Allstate joins State Farm, stops issuing new homeowners insurance policies in CA | Hacker News Reader

Allstate joins State Farm, stops issuing new homeowners insurance policies in CA

sfchronicle.com

58 pointsrobbiet48029 comments

The article says that the state has created an insurance product that people can buy if they can’t get insurance in fire risk areas - THEN that entity passes on losses to insurance companies who refused to insure that risk to start with! That seems like a great reason not to be in the fire risk business there. If the state thinks they can do it better, let them hold the risk.

Did, I misread that? Why would any company what to be in that space?

The FAIR Plan is an association comprised of all insurers authorized to transact basic property insurance in California.

"THEN that entity passes on losses to insurance companies who refused to insure that risk to start with!" Incorrect, some of them are refusing to offer new coverage. They still have existing contracts.

"Why would any company what to be in that space?" The FAIR Plan has higher premiums and the risk is divided by all insurers operating in California.

Now, when a insurance companies completely bows out of California. That will be big news.

This is going to cause a collapse in the housing market, you can't secure a loan without an insurance policy.

Seems like a perfect opportunity for Blackrock and friends to continue buying up homes in cash. Not like anyone should be buying now with current interest rates.

This is a partial misunderstanding - the institutional purchasers very much are using debt. But at the level of making an offer, they do so in cash without any financing contingencies. The models under which they can make profitable purchases does depend upon the prevailing rates, thus precipitating a recent be drop off in institutional purchases.

> Not like anyone should be buying now with current interest rates.

In the recent past, it seems like interest rates have been unusually low. Do you think they're going to go back down to those levels, instead of rising up to more historical rates?

Which in turn will activate the voters allowing for $ to spend on controlled burns & higher premiums.

Then the insurance will maybe come back?

Seems like a textbook example of price controls causing a shortage and subsidies causing excess consumption.

It’s a negotiation tactic with the state so they can charge higher rates

What exactly is "excess consumption" of homeowner's insurance?

Building here you shouldn't. Inflated property values on disaster prone areas.

Repetitive claims, eg your $5 million house in Malibu burns down, insurance replaces it, and 5 years later it burns down again.

Maybe a dumb question but let's say they all pulled this stunt at once. All of the insurers. What happens? And what stops the insurers from dropping current CA homeowner policies?

There's still a state plan right?

Take a look at FL, assuming it works similarly, both of your questions are answered.

Yes they can cancel you, and yes you'll be able to get insurance, but it may be prohibitively expensive.

Deciding to not risk operating at a loss is a “stunt”?

Recent and related:

State Farm halts new property insurance policies in California - https://news.ycombinator.com/item?id=36094633 - May 2023 (233 comments)

California is a quite dynamic state, geologically and meteorologically speaking. Floods, droughts, earthquakes and wildfires (along with the occasional debris flow) are a temporal reality in this state.

Nevertheless, insurance has been a reliably solid blue-chip investment sector for about a hundred years, hasn't it?

> "To obtain accurate information about the average rate of return on insurance investments in California over the specific 1950-2000 period, you may need to consult historical financial records, insurance industry reports, or academic studies that focus on this particular time frame and geographic area. It is worth noting that past performance does not guarantee future results, and the climatic landscape has changed significantly since the 1950-2000 period."

Chevron profits still run this state, I wonder when that bottoms out?

Is there something CA is doing the lump all of CA and not just the people in the high risk zones? I mean a lot of east coast states have roughly similar flood/hurricane issues on the coast or flood plain areas right? And they pay out and let them rebuild in the same area? Forgive my ignorance on it.

3 things that might be contributing:

Insurance companies are allowed to charge more for people in high risk areas, but there's a cap that probably doesn't scale with the actual risk level

Insurance companies aren't allowed to pass on the costs when their reinsurance costs go up

For a while there was a moratorium on dropping policies for homes in high risk areas

That seems like a pretty big deal, it could lead to a domino effect.

https://archive.is/4Muud

As some people who've been following the conversation on climate change around 15 years back noted, it's going to be the reinsurers and long-term value investors the ones who will be the agents of change for climate policy.

Sounds to me like these mega companies are expecting favorable regulation changes to give them more “freedom” (to reject valid claims).

Either that or they’re wanting a tax-payer funded bailout.

I'm inclined to believe this isn't the case, however the article notes that Allstate pulled out for a few years after having one of their rate increases denied.

It's probably worth noting in this context that while I believe Allstate is publicly traded and for-profit, State Farm is neither. It's a mutual - it's owned by its customers and its excess rates go back to them as dividends. There could still certainly be shenanigans, but not quite the same kind.

The cat is out of the bag on globalism ending. California has started their decline for the first time ever. I dont blame them at all for withdrawing from CA.

Appropriate response is for the state to offer insurance as competition instead of letting them try to coordinate extortion of us all.

The article discusses the state's plan of last resort. Carriers are required to pay into it, and this was one of the reasons cited for Allstate and State Farm pulling out.

Reply on news.ycombinator.com