Climate change fueled wildfires cause home and rental insurance rates to surge; State Farm solvency in question.
There! Fixed the headline. Journalism is so hard!
this post was submitted on 30 Jun 2024
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Well, when the media is owned by the same people who own the insurance companies, the headlines tend to be soft.
It's going to be true in parts of the country without wildfires too. For the second summer in a row, we had a devastating storm come through with 80mph+ shear winds which destroyed half the trees in the neighborhood. Obviously they fell on houses and cars. The power was out for a good day and a half and then went out for a good 10 hours again yesterday (we were gone for most of that one thankfully). This morning, a water main broke and I doubt it's coincidence, so we're under a 24-hour boil order now. We lost two of our own trees and it cost $3200 to get them taken care of. One hit the neighbors' garage, but apparently their insurance will have to cover that. Insurance doesn't cover downed trees. How long before they start raising our rates because of these storms causing home damage?
In my personal experience, basically no insurance in America is worth anything.
Nothing you would actually need insurance to cover ends up being covered, or, it covers a huge portion of an absurd cost which is only so absurd because of basically a corrupt cost inflation feedback loop between insurers and providers that you end up personally paying prices that are absurd to all but the very well off.
It ends up just being further cost requirements to basically exist, which means if you are poor fuck you, die.
Oh you want to challenge your insurance and force them to actually cover something?
Hire a lawyer! Those are cheap!
Believe it or not, when branches actually went through our roof a couple of times over the years, insurance did pay for it. They paid for half the garage roof to be re-shingled because of the damage one did.
So I guess it's a crap shoot.
The bigger problem is landlords have already been gouging renters. They aren't just going to absorb this one, if their insurance goes up 30, they will raise rent 40
They are the largest residential homeowners insurers in California, insuring 1 in 5 homes.
"The rate filing that State Farm just made yesterday (Thursday), they're triggering a rarely used part of the insurance law," said Soller.
"It's a regulation meant to address a company's financial solvency. That's what they're saying and we're going to look closely at that, and we have some serious questions about State Farm's financial condition and we're going to get to the bottom of it. "
That actually sounds like a rather bigger deal that I first thought from the title, if they're on the brink of going under...
Climate change and the housing crisis means both the cost of replacing a home AND the likelihood of needing to is going up. They may not be on the brink of going under, but may be trying to avoid getting into that position.
It is an enormous problem. When a property becomes un-insurable it loses value. When that happens to a TON of property it'll have massive knock ons. Something like 1/3rd of all assets in the US are commercial realestate. This next adjustment will not be pretty, and the real irony is a ton of people who got priced out of home ownership in the first place are going to suffer no matter what.
State Farm of California is at risk of insolvency due to the risks associated with home owners insurance there. This has been coming for decades and other insurers have even put multiyear pauses on issuing new policies in the past.
Do the insurance companies shield themselves by dividing into regional/state zones?
Edit: also, because it seems it'd be safer to balance risk v reward across the whole country. (They also invest insurance money in the stock market where most of their profit comes from.) Although, I suppose it'd be easier to grift states of their money when it looks like a subsidiary is failing rather than just looking at the whole balance sheet instead.
Literally every insurance company in California is seeking the same or more.
Been dealing with this in Florida too. Many times you can't even find an insurance policy, regardless of price.
What are folks doing in those cases? Where I live you can't get a mortgage if you don't have proof of insurance and until your loan to value in hits a certain amount the bank basically manages the policy.
Oh, if you can't get insurance, most all mortgages have a clause that says the bank can pick a policy (usually a really expensive one) and you are forced into it. Wonderful, isnt it?
Yeah. I understand this, my question was about what happens when no insurance company wants to insure the property?
No no, the bank doesn't pick a 3rd part company, they will place insurance on the house, usually with a bank subsidiary or other kind of bank entity. Usually is only for replacement value of the house, not theft or anything. It's placed to protect the bank only, and you pay.
They don't get a state farm policy... The bank gets a "this bank insurance company" policy.
Do the jingle!
"Inside your wallet, State farm is there!"
You know, to steal your money. Yeah, I'm wearing khakis.
I wonder what it's like being one of the businesses next to them.