State Farm announces major change affecting tens of thousands households in CA | Hacker News Reader

State Farm announces major change affecting tens of thousands households in CA

finance.yahoo.com

32 pointscebert64 comments

> However, with more insurance companies pulling out of the California market or limiting coverage recently due largely to the elevated risks of natural disasters, some homeowners may have no other option.

Elevated risk of natural disasters is half the story. The other half is that California won't let insurance companies price their plans based on risk, which in the face of said natural disasters gives them really only one option—withdraw [0]. It's pretty misleading of TFA to leave that important context out.

From KCRA:

> Unlike most states, California tightly restricts how insurance companies can price policies. Companies aren't allowed to factor in current or future risks when deciding how much to charge for an insurance policy. Instead, they can only consider what's happened in the past on a property to set the price.

[0] https://www.kcra.com/article/california-insurance-price-poli...

Leaving it to market also won’t take care of the problem and would instead cause chaos in the home ownership market for no beneficial reason.

The market can’t do the correct thing unless the cost is correctly linked to the reason for the increased costs. There needs to be another solution - personally I would think apply a tax to fossil fuels that pays into an insurance fund to partially lower underwriting risk.

We should not tax fossil fuels to subsidize costs for people choosing to live in dangerous regions.

We should if they're the reason the regions are becoming more dangerous.

Yes, a person in the inland empire using gas to get to their job far as fuck away because that’s all the house they can afford should clearly be subsidizing some coastal elite’s “I want a house on a cliff overlooking the ocean” insurance. Because fossil fuel use is the direct cause of the house’s instability.

Is there any indication that the high risk properties in California are coastal instead of rural or exurban? Presumably the risk is from fire and that’s disproportionately not going to be in highly developed communities like the coastal regions.

> Is there any indication that the high risk properties in California are coastal instead of rural or exurban?

https://experience.arcgis.com/experience/03beab8511814e79a0e...

There is very high fire risk in the coastal hills, which contain the most expensive real estate in CA, but low risk in the adjacent urban areas closer to the water.

The exurban areas of CA are in the Central Valley, which has lower fire risk, but very high heat risk. Rural areas can have high or low fire risk, depending on where they are.

This seems like a random meme designed to avoid drawing a basic line of responsiblity between fossil fuel emissions and the costs they impose on many people. That's one discussion.

Another discussion is if you chose to connect those - then how do you distribute the costs - and some allocation picked to inflame the discussion seems to be avoid the first issue while assuming some particular lopsided distribution.

Frankly, the evidence is not there that these wildfires are being caused by climate change vs cyclical droughts and mismanagement.

If global warming caused by C02 emissions is the reason why the place is becoming dangerous, why not?

The fact that insurance companies are making changes now shows that this is a more recent trend.

Fire danger in California is mostly due to terrible forest management policies - large scale blanket fire suppression and serious impediments towards logging and brush clearing.

Global warming may be what is lighting the match (sometimes - but frankly probably is only a minor influence) however the giant pile of fuel that has been growing for 100 years remains almost completely unabated.

Two things can be true at once. A dog can have ticks and fleas.

A match thrown down in a healthy forest won’t produce a massive apocalyptic firestorm.

No matter the time of year.

Even back in the 70’s the National Park service in Yosemite knew the existing forest management practice was creating apocalyptic fire risk (and the ‘91 Yosemite fire bore that out) but until very recently, practices across the state have been unchanged.

[https://www.nps.gov/yose/learn/nature/firehistory.htm]

Defacto, walk through the forests in California and the build up of brush is monumental. Along the coasts and in the Sierra Nevada. Many areas are impassible, except those that have burned recently.

If that were the case, we could let the trees be logged which I'm sure industries are scrambling to do, seems like a win-win? The fact that it hasn't happened would imply it is not the case.

Environmental regs mean a mountain of paperwork, bureaucracy, and delays. Because terrible forest management policies. And dramatically higher costs.

Despite it being true.

> would instead cause chaos in the home ownership market for no beneficial reason.

People losing home insurance altogether and being unable to find a replacement is going to be less chaotic for the home ownership market than insurance rates going up?

If uncertainty about the future value of the home brings prices down I’m all for it.

