Teslag said:

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eric76 said:

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Waffledynamics said:

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Let's focus especially on insurance for property like homes and businesses. This is an area where I feel may need some sort of government intervention, which isn't a common thing for me to say. They seem to not want to insure areas like the Gulf Coast or California. If they will at all, they will do so at exorbitant costs. The rate increases are egregious. This impacts people's quality of life possibly even more than all of the other inflation.

Should anything be done about the insurance industry?

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You just learn to live with it.

Where I live, home insurance is very expensive because we are so far from town. If your house catches fire, it will be pretty much burned to the ground by the time the fire department can arrive. So nobody has insurance. We don't suffer from some idea that we are entitled to have insurance.

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If someone has a mortgage they are required to have insurance

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That depends on the mortgage. It's a requirement of the lender. Find a lender willing to take the risk and they could either charge more interest or get paid back faster.

The biggest thing is stop using insurance for every repair you need to make to the house. If people arent going to choose to save adequately to cover their house repairs, then insurance companies will force you to pay them to save for you and charge a premium for it.

I'm paying $600/mo for home insurance. 900k policy when replacement cost is $1.5m, but I'm not paying $1000/mo for insurance.

Never made a claim in my life on home insurance. Auto insurance is with the same company. Only claim ever made there was when my truck was stolen.

It's a racket.

The biggest stop is to not allow attorneys fees in first party cases against your insurer

CS78 said:

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Thousands and thousands of roofs that don't even need to be replaced are claimed on people's insurance every year. And at a cost that is 2X what it should be. The roofing companies have been sticking it to insurance companies for a while now. It's finally circled back to the consumer and we're all paying for it. Fix that and insurance prices will come down.

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Why do insurance companies keep paying them out?

BMX Bandit said:

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ttu_85 said:

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bmks270 said:

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Just get rid of the legal requirement to carry insurance.

It'll be better overall.

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Tough to do when people dont really own their houses or cars-- in most cases they are owned by a lender.
so people have to carry full coverage.

Another example where debt is slavery.

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In Texas, it's not a requirement of law to have homeowners instance. That's a condition of the market.

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Edit: NM. Question answered

Insurance companies have lost their ass in coastal events. Couple that with massive value inflation in those areas...you get the crazy high rates or companies pulling out. If I owned an insurance company, I wouldn't write very many FL policies.

As for car insurance....imo, it's about 2 things:
1) recent outrageous increase in car values.
2) the high number of uninsured drivers getting in accidents.

TexasRebel said:

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Teslag said:

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eric76 said:

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Waffledynamics said:

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Let's focus especially on insurance for property like homes and businesses. This is an area where I feel may need some sort of government intervention, which isn't a common thing for me to say. They seem to not want to insure areas like the Gulf Coast or California. If they will at all, they will do so at exorbitant costs. The rate increases are egregious. This impacts people's quality of life possibly even more than all of the other inflation.

Should anything be done about the insurance industry?

---

You just learn to live with it.

Where I live, home insurance is very expensive because we are so far from town. If your house catches fire, it will be pretty much burned to the ground by the time the fire department can arrive. So nobody has insurance. We don't suffer from some idea that we are entitled to have insurance.

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If someone has a mortgage they are required to have insurance

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That depends on the mortgage. It's a requirement of the lender. Find a lender willing to take the risk and they could either charge more interest or get paid back faster.

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Do these lenders even exist? And FHA, VA, and USDA all require it which make a good portion of rural mortgages.

ttu_85 said:

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jja79 said:

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I moved from Houston area to Phoenix area last year and the sigbifixant decrease in insurance cost was a bonus. Just got my renewal Tuesday and it went down again.

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I wouldn't touch that area with it VERY precarious water situation. That and Vegas are water disasters waiting to happen

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We can't leave, yet, but I'm looking forward to going somewhere it isn't illegal to water on the wrong day.

eric76 said:

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jja79 said:

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Would you personally insure properties on the gulf coast for the same premiums as in other areas?

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Or well out in the country where it would take, at a minimum, 30 minutes for the fire department to arrive and when they did, they would be limited by how much water they were ccarrying?

According to one article I read a few years ago, the average home owner out in the country would be better off to put their money into installing a sprinkler system than on buying insurance for their house.

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For some reason in this country we have an aversion to using or understanding the word "risk", in spite of claiming to be capitalists who support a market economy. What you describe is exactly what I am talking about. If you pay for a sprinkler system, you understand there is some risk so you invest money into mitigating it. If you buy insurance you pay a company to run an actuarial analysis and then assume the risk. And then, of course, we complain because it costs so much. Too many Americans don't have a clue what insurance or risk is about.

Controlling inflation and reducing cogs.

