How does anyone think an insurance market should work?
California previously did not let insurance companies factor in current or future risks when deciding how to price their policies.
Not like that maybe?
Three months ago, he had received a letter from his insurer, State Farm, that his fire policy wasn’t being renewed.
Isn’t that a surprise?
The letter advised him to get fire insurance through California’s Fair plan, created by lawmakers 50 years ago to help people who had no other options for insurance.
OK:
As of last Friday, the Fair Plan had just $377m available to pay claims, according to the office of the senator Alex Padilla, and policies only cover basic property damage within a $3m range.
It’s too soon to know if Fair has enough reserves to pay out the billions it may soon owe.
Oh, you mean politically set prices didn’t cover the costs?
“Since the Fair Plan is run by the government, I’m sure they’ll try to craft the remedy,” Coffey said. “But unfortunately, that cost is going to be borne by taxpayers, either statewide or federally.”
My word, that is a surprise.
Don’t let politicians set prices.
There is a new build house in the Pallisades that looks untouched standing out from the rubble. Suggesting that once they’re all rebuilt with modern regs the risk will actually be considerably lower in the future.
Well the risk in the short to medium term is very low – there’s nothing left to burn and the under brush will take time to re-establish.
California previously did not let insurance companies factor in current or future risks when deciding how to price their policies.
Say what now? Might I enquire how else one prices an insurance policy?
Marius: « Might I enquire how else one prices an insurance policy? »
…ninethly,….etc. etc.
“ But unfortunately, that cost is going to be borne by taxpayers, either statewide or federally.””
My money is on The Donald using a few choice words if they come looking for federal funds. If love to be a fly on that wall.
“My money is on The Donald using a few choice words if they come looking for federal funds.”
Indeed, it’s not like Commifornia is a hotbed of MAGA supporters.
If The Donald refuses California federal funding on the entirely reasonable and accurate grounds that the disastrous loss was self-inflicted as a direct result of state government policy, it may have the potential to bring the entire Californian Democrat edifice tumbling down, because recovery is going to require a hell of a tax hike. Plenty of those who can will simply leg it to other states.
Finally, finally, the Progressive idiots get a taste of the consequences of their luxury beliefs.
“did not let insurance companies factor in current or future risks”
So now they can factor in (very recent) past risks they premiums can go up? But is there anything left to insure, any insurers still standing?
Borow was one of 1,626 State Farm customers in the Palisades neighborhood whose fire insurance was not renewed at the end of 2024, according to California’s insurance office
quickly followed by:-
Borow is hopeful that Fair will pay out for his claim, and that he may get some supplemental funds from State Farm.
Hello? State Farm? Look I know that my insurance cover with you had already ended but I’d still appreciate supplemental funds for something that’s happened in the meanwhile.
What? Listen buddy, I DESERVE to be given millions of other peoples money because I’m better than them and I drive a Tesla.
https://vigilantnews.com/post/bone-chilling-conspiracy-theory-emerges-as-california-burns/
Cracking bit of tin-hattery.
The only thing less likely than this being true is the belief that California would be capable of building anything in time for 2028. The environmental impact assessment process would take decades longer than that.
If DJT wasn’t about to clear house I’d have been tempted to form a “not-for-profit” called Friends of the Delta Smelt and apply for funding under the next multi-trillion democrat infrastructure recovery bill. I’m sure I could persuade a couple of local two-spirits (or is one sufficient? I’m not quite clear how it works) to act as my spokesperson(s).
I’d be interested to know about the valuations on those properties. If you were considering buying a property & found no insurance company would cover it, what difference would that make to your bid?
Like I always say, the concept of “value” is a fiction. There is only price discovered in a transaction. So what was the price of properties changing hands recently? Not what real estate broker thought they were worth some years ago. The ball game changed. Insurance companies seemed to believe they had little value, didn’t they? Or they would have offered insurance on them.
BiS – I don’t follow your reasoning there. If a property is legit worth $5M but I’m not allowed to charge enough to cover the risk, I wouldn’t insure it. If there’s a 1% chance of a total loss, I need to charge $50k (plus a bit for admin, etc.). If the State will only let me charge $40k I’m out, even if the $5M valuation is legit.
@Estaban
Then it’s not worth $5m is it? Think of it in terms of utility value. The value of being able to live in the house less the chances of not being able to gain that benefit because it burns down. If the insurance companies won’t cover that risk for any reason, the value’s wrong.
In other words, when California introduced that insurance cap it immediately devalued all those houses. Whether people realised that’s another matter. But that’s what happened.
It’s a fire ecology, like most of the Mediterranean littoral. The vegetation is adapted to fire.
Fires in France or Greece occasionally make the news, in Spain, Italy or the Balkans almost never. I surmise that this is due to differences in forest management.
“In the short-term, the Los Angeles county insurance commissioner, Ricardo Lara, said he has used his moratorium power to prevent insurance companies from canceling or not renewing home coverage for Los Angeles wildfire victims in affected zip codes over the next year.”
Not only can you not charge adequately for the service, now you can’t even decline to provide the service? I guess it’s the logical next step if you’re a moron….