Anyone with a mortgage is in theory obligated to get insurance asap - or owe the bank the entire outstanding balance. And if the place burns down they are still on the hook for the entire mortgage too.

If no one will underwrite? Oh shit.

Allow me to shed a tear for these hypothetical mildly inconvenienced landowners.

You mean like the 10’s of thousands of exurb Californians who all the sudden found themselves in ‘high risk urban-wildland fire zones’ after the recent wildfires?

Or who found themselves above a fault that no one previously knew about?

It’s not theoretical. [https://www.latimes.com/business/story/2021-09-26/california...]

Yes those. My family is actually among them, and guess what: our insurance premiums went down, and we're no longer being forced to pay for benefits we would never have actually received. (do you really think insurance companies were going to pay out for a natural disaster? their entire business model is refusing to pay out of they can find a way to weasel out of it. to the point they'll call themselves doctors and tell the real doctors what they can and can't do. the less mandatory insurance the better, such that the market might finally force them to be either helpful or cheap, but certainly not neither.)

You mean after the state stepped in a mandated the insurance company do it - which is why many insurance companies are pulling out of the state now?

And when something happens, now the taxpayers are on the hook?

Where does it say taxpayers are underwriting the state's home insurances? And how would that be different from literally any other insurance company ever? Who do you think insurance premiums are paid by?

California has a last resort insurer where the insurance funds are backed by the state - aka the taxpayer.

And you are still paying for insurance, supposedly based on your comment correct?

So what do you think is going on, if your rates went down despite being in a higher risk category?

Insurance companies have stopped scamming us by charging premiums for services that would have never actually been rendered, as I have already stated.

Since the actual set of coverages are set by law, and heavily regulated what you are saying makes no sense.

Or are you saying you signed up for insurance that doesn’t cover fire disasters in these now discovered high risk fire zones? Because if so, yikes.

Because you’re on the hook now. You might as well have signed something on your health insurance saying you don’t need coverage if you get cancer.

Insurance companies definitely paid out during prior disasters for insureds, which is why the insurance companies took such heavy losses. Over $12 billion in California in 2018 alone. [https://www.insurance.ca.gov/0400-news/0100-press-releases/2...]

So if you voluntarily aren’t getting fire damage coverage in a high risk fire zone? Yikes.

If you somehow are believing that the insurance company would never have paid you if it happens, but they’ll charge you less if you don’t get the coverage? I have no words.

It will bring home ownership costs way up as it has in Florida. It would also allow corporations who can self-insure to have a leveraged capital advantage to buying up homes - which doesn't help individual people who want to own homes.

The pressures of climate change disasters is a increasing bar of costs everywhere, home insurance is one of the first very visible places that is a predictor. We're going to have to figure out if we're ok with privitized fossil fuel profits with companies paying little to no taxes, while the costs land in very concrete ways on individual and gov't budgets.

They won’t have a capital advantage when all the homes they just bought up flood and now they’re out tons of money because they mispriced the insurance risk and self-insured.

The cap advantage is multiple - that a banks will lend them more, there is no insurance company profit margin, they can rebuild faster w/o that same insurance company approval red tape. With renters they can price up faster than individual incomes grow.

But note that none of this fixes the core fossil fuel driver to the costs.

Brilliant, now it's not just people who live in cities subsidizing rich people who choose to live in high fire risk suburban borders but everyone who drives too.

Generally, the people most at risk for fire are not particularly wealthy - they live out in the exurbs. Generally I’m not too supportive of socially subsidizing an expensive lifestyle, but let’s be clear that “everyone who drives” collectively generated this risk through pollution.

> let’s be clear that “everyone who drives” collectively generated this risk through pollution.

No, let's be clear that everyone who lives in the developed and developing world collectively generated this risk by living in said world.

In the US, the transportation sector as a whole accounts for only 29% of our collective greenhouse gas emissions [0]. Within that sector, passenger cars only account for 20% of the 29%, or 5.8% of our total greenhouse gas emissions in the country.

That's still a lot of greenhouse gases, but it's barely the tip of the iceberg of our total generation in the US, and the US itself only accounts for ~12% of the world's emissions.

Picking on passenger cars for pollution is similar to picking on green lawns during drought: sure, it's something that your average Joe can stop doing to feel like they're helping, and people who water their lawns make for a fun villain if you're into that kind of thing, but even if you managed to get that use case down to 0% of what it is currently you wouldn't even have begun to solve the actual problem.

