Allstate Now Increasing Home Insurance Rates in California by 34% | Hacker News Reader

Allstate Now Increasing Home Insurance Rates in California by 34%

franknez.com

35 pointspaulpauper18 comments

Cali is tough- the regulator is really standing in the way of a functioning market and is driving insurers away... Allstate stopped writing new policies in Nov 2022 and said they would pull out of the state entirely unless they could increase rates drastically... so they were allowed this increase.

The 2017 and 2018 wildfire seasons wiped out nearly two times the combined underwriting profits for California homeowners’ insurers for the prior 26 years… it’s acceptable to have large losses in this business but you need to have years of gains to offset them. CA is the only state that doesn’t allow for consideration of reinsurance costs in ratemaking.

CA requires insurers to underwrite using historical data from the past 20 years (which doesn’t include housing growth in high-risk regions or increased fuel load following years of drought and poor fire suppression strategies) to determine catastrophe losses vs predictively modeled data incorporating climate change. It is the only state that disallows forward-looking models when pricing wildfire risk.

Until California does something to ensure that the prices of insurance reflect the risk (letting them use modern catastrophe models, letting them price in reinsurance, approving rate filings in a timely manner), insurers will continue non-renewing folks and pulling out of the state altogether. It filed the rate increase in April 2023 and was just approved. In the meantime, Allstate has not added a single new homeowner in the state.

Wouldn't the prior 26 years in california include multiple huge wildfires?

I suspect they’re getting more and more frequent so the last 26 years alone don’t accurately model the future risk.

Not only that, they’re getting worse. Look at the list of the 20 most destructive wildfires:

https://en.wikipedia.org/wiki/List_of_California_wildfires?w...

And check the years. All but 1 are in the past 25 years.

Costs for construction are also way up.

Having worked in general insurance for a number of years a decade or so ago, it is no surprise to me that this is happening and while California being a canary may relate to their own particular regulatory regime, the underlying fact is that localised impacts of climate change across the world has been and will continue to drive insurance premium increases. If you really want to peek through a window into the future when it comes to risk, just look at what insurance industry actuaries are predicting.

I mean, I was born in California and lived there as a young kid and until recently moved out. Climate change may be playing a part, but nobody wants to admit that the towns that burned down were tinder boxes. I’ve been to Paradise many times years before it burned and the many others in the Sierra, I always thought, this whole place is going to go up in flames, why would you build here? Of course, it did.

You might still be able to go to the library and pull up the microfilm, the old newspaper articles show wildfires were a regular occurrence and many of the same towns burned down a century ago. Either this has buried on purpose or property owners don’t want to confront uncomfortable facts.

> property owners don’t want to confront uncomfortable facts.

This seems to be a constant around the world. Just look at how many towns have been built closer to Vesuvius than Pompeii: https://www.openstreetmap.org/?mlat=40.75&mlon=14.49

California has intentionally been building up more and more organic material to burn due to neglectful forest management. The state government has a budget the size of Finland, but they don’t know how to spend money effectively.

A. Most of the forests are national forests not state land. The 10 o’clock rule was a nationwide wildfire policy.

B. Every western state is facing the problems with increased wildfire.

Oh but let’s bash California because its in vogue.

> just look at what insurance industry actuaries are predicting.

Could you recommend a good source for that? Preferably also for Europe?

North American actuaries have developed two localised indexes - the Actuaries Climate Index and the Actuaries Climate Risk Index [0].

“The Actuaries Climate Index (ACI) measures the frequency of extreme climate events over recent decades for the U.S., Canada and 12 sub regions in North America.”

“The Actuaries Climate Risk Index (ACRI) illustrates the economic impact of climate risk and its evolution over time.”

There is work being done to develop a European ACI [1]. Australia has its own AACI [2].

[0] https://content.naic.org/cipr-topics/actuaries-climate-index

[1] https://web.actuaries.ie/development-european-actuaries-clim...

[2] https://www.actuaries.digital/category/climate-change/aaci/

I had expected these rate increases to come a decade ago, to prevent losses. Why do they end up being purely reactive ?

insurrane damage risk models are the most unideologic models of reality available. you can deny climatechange all you want, but change can deny you coverage.

Seems to be mostly due to the rising cost of replacing household appliances, which are experiencing huge price increases.

“Higher home values and repair costs coupled with more frequent, severe weather lead to higher payments to help customers recover, so we need to adjust rates to better reflect the cost of protecting our customers,” a company spokesperson said in a statement.

Or maybe it is related to the increased building in the WUI. It looks like there are around 15 million new houses built in the interface area than there were 30 years ago.

I'm so glad my appliances are made in Japan.

Still, I didn't think appliance failure out-of-warranty was covered by homeowners' insurance.

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