Insurance companies pulling out of risk areas

[Pellice]

I do not think it will be possible to confine higher costs to more risky zip codes. Well, to qualify that, those areas DO pay higher premiums for insurance. But costs do now and will continue to spill into areas that see themselves as substantially less risky. States cannot let real estate markets collapse without endangering the state's entire economy. And what about infrastructure? The whole state pays for raising bridges and roads, moving sewage treatment plants, stabilizing shorelines. And many major cities are located in danger zones.

This country as a whole has a large number and variety of natural disasters. There aren't that many areas that can call themselves exempt or say they will "never" need help.

My hope is that "we" (and who is that?) can gradually ease people out of the most risky areas (though most show no signs of willingness to do so), somehow fund sensible upgrades to infrastructure and come up with some sticks and carrots for better building. But the challenges - the diminishing water in the west, the encroaching water along the coasts, the anticipation of disruptions caused by global warming - are not the sort that can be met with a one-time solution.

Right now, the most common action is to wait for something to happen, then try to mitigate it. I anticipate that will continue.

 

[MichealKnight]

Fearless prediction for funny strange bedfellows one day in the future..... and I am *not* mentioning names. But....

Imagine one day. Florida and California will join forces to get some fort of comprehensive Federal Government administered homeowner and property insurance established.

 

[OldShooter]

Fearless prediction for funny strange bedfellows one day in the future..... and I am *not* mentioning names. But.... Imagine one day. Florida and California will join forces to get some fort of comprehensive Federal Government administered homeowner and property insurance established.

Not at all unlikely. In our state, the inner city legislators and the rural legislators have banded together to extract "local government aid" from the rest of us.

And we'll soon see the desert dwellers banding together to steal water from places who have more of it. After all, they've got a God-given right to grow cotton and build semiconductor fabs anywhere they like.

 

[ownyourfuture]

Tell that to the Weather Channel! They report hurricanes off the Pacific Coast of Mexico all the time.

The weather channel

 

[ownyourfuture]

So I'm going to challenge the narrative that "all weather is worse" when it comes to tornadoes.

I will also present to you this graph, directly from NOAA, which you can also generate. This is not some whack job's graph, it is direct from NOAA:
https://www.ncei.noaa.gov/access/monitoring/tornadoes/

Very interesting. Thanks for posting.

 

[Markola]

Not at all unlikely. In our state, the inner city legislators and the rural legislators have banded together to extract "local government aid" from the rest of us.



And we'll soon see the desert dwellers banding together to steal water from places who have more of it. After all, they've got a God-given right to grow cotton and build semiconductor fabs anywhere they like.

Or states collaborating to prevent such a thing. Every few years, someone tries to build a pipeline from the Great Lakes to the Desert SW, so Great Lakes states banded together to disallow water from leaving the watershed.

 

[NW-Bound]

I think our society would benefit overall if we left certain areas more natural and only used them for activities that would not be a dangerous and expensive disaster if they were interrupted by a nature event...

It may be hard to quantify and classify different areas in terms of hazard levels. Looks to me there is danger everywhere, with some of the recent ones unanticipated, e.g. the Maui fire, the various California wild fires and flooding, etc... Where do you find safety? Here in AZ, we don't have tornadoes, earthquakes or hurricanes, but have the drought which is also a natural disaster.

If you find some safe areas and pile all of the US population of 330 million there, it's going to be pretty crowded.

Plus, these disaster-prone areas are often productive in other aspects, such as agricultural activities in California. I assume that people grow "stuff" in certain places because it is better to do it there due to the climate.

 

[ncbill]

Tell that to the Weather Channel! They report hurricanes off the Pacific Coast of Mexico all the time.

IIRC, hurricanes regularly hit southern California as late as the first half of the 19th century.

With the recent tropical storm I wonder if the above will make a comeback?

 

[teej1985]

A bit of a tangent off the topic: But along the same lines (of eliminating higher insurance risks), how long before "they" start reducing Medicare or other insurance coverage/payments for smoker and/or drinker, etc related aliments?


Many lifestyles can be classified as a risk areas too, similar to where you choose to live.

Medigap already charges higher rates for smokers. I'm not sure the population would support adding drinker surcharges.

 

[Markola]

Probably only tangential to insurance company decisions but FEMA just identified, with an interactive map, the places where it is focusing on providing help to the most vulnerable populations in anticipation of ongoing effects of climate change:

https://www.fema.gov/press-release/...mmunities-receive-targeted-assistance-hazards

 

[Gumby]

I was unable to find out precisely why the one zone in CT was identified. It's not one of the obvious places.

 

[Montecfo]

I can see where they do not like hurricane coverage as a big hurricane can damage so many homes you are covering...