[0] https://www.epa.gov/ghgemissions/sources-greenhouse-gas-emis...

> In the US, the transportation sector as a whole accounts for only 29% of our collective greenhouse gas emissions [0]. Within that sector, passenger cars only account for 20% of the 29%, or 5.8% of our total greenhouse gas emissions in the country.

You need to account for light duty trucks here too. Merely including "passenger cars" is wrong since enormous numbers of Americans are driving pickups/SUVs/etc as their personal vehicles. That would push personal transportation to 16.5% of our total GHG emissions.

True, but that's a separate category for two reasons:

1) Because the emissions profiles of said vehicles are dramatically different, and it's unfair to drivers of low-emissions passenger cars to conflate them. "Everyone who drives" can't be said to be equally culpable if the minority that drive SUVs and trucks produce more than 2/3 of personal-transportation emissions.

2) Because the usage profiles are different. Yes, many light trucks are driven as personal vehicles, but they're also used for real work that even non-drivers are reaping the benefits from. When the cable guy or the plumber comes to your apartment building to make a repair, they come in a light truck.

I wish the numbers broke down emissions by usage type instead of or in addition to vehicle type, but we don't have that. As is, I'm comfortable saying that somewhere between 5.8% and 16.5% of our emissions come from personal transportation, and I don't believe that that alters my argument in any meaningful way.

By that logic you could further include semi trucks that deliver groceries by extension. Pick your side.

I'm thoroughly confused. I'm saying that many uses of light trucks (such as plumbers and cable guys) should not be categorized as personal transportation. Why does me excluding such uses lead to a logical extension that includes semi trucks?

Why would you assume that a hybrid scheme would shift that any more or less than the private insurance companies were already doing?

> Leaving it to market also won’t take care of the problem

Why not?

I'm in another discussion on this very site where people (admittedly, not you) are arguing that property owners are "housing providers" because they stand between tenants and asset risk. But in this thread you suggest that at the first whiff of risk the state should step in to subsidize the risk of the wealthiest 1% of the state.

Not the first whiff of risk, a solid look at increasing risk due to climate change. This is one company now, but is an issue which is going to keep hittiong more companies & more home owners.

I wonder why California thinks it needs to implement pricing controls as well as provide its own alternate insurance. Is this latter construct the “public option” equivalent for home insurance? California ought to compete for business with the private companies, not drive them away.

"California" might not think this now but in 1988 at the tail end of a spectacular streak of magical thinking on the part of the electorate these insurance regulations were passed by plebiscite, so it will take either another supermajority plebiscite or a political revolution to fix the regs.

It only requires a majority plebiscite, not a supermajority, to fix.

Note: CA (un)FAIR Plan is not underwritten nor operated by the State of California. It is a state-mandated insurer of last resort run by an association of admitted insurers. If it experiences losses that exceed its assets and reinsurance coverage (which its president has said is a real probability), then every admitted policyholder in CA would be assessed a fee over the course of 1-3 years to cover the gap.

The CA FAIR Plan only offers $300/sq foot to rebuild, which is far less than the $500-1000/sq foot it costs to build new construction in most parts of the state.

In other words: the backstop for the CA FAIR Plan being unable to charge risk-appropriate premiums is an involuntarily assessment of policyholders in lower risk locations.

You'd prefer the government with unlimited resources and little incentive for quality should compete with private enterprise?

in addition you basically get punished for being a good driver with not having a history of rash driving, subsidizing the bad drivers.

wonder if this extends to taking loans. it is a significant moral hazard for the govt to intervene in such a manner

It’s probably more California regulations than the wildfire risk per se?

The direct backyard of my house in Wyoming is Bridger-Teton National Forest, wooded mountainous wilderness for miles with its trees abutting my property. A wildfire in 2012 in the forest came within 1.3 miles of me. I’m insured by State Farm, pay substantially less percentage wise than most places in the country for home insurance and my rate went down this year by about $1K, go figure.

1. Yes the article says that insurance agencies can only look at historic risk, not future risk. So a region becoming more fire prone won’t be reflected.

