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oh, i don't buy that. insurance is just a numbers game. no matter how much risk there is, they can always raise premiums to cover it.
now, a particular state might be too corrupt or stupid to allow the insurance market to work properly ... but that'd be an issue for that state's legislators to solve. homeowning voters get cranky when you take away their insurance subsidies.
The problem is that there would be enough people getting premium increases so large they just couldn't pay....and then they'd scream bloody murder and then the state\local government would go on TV blaming the evil corporate gougers, threaten fines and even criminal action and drag the insurers through the mud.
This is basically what happened in Florida after the 2004 or 2005 bad hurricane(s) year.
And then you have hurrican Katrina where Trent Lott and others in MS blamed the insurers for not covering storm surge and drug them through the mud even though they paid >99% of claims promptly and with issue. It's the old...don't buy insurance then use political clout to try to force retroactive coverage.
The NFIP has cleaned up their act in recent years regarding things like repetitive loss properties (Places built on 1 in 10 or even more frequent flood plains etc.) so it's not quite as big of a boondoggle but still it's a subsidy that I do not favor.
Good comment about the corrupt and stupid states. There are some states (especially in south coastal areas) where some insurers just refuse to do business given the "environment".
Well look at many states that now have to have state assigned policies to new homeopwner wind strom like many coastal sates.
there is no state that "has to have" that. they choose to have the state intervene because a handful of property owners are unwilling to pay the market rates.
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Even then many insurance companies do not sell in those states and the states actually garanteee for those that do. That is also a reality you don't have to believe unless your affected.
the insurance companies do not sell in those states, because reckless state governments will step in and try and force the insurers to write policies that lose them money. this type of heavy-handed regulation kills the free market.
there is no state that "has to have" that. they choose to have the state intervene because a handful of property owners are unwilling to pay the market rates.
the insurance companies do not sell in those states, because reckless state governments will step in and try and force the insurers to write policies that lose them money. this type of heavy-handed regulation kills the free market.
Yep, that's how FL suppressed homeowners rates for years until the Insurer revolt after the last big round of storms. If you stop writing one type of insurance they will make you leave for ALL types...and oh yeah....they completely control the prices you charge....and yeah they can greatly restrict how quicklly you can leave the state.....
Insurance in unbelievably political and whats crazy is how it can be a disaster in a state for a particular type while the other types are ok.
Example: California
They have a state run Workers' Compensation insurance company. It sells at inadequate rates and the states own dept. of insurance has taken issue with it's financial situation, threatening to close them. lol.
Medical Malpractice insurance in CA? It's absolutely fine.
Go to Georgia a numbe of years back and Medical Malpractice insurance was in crisis (maybe still is?). The state arbitrarily decided they'd only approve increases <7.5% and at the time medical malpractice losses were going up >10% annually...20% in some layers. End result....major shortage in malpractice insurance availablity since they were underpriced.
Though it's not like the insurers are somehow blameless in the matter. They've got the money to pay the good lawyers and set it up so that everything's a series of shell companies and subsidiaries. So every year, the parent company will be crowing about record profits to Wall Street and then using those subsidiaries to claim poverty to state insurance boards with regulatory powers when they come to ask for yet another 30-50% premium increase.
And another instance of homeowner's insurance not making much sense down here. If you're going to purge, wouldn't you keep the lower risk policies in a high risk area?
there is no state that "has to have" that. they choose to have the state intervene because a handful of property owners are unwilling to pay the market rates.
This is not true in FL. In FL Citizens (the state pool for windstorm) is MUCH MORE MONEY than private policies. People only go with Citizens when they have no other choice. Citizens exist because not everyone who wants private insurance can get it NOT because people are price shopping. By law, private insurance is cheaper than Citizens.
Though it's not like the insurers are somehow blameless in the matter. They've got the money to pay the good lawyers and set it up so that everything's a series of shell companies and subsidiaries. So every year, the parent company will be crowing about record profits to Wall Street and then using those subsidiaries to claim poverty to state insurance boards with regulatory powers when they come to ask for yet another 30-50% premium increase.
