> California home insurance companies’ return on net worth ... was three percentage points higher than the national average ... [and] the last five years were even better.
This is a fairly classic statistics mistake. If you shrink the insurance market by making it risky and difficult for businesses then the accessible low-margin types shut down and the boutique, highly expensive ones are the last to cling on. High profits in simple businesses like insurance are a sign of unhealthy markets. If anyone could go in and charge what they liked, the rate of profit would be so low that without investing the float insurers would be making a loss.
[0] I admit to making an assumption here. I did at least check for some sort of data although I don't hold myself to any particular standard of interpreting it - https://www.atlas-mag.net/en/article/distribution-of-insuran...
This is a big claim to make unsubstantiated. If it were so profitable, business wouldn't be pulling out.
Looking just at 2022 and 2023, Californian insurers wrote $28.8bn of fire and homeowner policies and experienced a 56.5% loss ratio [1]. If the LA fires cost insurers $30bn [2], that's almost five years' underwriting profits. Over the last ten years, California's homeowner insurers have paid out $108 in claims and expenses for every dollar of premium they brought in [3]. Show me the "healthy profit."
> the FAIR Plan, California’s high-cost, low-benefit state insurer of last resort
Even this stingy model will need a bail-out [2].
This analysis is deeply flawed, starting from the premise that insurers are screwing consumers and then trying to work backwards.
[1] https://www.insurance.ca.gov/01-consumers/120-company/04-mrk...
[2] https://abcnews.go.com/Business/los-angeles-fire-losses-reac...
[3] https://www.iii.org/sites/default/files/triple-i_trends_and_...
[4] https://www.insurancejournal.com/news/west/2025/01/16/808564...
I understand people's frustration at expensive premiums, but increasing the regulatory burden, and instituting price ceilings will only further reduce the number of options available. Also, insurance is a highly competitive industry, with institutionalized competition (enforced by brokers), and it's a bit ridiculous to pretend that clients are loyal to providers.
Maybe, just maybe, it's possible that some places are becoming too expensive to insure and insurance companies are exploiting every loophole they can to maximize their profits?
We should all be able to agree that the actuarial math backing their rates is good. What they do after when it comes to fighting policy payouts is another story
I started my way towards becoming an actuary. If actuarial work requires public disclosure, it stops being worth investing in for competitive advantage.
This entire article is Exhibit A for why Californian homeownership is fucked.
They can have underwriting losses every single year and still be fine.
You can't fix that problem by setting a price cap on insurance; you need to stop the destruction.
Sounds like a load of bull.
Don't take my word for it. There are plenty of professionals and agencies who explain how it can be done[1]. I'm not saying there aren't tradeoffs, but it is definitely possible.
https://www.nifc.gov/fire-information/fire-prevention-educat...
Why aren't multimillionaires doing that?
Not an expert, but the main ingredients seem to be to create a defensible space free of combustibles (trees, brush, foliage, wood piles, wooden fences, etc.) within a perimeter of the house and build the exterior fire-safe materials (tile, slate, sheet iron, aluminum, brick, or stone).
> Why aren't multimillionaires doing that?
I don't think the wealthy have anymore risk foresight than anyone. Almost everything in the system is discouraged from emphasizing catastrophic risk: buyers want a fancy looking traditional house (not a barren yard and unconventional building materials), real-estate agents want to close on as expensive a property as fast as they can, and the municipality is discouraged by owners/voters from forcing expensive fire-safe changes. It's human nature not to learn hard lessons until they directly affect you.
Or I guess everyone can just double down on price controls and “good intentions” to save the day…
We’re about to see how poorly the FAIR plan managed their policy portfolio.
When properties in California become uninsurable due to climate change: This is a capitalist conspiracy by the big corporate insurance companies and the ruling class to exploit a tragedy for profit!