And I bet that the people in Nebraska do not want to pay higher premiums to cover Florida's problems...


Fires used to not be a big problem AFAIK... maybe in California they were but it seems like the big fires are getting bigger and doing a lot more damage..


Think about it a bit.. I saw where premiums might be $6000 per year in Florida... so if you have a $350,000 house that means it would take more than 58 years to get enough to replace your house if destroyed... some places seem to get hit way more often...

They keep developing to edge of susceptible forest land. Unmanaged forests with little fire mitigation. What could go wrong?

 

[Markola]

I was unable to find out precisely why the one zone in CT was identified. It's not one of the obvious places.

Every state has at least one zone by design. Gotta make every Senator happy.

 

[Countdown To Freedom]

As someone who recently retired from the insurance industry from a national carrier, I can tell you that most of us were completely stymied a few years back when our employer decided to make a huge new business push in Texas and unleashed a giant marketing blitz there. Between hurricanes, hailstorms and the crazy ice storms that caused water damage due to pipes freezing and hot water heaters exploding, Texas, from an insurance standpoint, was insanity and we had no idea why the company freely chose to go in that direction. So, when I heard a month or so ago from my former co-workers that the company is now slowly ceasing to court new business in Texas, as well as Florida and California....well, after all the natural disasters lately in those places, let's just say I was not surprised.

And regarding premium rates, I remember reading many years ago that some folks in Cape Cod/Barnstable County MA were demanding that their homeowners' insurance premiums be equal to those who reside in Central MA/Worcester County, because " we all live in MA and it wasn't fair that we should be punished for living on Cape Cod". Well, they chose to live near the water and assume the risks living near it, so naturally they would pay more in premiums than someone who lives further inland and has less risk. That's just common sense.

 

[indiajust]

Some of the insurance co. concerns are around pricing for construction cost advances. A stick built 60's modernist house likely can't get labor to rebuild at any price. Some states are using the legal system to cap/contain price increases.

Then there are places like Florida that offer socialized insurance plans, which underprice the market and push costs onto taxpayers instead of homeowners. NC tends to do a similar thing with auto insurance.

With this many thumbs on scales, plus mandatory insurance laws, its not a surprise to find markets disappearing in favor of protectionist legislation. It will be messy.

 

[mickeyd]

I think you misunderstand me. I am not saying that they don't pay legitimate claims. I'm saying that they only make money if claims do not exceed premiums (plus a little investment income). Therefore, if people can/will only pay X in premiums, as an insurer I want to make sure I have <X in claims, so I will avoid high risk areas because I can't charge enough for that risk.

What Gumby says is spot on. P&C insurance companies are not charitable organizations. If they can not make a profit (deliver the stockholders value), they are out of business. This is how it has always worked.

 

[Zathras]

As someone who recently retired from the insurance industry from a national carrier, I can tell you that most of us were completely stymied a few years back when our employer decided to make a huge new business push in Texas and unleashed a giant marketing blitz there. Between hurricanes, hailstorms and the crazy ice storms that caused water damage due to pipes freezing and hot water heaters exploding, Texas, from an insurance standpoint, was insanity and we had no idea why the company freely chose to go in that direction. So, when I heard a month or so ago from my former co-workers that the company is now slowly ceasing to court new business in Texas, as well as Florida and California....well, after all the natural disasters lately in those places, let's just say I was not surprised.

And regarding premium rates, I remember reading many years ago that some folks in Cape Cod/Barnstable County MA were demanding that their homeowners' insurance premiums be equal to those who reside in Central MA/Worcester County, because " we all live in MA and it wasn't fair that we should be punished for living on Cape Cod". Well, they chose to live near the water and assume the risks living near it, so naturally they would pay more in premiums than someone who lives further inland and has less risk. That's just common sense.

I would guess, that insurance companies don’t mind areas with high disaster rates. Especially if those costs are reliable.
When they flee states, are when the government prevents them from charging rates that reflect the risks.

I am guessing that Texas did not cap those rates at one time. Perhaps the political atmosphere changed and a cap to the rates became more likely, leading your insurance company to become less eager for new Texas business.

 

[NW-Bound]

Probably only tangential to insurance company decisions but FEMA just identified, with an interactive map, the places where it is focusing on providing help to the most vulnerable populations in anticipation of ongoing effects of climate change:

https://www.fema.gov/press-release/...mmunities-receive-targeted-assistance-hazards

I was unable to find out precisely why the one zone in CT was identified. It's not one of the obvious places.

I got curious, looked, and found some areas in AZ that were earmarked while the surrounding areas were not.

A note on the map explained it all. It has to meet 2 criteria: high environmental risk, plus being economically disadvantaged. There's some arbitrary cut-off point involved there. It means the surrounding areas are not any safer, only that they are rich enough to take care of themselves.