Think of the insurance company as a proxy for a buyer. Because that’s what insurance companies are. At $3½m with a $40k premium they might have considered it a good risk. But not at $5m. So it’s worth $3½m.
So lots of Commiefornia state-level insurance companies (and the state-level subsidiaries of larger ones) having the corporate equivalent of “it burned down all by itself, guv, honest!” and declaring bankruptcy?
in Spain, Italy or the Balkans almost never.
You obviously don’t read the papers. We had some serious wild fires last summer. Some enormous ones, couple of years back. Sky to the south of me was black in the day & red at night.
They’re the result of prosperity. Nobody keeps goats anymore. At one time those hillsides were kept bare by people gathering firewood & grazing goats on them. Unfortunately Brit second home buyers don’t gather firewood or keep goats but do like leafy gardens around the house.
I own a bit of land up in the mountains. I let one of the guys up there graze his goats on it. If I didn’t, it’d be a tinder box.
‘At one time those hillsides were kept bare by people gathering firewood & grazing goats on them.’
BiS. I noticed that during my trip to Greece, many many years ago.
As for Brisbane today, I wandered down to Gallipoli Road to look at the huge tree that had fallen on a house after the storm yesterday. Evidently the owner had been trying to get the council to cut it down for a long long time.
@BiS
all that heat from the fires and smoke has an effect on the world environment.
a totally different effect from turning the scrub and underbrush into goat (and then eating it), or using the wood to keep warm in winter.
It’s man made climate change innit, just not the type that the loons are prepared to discuss.
BiS. If you can’t get insurance you won’t get a mortgage, limiting your market to those who can either pay cash or whom you’re willing to finance yourself. Prices would have to come down, though if you carry the mortgage you might get a higher price than from a cash buyer while shouldering more risk.
Oh that ain’t the half of it. The infantile Governor has announced an Executive Order to cover the construction industry as it prepares to repair or rebuild. He is going to forbid “price gouging” on what they can charge.
That takes the biscuit, eh? He’s a Bourbon – learnt nothing and forgotten nothing.
Dearieme That might work if your goal is to limit what gets rebuilt
What these woodlands need is a grazing animal as unfussy as a goat and which tastes like bacon. Genetic techies, get on it.
Boar.
Problem is, they can be quite dangerous.
But not as dangerous as a Democratic Insurance Commissiioner
@TD
That’s why I’m interested in those “values”. I suspect what we are being told is largely historic
Value is not the same as price – except to an accountant or to a Russian (the Russian language uses the same word for “price” and “value” which is one of the reasons why the Soviet union failed). e.g. the value of our (nominally four-bedroom) house has gone down since the boys left home but its price has reportedly doubled.
Bis, with fire insurance one generally insures the cost of rebuilding. First house I owned was a Coronation Street two up two down in Moss Side. A fine working class property for 1900 and, while freehold, came with a feudal chief rent. Just after the local “troubles”. Consequently the insured value was about 4 times what I paid.
As consolation, if you own an uninsured two-bedroom two-million-dollar house on a fifth of an acre in Palisades and it burns up, you will still have a fifth-acre lot in Palisades, which will account for a big portion of the home value.
And if CA is waiving parts of the permission process for teardown and rebuild, the land value might even go up from there. Permitting fees for a teardown and a build can be huge.
So, yeah, you’re forced to move unless you can finance the rebuild, but you’re not broke. You sell your million-dollar lot.
BIS,
“They’re the result of prosperity. Nobody keeps goats anymore. ”
Also, in these parts of California they used to be where the poor people were who lived poor agricultural lifestyles, where you kept animals, and you regularly burned parts of the land to prevent fires and made sure to not have your washing out for those days.
Along come cars and bad inner cities and people move to these areas. But they want it like the refined city lifestyle.
I’m waiting for the historical preservation societies to say “You have to rebuild them the exact same way as they were before. Revised fire codes? Nope.”
Admittedly it is California, so perhaps those societies don’t have quite the same power they do in Europe.
It’s California, so the only buildings older than ‘Victorian’ (the term used in the US, too) are a handful of Spanish Missions. In Hollywood and adjacent areas, I doubt there’s anything over 100 years of age.
@bloke in spain – “In other words, when California introduced that insurance cap it immediately devalued all those houses.”
I disagree. If you are about to buy a property for $5M, and the fair insurance price is $50K, then you pay $5M, plus $50K/year after. If regulations prevent you getting insurance (e.g. capped at $40K so no takers), the property is still worth exactly the same except you must self-insure, saving $50K/year but bearing the risk. If you are rich enough, this is what you should be doing anyway. An insurance company average out the risk across policies, taking a fee for the work. If destruction of your property would be financially devastating to you, you should get insurance, but if you could personally afford to just buy another and sell the lot, then you don’t need the averaging and are paying an unnecessary fee when insuring.
This is the same principle which says that for most people insuring a phone, washing machine or similar device is poor value. You insure your motor vehicle because it is a legal requirement, and your house because for the vast majority of people losing it would be financially disastrous.