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Let's first talk rate suppression.
If an insurer shows they need a 40% increase to cover expected costs and get a fair return, but regulators only approve 15%, that's a 25% rate suppression.
CA ranks 50th in rate suppression - approving rates 29% below what actuaries show is needed for homeowners insurance.
In plain English: regulators force insurers to sell WAY WAY below cost.
Other states with price controls still let insurers charge closer to actual risk.
A price control near the market price doesn't create much dead weight loss and can accomplish other goals (say favoring buyers)
CA forces the biggest gap between rates and risk in the nation.
The system is also uniquely rigid. CA won't let insurers:
- Use catastrophe models to project future fire risk
- Consider reinsurance costs
A state leading on climate change won't let insurers use climate science to price risk.
Make it make sense.
If it was just the ridiculous under priced price controls, that'd be one thing.
But it's slow slowest system to change as well.
How bad is CA's system?
Over the last 5 years, CA ranks 50th in speed of rate approvals. The avg delay is 236 days for homeowners and 226 days for auto insurance.
That's not a typo.
Why do delays matter?
Insurance is about matching price to risk. When a market can't adjust prices quickly to changing risks (like increasing fires), it breaks down.
Insurers pull back rather than sell at outdated prices.
And it's getting worse.
The avg delay from 2013-2019 was 157 days. More recently? 293 days. When insurers can't adjust rates to risk quickly, they pull back coverage.
The results? State Farm, Allstate, Farmers all pulling back. These homes didn't have insurance canceled on them. The policy wasn't renewed because it was bleeding money.
The state-run FAIR plan growing 90% since 2015.
And now, devastating fires with many uninsured homes.
It's an extremely tragic story but one we've known about for years.
For more info, check out the excellent white paper my colleagues @raylehmannand put out last with Lawrence Powell
laweconcenter.org/wp-content/upl
The catastrophe in California combined with the policy failures is simply a tragedy. There's no other word.
Where could the homeowners get accurate information? The price system could have at least signaled to them the truth about honest risk, which they weren’t going to get anywhere else.
Allowing functioning insurance markets are just one component, but sadly, an ignored one
Good and useful explanation on the virtues of markets. But there are other issues on top that require debate. What about this statement? What’s your opinion on the matter? latimes.com/california/sto
Financial ruin, lawsuits, reputation in tatters, your job on the line. Is THIS the legacy you want? Cyberattacks are REAL, and the stakes are HIGH.
Arm yourself with knowledge BEFORE disaster strikes.
"Cybersecurity Dictionary for Everyone" on Amazon: amazon.com/CYBERSECURITY-![Image](data:image/svg+xml,<svg xmlns="http://www.w3.org/2000/svg" width="1200" height="1007"><rect fill-opacity="0"/></svg>)
I’m honestly curious. Do you think any of the houses that burned in these fires was uninsured?
I remember when this proposition was being debated in the late 80s and it was basically every insurance company is greedy and only a good and gracious government bureaucracy can save us. And that’s what happened.
This is one of the best explanations I’ve read on the problems with CA’s governmental overreach in insurance
Good.
As an insurance person w expertise in predicting cost consequences, this is a path to NO (private) insurance company will remain in California based on actuarial rules and standard accounting practices required by regulators and prudent practices.
Market based insurance of some risks may be incompatible with political reality in the short run, until they vaporize State of California finances by being de facto reinsurer of last resort, with all the risk generated by moral hazard due to politics blowing back on politicians.
Despite low emissions, Pakistan is at high risk from climate challenges
Is Pakistan's climate crisis solution electric vehicles?
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#ClimateCrisis | #ElectricVehicles | #SustainableFuture
Could be mismanagement, ignorance, incompetence, OR it could be intentional. Why would someone want this particular patch of ground to be leveled and the people to be displaced without compensation? Is it just for the chaos? Seems to me that having zero fire protection during
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Because California fucked them so they pulled out of the state you lying cunt.
What even are "normal insurance price controls"?
Why would it be normal to try to control insurance prices?
So it lots of other states are suppressing rates too, sounds like insurance commissions think they can get other states to subsidize their homeowners.
CA's Prop 103 is a total mess, price controls leading to uninsured homes, a classic case of government intervention backfiring
Same thing happening in NJ. Insurer dropping me for ridiculous reasons while simultaneously saying the state is not approving 40 percent rate hike
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ONLY the CPUC approves any/all rate increases that cross their desk. 
One thing I am confused is how these insurances price. The risk of burning is just so correlated in the given area. Insurance companies cannot diversify the risk. I suppose there needs to be some fence that blocks fire from one to another. Otherwise insurance companies bankrupt
Financial ruin, lawsuits, reputation in tatters, your job on the line. Is THIS the legacy you want? Cyberattacks are REAL, and the stakes are HIGH.
Arm yourself with knowledge BEFORE disaster strikes.
"Cybersecurity Dictionary for Everyone" on Amazon: amazon.com/CYBERSECURITY-
if you put the government in charge of the Sahara, soon there'd be a shortage of sand
GIF
“Total dysfunction” is now synonymous to California Politicians. This Confederacy of Dunces would be a hit comedy if it weren’t for the fact that they are literally murdering citizens with their incompetence.
Love the thread.
My only disagreement is in the words… “it was a tragedy”. It was gross incompetence.
The people… the ideology… the government… the economic incentives… everything about Califormia is unhealthy.
It has become a case study on how a society fails.
Who's the chick in your picture?
Just kidding dude. This is some seriously good information. Thanks! Is it OK if I retweet and post a link elsewhere?
Doi head is elected, and that is an idiotic way to place that particular position.
I guess the problem in FL is too high of premiums so no one get insured as well.. ie your analysis is incredibly dumb
The ideological takeover of the state and the derivative intervention of failed and sectarian ideas in economic freedom always go wrong.
The biggest victims of Ukraine war are christians.Zelensky is murdering priests, blowing up churches while Biden is replacing all the christian ethics that have kept American families safe and righteous with woke virus.
I will serve the Lord at all cost.
latimes.com/world-nation/s
Readers added context to this image
This photo is from Egypt in 2017. The Islamic State (IS) extremist group claimed responsibility for the attack:
rferl.org/a/egypt-bombin…
Russian Forces have been killing Ukrainian Priests:
thetablet.co.uk/news/18436/cle…
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Insurance companies employ ecologists who are way smarter than you as they know this kind of fire was imminent and cannot be stopped
