Does this mean that homeowners in safe areas will need to subsidize the premiums of homeowners building or staying in places they know will burn again?
Does this mean that homeowners in safe areas will need to subsidize the premiums of homeowners building or staying in places they know will burn again?
It's a bit more complicated than the other response/quote from the article, but the answer is Yes. All insurance is a risk pool, your car insurance isn't just paying for your likelihood of needing...
It's a bit more complicated than the other response/quote from the article, but the answer is Yes.
All insurance is a risk pool, your car insurance isn't just paying for your likelihood of needing to use it, but also a portion of the triple-DUI driver's likelihood, your health insurance doesn't care if you run a 5k every day, you're still paying for the person that drinks a bottle of cheap gin and smokes a pack of cigarettes a day, and so on and so forth.
Until this new law kicks in insurers in California aren't allowed to pass on the cost of reinsurance on to consumers in California; reinsurance is insurance for insurance companies that they take out to not have catastrophic loss when the ever increasing massive catastrophes cause them to pay out vast quantities. So they stopped writing policies in California high-risk areas (or altogether) since no business is going to purposefully operate in a high-risk no-reward market.
I largely blame the controlled-burn NIMBYs and the pull they have with the various agencies to prevent these catastrophic fires from occurring. Paradise, CA, mentioned in the article regarding the 2018 fire that destroyed 90% of the town of 26,000 and still hasn't recovered (2020 population was about 4.5k), was "an island of relative affordability in expensive California", but because no disaster will go unpunished, that is largely gone now. New building regulations, insurance costs, and the price of losing everything, leaving, and trying to come back means it's quickly becoming just another rich people's mountain town.
The rule will require home insurers to offer coverage in high-risk areas, something the state has never done, Insurance Commissioner Ricardo Lara’s office said in a statement. Insurers will have to start increasing their coverage by 5% every two years until they hit the equivalent of 85% of their market share. That means if an insurer writes 20 out of every 100 state policies, they’d need to write 17 in a high-risk area, Lara’s office said.
What I don't quite get is this section of the article. Sure insurers will now be able to pass on the cost of reinsurance to consumers and might re-enter the market because of that, but they're going to have to eventually have an 85% high-risk portfolio? Who the hell would do that? Who the hell in a non-high-risk area could afford to subsidize the 85% of high-risk policies?
The article's phrasing seems to be poor, but the general description sounds like it's demanding relative parity of market share rather than number of contracts. An insurer with a 10% market share...
Sure insurers will now be able to pass on the cost of reinsurance to consumers and might re-enter the market because of that, but they're going to have to eventually have an 85% high-risk portfolio? Who the hell would do that?
The article's phrasing seems to be poor, but the general description sounds like it's demanding relative parity of market share rather than number of contracts. An insurer with a 10% market share overall in the states must (eventually) have a market share of 8.5% in the high-risk segment.
The phrasing is poor, but I understood it. I'm just struggling with how they're expecting insurance to be affordable at all if eventually 85% of every California insurer's market share has to be...
The phrasing is poor, but I understood it. I'm just struggling with how they're expecting insurance to be affordable at all if eventually 85% of every California insurer's market share has to be high-risk.
No, what you're writing down is still showing that you don't understand. Let's say there are 1000 low-risk houses and 100 high-risk houses in California. If Company X insures 100 of the 1000...
No, what you're writing down is still showing that you don't understand. Let's say there are 1000 low-risk houses and 100 high-risk houses in California. If Company X insures 100 of the 1000 low-risk houses, they would then need to insure 8.5 of the 100 high-risk houses.
In the end, they would insure 108.5 houses total, and 7.8% of everything that they insure would be high risk.
It's 85% of their percentage market share of the rest of the California, not 85% of their total market share.
Does this mean that homeowners in safe areas will need to subsidize the premiums of homeowners building or staying in places they know will burn again?
It's a bit more complicated than the other response/quote from the article, but the answer is Yes.
All insurance is a risk pool, your car insurance isn't just paying for your likelihood of needing to use it, but also a portion of the triple-DUI driver's likelihood, your health insurance doesn't care if you run a 5k every day, you're still paying for the person that drinks a bottle of cheap gin and smokes a pack of cigarettes a day, and so on and so forth.
Until this new law kicks in insurers in California aren't allowed to pass on the cost of reinsurance on to consumers in California; reinsurance is insurance for insurance companies that they take out to not have catastrophic loss when the ever increasing massive catastrophes cause them to pay out vast quantities. So they stopped writing policies in California high-risk areas (or altogether) since no business is going to purposefully operate in a high-risk no-reward market.
I largely blame the controlled-burn NIMBYs and the pull they have with the various agencies to prevent these catastrophic fires from occurring. Paradise, CA, mentioned in the article regarding the 2018 fire that destroyed 90% of the town of 26,000 and still hasn't recovered (2020 population was about 4.5k), was "an island of relative affordability in expensive California", but because no disaster will go unpunished, that is largely gone now. New building regulations, insurance costs, and the price of losing everything, leaving, and trying to come back means it's quickly becoming just another rich people's mountain town.
What I don't quite get is this section of the article. Sure insurers will now be able to pass on the cost of reinsurance to consumers and might re-enter the market because of that, but they're going to have to eventually have an 85% high-risk portfolio? Who the hell would do that? Who the hell in a non-high-risk area could afford to subsidize the 85% of high-risk policies?
The article's phrasing seems to be poor, but the general description sounds like it's demanding relative parity of market share rather than number of contracts. An insurer with a 10% market share overall in the states must (eventually) have a market share of 8.5% in the high-risk segment.
The phrasing is poor, but I understood it. I'm just struggling with how they're expecting insurance to be affordable at all if eventually 85% of every California insurer's market share has to be high-risk.
No, what you're writing down is still showing that you don't understand. Let's say there are 1000 low-risk houses and 100 high-risk houses in California. If Company X insures 100 of the 1000 low-risk houses, they would then need to insure 8.5 of the 100 high-risk houses.
In the end, they would insure 108.5 houses total, and 7.8% of everything that they insure would be high risk.
It's 85% of their percentage market share of the rest of the California, not 85% of their total market share.
Ahh, that makes much more sense. Thank you.
Yes, but which policyholders?