I work for a health insurance company and we haven't turned a profit since 2020 and largely due to that.

aggiehawg said:

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Insurance companies are state regulated. Not federal.

They can choose which states in which they choose to do so. It is what it is.

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Mostly true. The Missouri vs SEU case states the federal government has the right to regulate insurance, but McCarran-Ferguson says they're leaving it to the states unless a state is not regulating or Congress wants to get involved in the business of insurance like Flood, Crop, TRIA, NRRA, etc.

Waffledynamics said:

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Let's focus especially on insurance for property like homes and businesses. This is an area where I feel may need some sort of government intervention, which isn't a common thing for me to say. They seem to not want to insure areas like the Gulf Coast or California. If they will at all, they will do so at exorbitant costs. The rate increases are egregious. This impacts people's quality of life possibly even more than all of the other inflation.

Should anything be done about the insurance industry?

---

The biggest issue for California is their crappy ratemaking policy that doesn't let insurers take the rate they need.

Rate Increase = (Non-cat Loss rato + Cat Loss ratio + Fixed Expense Ratio)/(1 - Variable Expense Ratio- Profit Provision) - 1

Gulf Coast is a different story. Inflation tells part of the story for non-catastrope losses. Variable expense isn't affected by inflation. Fixed expense is affected by it. Catastrophe losses are another thing.

Catastrophe loads are put into the ratemaking process. Depending on the company it takes somewhere from a 10 to 20 year average of the losses incurred adjusted for inflation and other trends. Seemed like the Gulf Coast was taking a major hit every 10-15 years. From 2005 until now, there's been a huge uptick in major storms making landfall along Katrima, Ike, Harvey, Irma, Matthew, Michael, Laura, etc. Not only that there's more tornado activity/damage along Dixie Alley as well as more hail damage.

Combine that with the tight reinsurance market, companies are retaining more risk (or paying more in expenses to maintain the same risk tolerance). One of the reason for reinsurance is to stabilize loss results. With the lack of stability, more profit has to be made to cover for the unstability. So we have a larger numerator and smaller denominator for a much larger rate increase than usual.

Insurance companies can get away with a lower profit provision IF the market is doing well, so they have some investment income, but that's not the case at the moment. This is how workers comp can be profitable because they depend on investment income to support that line of business since it's long tailed. Property lines are short tailed so not as much investment income. Also, inflation would totally eff over companies that got hit with a big loss and needed to sell some of it's portfolio. The bonds are priced at book value on the balance sheet, but they're worth less because of inflation, so companies would be taking loss if they needed to sell bonds.

It's going to suck for a year or two, but prices should go down as reinsurance coverage becomes cheaper, so long as inflation gets under control.

ttu_85 said:

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jja79 said:

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I moved from Houston area to Phoenix area last year and the sigbifixant decrease in insurance cost was a bonus. Just got my renewal Tuesday and it went down again.

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I wouldn't touch that area with it VERY precarious water situation. That and Vegas are water disasters waiting to happen

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It's your right to stay away.

TRADUCTOR said:

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Waffledynamics said:

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Let's focus especially on insurance for property like homes and businesses. This is an area where I feel may need some sort of government intervention, which isn't a common thing for me to say. They seem to not want to insure areas like the Gulf Coast or California. If they will at all, they will do so at exorbitant costs. The rate increases are egregious. This impacts people's quality of life possibly even more than all of the other inflation.

Should anything be done about the insurance industry?

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Just shut up, press on till you can self insure.

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I have a feeling you are joking but this will never happen... Let's say hypothetically you have an 8 figure networth and still live in a cheap enough property you could absorb the hit of losing it all to a flood/fire... You would still be wise to have an umbrella policy to protect your networth from a frivolous lawsuit and no insurance company will write you an umbrella policy without having max home and auto insurance first.

Kenneth_2003 said:

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Technically he has insurance. He's self insured. But he also has economies of scale in his favor.

19 properties, could easily be looking at 100,000 a year in premiums.

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Depending on the value of the homes, 19 rentals will run between $20,000 and $30,000 per year. It's also a tax deductible expense so accounting for tax savings brings down the overall cost. Also, unless he has a stand alone liability policy, then he's leaving himself and his assets wide open for a big loss. Losing a house or two is one thing, it's an insulated loss, a liability claim is a whole other animal that can extend well beyond a single property loss. Plus, the liability portion pays both your court costs and attorney's fees.

CS78 said:

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Thousands and thousands of roofs that don't even need to be replaced are claimed on people's insurance every year. And at a cost that is 2X what it should be. The roofing companies have been sticking it to insurance companies for a while now. It's finally circled back to the consumer and we're all paying for it. Fix that and insurance prices will come down.