2. Presumably an area that just experienced a fire is now at lower risk of a repeated burn?

> the article says that insurance agencies can only look at historic risk, not future risk

The article actually doesn't say that, that's a quote from a different article that I linked to above. The article only mentions the increased risk of wildfires and doesn't place any blame on California's regulatory environment at all.

My other comment: https://news.ycombinator.com/item?id=40260160

Yes, and it is also the high construction (replacement) costs in California.

Construction costs here (Teton County, WY) are significantly higher than CA or most places in the US due to labor constraints (we have the highest average per capita income in the US, yet an ~80 : 1 median house price : median yearly income ratio, contractors have to commute in from 50+ miles away because unless you bought your home 20+ years ago it's hard to do so as a tradesperson now, etc). It's hard to construct SFHs here for less than $800/sq ft. The same I would imagine is true of other expensive resort places like Aspen or Park City as well.

My house is insured for more than I bought both the land and house for, as suggested by State Farm themselves due to ludicrous construction costs.

Better title: State Farm to discontinue coverage for 72,000 homes in CA due to risk exposure

Better URL: https://apnews.com/article/california-wildfires-state-farm-i...

Is there anything new here? This article is dated yesterday, but it's citing other news stories from March, which is kinda weird.

Previously: https://news.ycombinator.com/item?id=39804437

The problem with insurance companies in California is that they have no incentive to help the homeowner mitigate wildfires. If you cannot get insurance because the provider leaves, or declines to provide coverage, you must go through the California FAIR Plan. The insurer of last resort. It is a non-voluntary association of carriers who will provide insurance, by law, but it will be extremely expensive.

The core issue, however, is that the FAIR Plan and its associated providers, have no incentive to help a homeowner mitigate their wildfire risk, which could help them get off of a FAIR plan and on to a more traditional insurance policy.

Worse, the software the insurance providers use to calculate risk does not take into account mitigation efforts. Instead it uses county level census data that lumps everyone in a county into the same wildfire risk score.

https://www.cfpnet.com/

CA (un)FAIR Plan is required to periodically attempt to find and place policyholders with alternate carriers if there are options. They operate a clearinghouse to do this.

While the FAIR Plan is not required to help a policyholder mitigate their risk, it does offer up to 14.5% discounts off the wildfire peril premium for those who take mitigation actions prescribed by CA Department of Insurance (CDI), including being a member of a Firewise USA Community in good standing, screening vents with 1/8in metal mesh, etc.

All admitted carriers are also required to consider these mitigations actions when determining premiums; however, most of these rate filings have not yet worked their way through the overly bureaucratic CDI review process.

The bigger trend right now is the Wildfire Prepared Home program, which is the only science-based standard recognized by insurers.

No, that's not correct, otherwise SB 1060 would not be moving through the Senate. It's specifically direct insurance companies to consider mitigation.

You also missed the part that the mitigation is only for vegetation hardening. Nothing about structure specific hardening. Which, even if you did control for the vegetation, which AB38 addressed, you're still not guaranteed a discount.

https://sd13.senate.ca.gov/news/press-release/april-24-2024/...

https://fire.lacounty.gov/wp-content/uploads/2021/07/AB38-In...

Eventually you’re going to see a lot of people just driving without insurance (car insurance is soaring as well as home insurance).

A couple of issues separate car insurance with home insurance. You can still buy a car and drive it without insurance, albeit illegally in most states. With a home you cannot even BUY the home (with a mortgage) without home owners insurance. You could "self-insure" but no lender will give you a mortgage without insurance. Whereas a car dealer will gladly sell you a car with or without insurance.

Eventually, government will mandate insurance before buying the car.

Then people just won’t be able to drive. I think a lot of people don’t see how precarious some people’s lives are now, even with what would have been decent incomes five years ago.

You already do, you just don't know it because it's not something plastered on the windshield. Same thing with driving without a license.

For financed homes, isn’t this a mandatory line item? Banks, especially regional banks in CA, probably really nervous as these polices lapse.

State Farm is like a good neighbor. But they are very particular about who their neighbors are.

Alternate title: Minor change in insurance policies does not affect 99.5% of California homes.

Many insurers are not issuing any new policies, and not renewing policies. Maybe this article focuses on a small part of that, but only demonstrates that the problem is growing.

Reply on news.ycombinator.com