, but now want the insurance industry to subsidize the errs of their ways and insatiable appetite for OPM — other people’s money! This is akin to a west coast “shakedown” for insurers because there are very few entities or industries left that have the “deep pockets” politicians love to pick.
Is the Insurance Commissioner going to pay for the claims that insurers will have to absorb while the state figures out to get power companies to stop starting disastrous fires in the meantime? Or rescue small carriers who get driven into insolvency because they can’t charge enough premium to cover the risk? TANSTAAFL.
Typical Leftist Authoritarian Move: scare insurance companies into refusing to write new business for fear of never being able to get off a risk. Genius.
Not leftist. Populist.
Populist decisions generally return decision making to the people on the ground. This is Leftist Authoritarian to the core.
Yeah, totally. Those leftists, putting small regional insurers out of business because of the fires. It’s all part of the plan? What a joke. OK Boomer.
Huh? What? That makes no sense at all. Oh, wait. You were being funny! Got it.
Hilarious!
Leave it to the boomers to understand humor, you’re definitely in on and not actually the joke!
The property insurance in the state was partially created by the Department due to requirements to cover mudslides and additional payouts during catastrophic events without proper adjustments to price and coverage. In political office, it is easy to mandate how other people spend their money if it costs you nothing but benefits your vote count.
One way the state could rescue the market is to have the California State Employee Retirement System (CalPers) provide insurance companies with reinsurance to cover PMLs from 50 years to 500 years at 2016 prices. To all, it would be a sign that DOI management and employees are so sure of their policies that their willing to risk a small amount of their own retirement that their policies are correct. The amount would actually be a very small portion of the CalPERS total and would allow small markets to remain in the game. Any change against insurance companies would be shared with legislators and regulators which might force them to understand risk to a greater degree.
He’s doing this to “help the people” but at the same time damage insurers. At the end of the day this will backfire. Insurers will pay out losses after they’re forced to stay on policies. After the one-year moratorium is over – the insurance companies are going to charge even MORE premium to make up for losses from Insured’s they never wanted to cover. This is going to drive rate in an already hard market.
Hidden due to low comment rating. Click here to see.
Sorry, Robert, but nobody is ripping you off. You choose to live in a place with high risk, so you have to pay for that. I live 4.5 miles from the ocean on the east coast and I pay a lot for Homeowner insurance. I understand why and accepted that cost when I chose to move here. If you don’t like what it costs to live there, then move.
Hi Robert: The challenge that most primary insurers encounter is that they need to purchase reinsurance from other markets. Those investors from other markets want a significant return for the great risk they face for insuring catastrophe prone areas. This great risk is causing the price to be high.
The question you might ask yourself is whether you would put your own money to insure properties in risky areas with little return. The other question is whether people who reside in safer areas should subsidize those who elect to live in riskier areas. Is that fair? Should safe and sober drivers pay the same insurance premium as those who choose to continue to drink and drive?
My challenge to the state legislators and DOI employees is whether they might risk their own retirement money through CalPERS catastrophe insurance bonds to insure these fire prone areas at 2016 prices, The answer is most likely no, but it is fine to them if it is other people’s money.
Hidden due to low comment rating. Click here to see.
Hi CO-yeti: My intent was not to be “wonkish” or unclear. My theme was whether the regulators were ready to risk their own pocketbooks with their own actions. My assumption is that most of the impacted homeowners are financially successful given the affordability challenge in California and have some investments of their own either in a 401K/IRA plan or some other plan and can relate to the risk challenges of insurers.
Please share a better explanation or analogy.
https://californiapolicycenter.org/calpers-pounds-table-response-reports-showing-looming-state-pension-crisis/?gclid=EAIaIQobChMI0MHn8-2o5gIVjtdkCh2djwbiEAAYASAAEgI4K_D_BwE
https://www.santacruzsentinel.com/2019/05/04/editorial-alarming-data-shows-public-employee-pension-crisis-worsening/
I do not live in CA, but you can read all day long about how underfunded the pension fund is there. It’s the 3rd worst in the Nation, but by far, the most underfunded in terms of actual dollars. While I agree they need to have some skin in the game, it has to be real skin. Offering up pension funds they already do not have is no different than lying. When less than half of the pension money is even available, and will eventually hit crisis proportions, they can’t afford to risk a dollar. It’s a great idea, just not a feasible one. At some point, CA is already going to have to ask for a large tax increase to get that fund fully funded. Or, they can do what many other States and Companies have done, dramatically cut the benefits. I’m sure some are grandfathered in that are already retired, but I saw what General Motors did to my Uncle. 30 years of service. Upon retirement, after his very first year in fact, he pension was slashed by 2/3rds. That shouldn’t even be legal, but I watched it happen. It’s happening to my dad, who is 76, with the company he worked for as well.
I guess some CA risk areas are getting to be like writing the habitual drunk driver – how much can you charge for the (almost known) risk and you know they can’t afford it?
Obviously, you can’t ask the insurance companies to absorb all this unknown/known risk; otherwise, as noted on other comments, you’re going to run into insolvency and insurers leaving the state. Its somewhat like the flood insurance black hole as there’s little chance of a company being able to charge enough without subsidy or blind luck.
I do feel for the people with the increases and cancellations, you’ve got the sales side of an insurance company telling the prospect and insured “come with us to cover your family’s future” and then when the chit hits the fan “you have no future with us.”
This whole discussion is an exercise in futility. The Ins. Commissioner is ignoring the basic tenets of insurance for base political gain. If he is really serious, let the state step in as the reinsurer for all policies written in these high risk areas. And, let the insurance companies charge an actuarially sound rate. Or ….. prohibit construction in the woods, in unprotected areas. Just like those who whine about the windstorm rates on the Texas coast, don’t build there if you cannot afford the premiums. I have NO sympathy for those so foolish.
The issue is not limited to pure non-renewals. Insurance companies are setting unrealistic cost prohibitive conditions to renewal – examples: remove all the trees around your house, add sprinklers on your roof, conditions that cost 20-30K, before the premium. One friend with a small home in a residential subdivision in El Dorado was told to clear 100 feet around her home, far outside her property lines, and into the land of neighbors and the town. People are being forced to sell because they can’t afford insurance, and mortgages go into default if property is not insured. Homes are for sale all over Truckee and Donner as a result. With homes in Sonoma and Truckee I dread the coming renewals. Thanks to Cal legislature for protecting our homes.
Cali: If you could, would you insure a house in these areas? I doubt it. So why the righteous indignation when the insurance companies seek to mitigate the exposures?
Due to re-insurance, I can’t imagine many Carriers are going to keep offering coverage on homes in these areas, regardless of the premium they collect. It isn’t insurance carriers trying rip anyone off, or take advantage of a situation. They are facing higher costs to insure the home and passing it along to the homeowner. It’s pretty normal.
I know people hate to hear this, but if you live in one of these areas, it’s time to move. Insurance carriers already dislike the system in CA. This is only going to make it worse. If you can find coverage, it will likely be 3 to 4 times higher than what you’ve been paying. I had friends just move from Novato to Las Vegas. It was 100% because of the cost of their home insurance and taxes. The only complaint they have now is that they didn’t do this years ago.
The bigwigs in Sacramento, along with the regional and local politicians, enjoy the taxes and fees that development provides and the full support of developers, builders, the real estate industry, etc., to open new tracts and areas that were previously not developed, but now want the insurance industry to subsidize the errs of their ways and insatiable appetite for OPM — other people’s money! This is akin to a west coast “shakedown” for insurers because there are very few entities or industries left that have the “deep pockets” politicians love to pick.