Many areas in AZ that are marked are so thinly populated, I don't know if the identification is meaningful. How do you help the few hermits who live there, other than to relocate them to somewhere safer?

 

[Gumby]

I got curious, looked, and found some areas in AZ that were earmarked while the surrounding areas were not.

A note on the map explained it all. It has to meet 2 criteria: high environmental risk, plus being economically disadvantaged. There's some arbitrary cut-off point involved there. It means the surrounding areas are not any safer, only that they are rich enough to take care of themselves.

Many areas in AZ that are marked are so thinly populated, I don't know if the identification is meaningful. How do you help the few hermits who live there, other than to relocate them to somewhere safer?

I read that note too, but the one area in CT does not appear to be an area of high environmental risk based on my knowledge of it. There are more obviously threatened poor areas.

 

[NW-Bound]

I read that note too, but the one area in CT does not appear to be an area of high environmental risk based on my knowledge of it. There are more obviously threatened poor areas.

The entire Fairfield County of CT is classified as high risk due to flooding (relatively high), hurricane (relatively high), ice storm (very high), strong wind (very high).

It may be that the marked area is singled out because it is the poorest according to the census.

 

[Gumby]

The entire Fairfield County of CT is classified as high risk due to flooding (relatively high), hurricane (relatively high), ice storm (very high), strong wind (very high).

It may be that the marked area is singled out because it is the poorest according to the census.

I would be surprised if that area is the poorest in Fairfield County, but I could be wrong.

 

[NW-Bound]

I assume the cost map is accurate, but some of those numbers seem counter-intuitive. Kentucky costs more than North Carolina or California? Why is that??

Here is a FEMA map showing high risk areas. Based on the FEMA map, it seems like Kentucky would be way less risky. For some reason the maps of insurance cost by state and the map of risk, don't seem aligned.

The FEMA Risk Index map is very interesting. One can spend a lot of time looking around.

See: https://hazards.fema.gov/nri/map

For example, Harris County (Houston) has its risk off the map, with the overall score of 99.97! YIKES!

Here are some eye-catching risks.

Cold Wave: 99.2
Heat Wave: 99.4
Hurricane: 100
Lightning: 100
Riverine Flooding: 100
Tornado: 100
Winter Weather: 97.8

Is there another place with more "perfect scores"? Any place that ranks higher in both heat and cold waves?

And FEMA does not even know about the longer risk list that REWahoo compiled.

Just to think, last year we spent a few days in Houston in our road trip through these Texas parts, and I told my wife I liked these Houston neighborhoods which looked a lot greener and nicer than Phoenix. And homes were less expensive too.

 

[audreyh1]

I got curious, looked, and found some areas in AZ that were earmarked while the surrounding areas were not.

A note on the map explained it all. It has to meet 2 criteria: high environmental risk, plus being economically disadvantaged. There's some arbitrary cut-off point involved there. It means the surrounding areas are not any safer, only that they are rich enough to take care of themselves.

Ah, that explains why our 2-3 RGV counties were singled out. Poor counties overall. I had noticed urban areas in TX were singled out and we are pretty urban down here too.

 

[aja8888]

It may be that the marked area is singled out because it is the poorest according to the census.

I was born in Fairfield County (Bridgeport) and we were poor (very much so). So I can verify that poor people lived in Fairfield County . Now it's got some real nice areas..

I would bet that New Haven County is now the "poor" county since many of the towns there lost all the heavy industry companies and thousands of associated jobs over the last 40 years. For instance, the largest employer in Waterbury (once the Brass Center of the World) is now the City, then followed by the two hospitals (one of which is in financial trouble) . That town has 100+ K residents.

Yes, coastal CT is exposed to hurricanes and other bad weather more so than inland.

 

[Quantum Sufficit]

Would you invest in an insurance business that was overexposed in high risk areas? I would not.

I think that it is normal for any company to change direction, change market offerings based on external factors. For some underwriters and reinsurers that will mean greatly reducing or walking away from perceived high risk areas or severely limiting policy exposure with exceptions and high deductibles. Normal business practice in many industries. Well run businesses in all sectors seek to reduce financial risk to their respective organizations.

Certainly not great for those who live in those high risk areas.

If you live in a low risk area, how do your feel about your insurance premiums being 20-30 percent higher than they might otherwise would be because the insurer is spreading some of the risk/exposure from high/ultra high risk customer policies to low risk customers?

I believe that it is too easy to blame the insurers. They are protecting their business and their shareholders.

This is a much greater and more complicated problem than simply blaming the insurance industry IMHO.

News flash: how do you think insurance companies work. It is called risk pool for a reason.