And another instance of homeowner's insurance not making much sense down here. If you're going to purge, wouldn't you keep the lower risk policies in a high risk area?
1. The premium increases are justified based upon losses etc. NOT the assets of the company. You don't get increases by crying poverty, you get them by showing that the policies are insufficiently priced.
2. How is State Farm dong on the old wall street stock market? (trick question) People have not been making money selling homeowners insurance in FL....hence the crisis. Now, they will only write the lower risk stuff and leave the garbage to Citizens which is still underpriced and subsidized by the taxpayers.
3. Your article references exceptions and it's expensive and impractical for companies to 1 by 1 underwrite homes like that....so it's just easier to exit high risk areas.
This is not true in FL. In FL Citizens (the state pool for windstorm) is MUCH MORE MONEY than private policies. People only go with Citizens when they have no other choice. Citizens exist because not everyone who wants private insurance can get it NOT because people are price shopping. By law, private insurance is cheaper than Citizens.
all you're saying is that the low-risk people in Florida are covered by the cheaper private policies, while the high-risk people in Florida can't get private policies, because the state won't let private firms charge rates that reflect true Florida risk.
so to fix this, Florida had the genius idea to set up a state liability of $2trillion for those high-risk properties, charging below market rates.
according to this report, the "Florida Citizens" plan has all sorts of tax benefits and special instruments to create state debt, that a private insurer does not. this is state subsidized insurance. they do not "have to" have this, they are just unwilling to let markets charge what should be charged.
all you're saying is that the low-risk people in Florida are covered by the cheaper private policies, while the high-risk people in Florida can't get private policies, because the state won't let private firms charge rates that reflect true Florida risk.
so to fix this, Florida had the genius idea to set up a state liability of $2trillion for those high-risk properties, charging below market rates.
according to this report, the "Florida Citizens" plan has all sorts of tax benefits and special instruments to create state debt, that a private insurer does not. this is state subsidized insurance. they do not "have to" have this, they are just unwilling to let markets charge what should be charged.
I think it's a combination of the state being unwilling to allow markets charge what they need AND the high risk of nature of the state in general.
I think it's a combination of the state being unwilling to allow markets charge what they need AND the high risk of nature of the state in general.
You and Le roi are both correct.
The politicians in FL helped push a lot of building and development and in order to faciliate that held down insurance rates. Even after Andrew I recall they passed then repealed tougher building codes because it was "too expensive".
So they put a lid on the pressure cooker of how and where people should be building and the resultant insurance costs and voila it finally popped.
So, at that point the state decided to continue to subsidize higher risk insurance rates on the backs of the whole state's residents and tax payers for political reasons....while blaming the entire crisis on the insurers.
What's really cool is that all the homeowners rates have to be state approved...then the state claimed "gouging" lmao. Crist shouldn't be elected dog-catcher...and lo and behold after all the chest puffing and posturing they completely caved to State Farm whom they said were gouging. Yay, they gave a rate increase to a company they said was gouging.
all you're saying is that the low-risk people in Florida are covered by the cheaper private policies, while the high-risk people in Florida can't get private policies, because the state won't let private firms charge rates that reflect true Florida risk.
so to fix this, Florida had the genius idea to set up a state liability of $2trillion for those high-risk properties, charging below market rates.
according to this report, the "Florida Citizens" plan has all sorts of tax benefits and special instruments to create state debt, that a private insurer does not. this is state subsidized insurance. they do not "have to" have this, they are just unwilling to let markets charge what should be charged.
And don't forget, they paid Warren Buffet something like $200million for a line of credit in case a hurricane occurred because they knew they'd have no way of getting the money raised to pay people promptly.
I think it's state law that you have to be paid in something like 60 days....the state isn't going to be able to scrape up 20-30billion in 60 days...via assessment and bond offering.
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