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Comment by theogravity | Hacker News Reader

I live in CA. We have a separate optional earthquake insurance that is maintained by some CA authority that is pretty expensive to buy into. Wonder why that can't be done with fires that originate from a forest if it's such a high risk?

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California law has established the FAIR plan [1] which is insurance of last resort for people who can't otherwise get fire insurance coverage for their home. It's a mandatory association of insurers who are operating in California.

It's my understanding that FAIR plans are very expensive compared to market-provided homeowners insurance. I presume this is because of adverse selection--if you buy FAIR insurance you're in the same risk pool as people who live in very high fire risk areas and have no other insurance options.

[1] https://www.cfpnet.com/

Because state run insurance is kind of a crock. These are programs put together for constituents to be pleased enough to vote in the next election cycle but will do little to help in an actual disaster. Its been years but the state run insurance had pretty limiting caps on both contents and the cost to rebuild. Seemed kind of pointless from a total loss perspective.

Edit: I would guarantee that the state run plan is both underfunded and not charging appropriate premiums for the given risk.

> underfunded and not charging appropriate premiums

Sure. But Sacramento has a secret disaster recovery plan: Appeal to Washington for a bailout.

And that probably would happen.

Genuinely curious, how so? Do they have frustrating claims processes or limit pay-out when an incident happens?

I'm in another state and my home insurance has been increasing but nowhere near what it sounds like is happening in California and Florida.

Good question. Not about the claims process but about state programs being generally underfunded and not underwriting the risk properly. If multiple insurance companies cannot underwrite the risk properly, how can a state government do it any better and at a sometimes affordable price. Maybe everyone is baking in the idea that the state will just get a bailout from the federal government.

I also believe that it creates a perverse incentive for people to continue living in unmaintainable habitats. We also hear talk about how can these cities with no water continue to survive, its not maintainable etc. Well neither is living in a hurricane prone area or high fire risk area.

The options for these funds are often fairly limited too and not covering even 50% of the loss. YMMV.

The CEA is because earthquakes would bankrupt insurance companies because they strike multiple properties at once.

Something similar could be done for forest fires but hasn’t been setup yet.

The general consensus is CEA policies are underfunded and the expectations are that the feds will step in.

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