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This may have been true a decade ago, but it's not now.

Typically you won't be sticking anything to an insurance company. If you have a 20,000 roof and roll up with a 25,000 estimate, you better justify it or they'll tell you to pound sand.

Keep in mind that just because Chucks Handyman Service will do your roof for half my price, it doesn't mean that is the going rate for a legitimate professional. Insurance pays you for a pro, not for Chuck in a Truck. Insurance estimates for an average cost in your market for a roof like yours. As you can imagine, the average price is generally professionals, which are more expensive for obvious reasons.

Waffledynamics said:

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Let's focus especially on insurance for property like homes and businesses. This is an area where I feel may need some sort of government intervention, which isn't a common thing for me to say. They seem to not want to insure areas like the Gulf Coast or California. If they will at all, they will do so at exorbitant costs. The rate increases are egregious. This impacts people's quality of life possibly even more than all of the other inflation.

Should anything be done about the insurance industry?

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Believe it or not, you can live and survive without insurance.

Finn said:

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Start with things that make insurance go up like Regs, Fraud, Inflation, Non-Insured.

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Correct.

Woods Ag said:

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I'm paying $600/mo for home insurance. 900k policy when replacement cost is $1.5m, but I'm not paying $1000/mo for insurance.

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Sounds like you bought too much home. Downsizing is an option.

ttu_85 said:

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bmks270 said:

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Just get rid of the legal requirement to carry insurance.

It'll be better overall.

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Tough to do when people dont really own their houses or cars-- in most cases they are owned by a lender.
so people have to carry full coverage.

Another example where debt is slavery.

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100% agree with everything about. While people complain about insurance, they're often legally required to own the product because they have an asset they're making monthly payments on.

The state mandated liability coverage for cars is not that bad. Collision and comprehensive are optional.

Old_Ag_91 said:

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Heres what i know… i know house and property insurance continue to go up at a crazy rate.

Auto insurance is ridiculous.. i think we are paying for illegal immigrants or anyone who wants to drive and DOES NOT carry insurance.

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Auto-insurance is going up at a crazy rate because the cost to repair vehicles is going up at a crazy rate.

10 years ago, you could replace a headlight for $500 on the high end. Now, for the fancy LED ones, it can be over $5000. Sensors everywhere means when you get front end damage, they have to replace all the body parts, plus replace and re-calibrate sensors, which is an extra $1000. Body panels are much more expensive for some reason. Wheels are generally bigger now, which means more money (17" rims used to be big, now that's the lowest trim size typically).

With all the additional electronics in vehicles, they just cost more, they often have a reprogramming requirement for new parts which drives it up more, and insurance goes up accordingly.

TRM said:

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Waffledynamics said:

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Let's focus especially on insurance for property like homes and businesses. This is an area where I feel may need some sort of government intervention, which isn't a common thing for me to say. They seem to not want to insure areas like the Gulf Coast or California. If they will at all, they will do so at exorbitant costs. The rate increases are egregious. This impacts people's quality of life possibly even more than all of the other inflation.

Should anything be done about the insurance industry?

---

The biggest issue for California is their crappy ratemaking policy that doesn't let insurers take the rate they need.

Rate Increase = (Non-cat Loss rato + Cat Loss ratio + Fixed Expense Ratio)/(1 - Variable Expense Ratio- Profit Provision) - 1

Gulf Coast is a different story. Inflation tells part of the story for non-catastrope losses. Variable expense isn't affected by inflation. Fixed expense is affected by it. Catastrophe losses are another thing.

Catastrophe loads are put into the ratemaking process. Depending on the company it takes somewhere from a 10 to 20 year average of the losses incurred adjusted for inflation and other trends. Seemed like the Gulf Coast was taking a major hit every 10-15 years. From 2005 until now, there's been a huge uptick in major storms making landfall along Katrima, Ike, Harvey, Irma, Matthew, Michael, Laura, etc. Not only that there's more tornado activity/damage along Dixie Alley as well as more hail damage.

Combine that with the tight reinsurance market, companies are retaining more risk (or paying more in expenses to maintain the same risk tolerance). One of the reason for reinsurance is to stabilize loss results. With the lack of stability, more profit has to be made to cover for the unstability. So we have a larger numerator and smaller denominator for a much larger rate increase than usual.

Insurance companies can get away with a lower profit provision IF the market is doing well, so they have some investment income, but that's not the case at the moment. This is how workers comp can be profitable because they depend on investment income to support that line of business since it's long tailed. Property lines are short tailed so not as much investment income. Also, inflation would totally eff over companies that got hit with a big loss and needed to sell some of it's portfolio. The bonds are priced at book value on the balance sheet, but they're worth less because of inflation, so companies would be taking loss if they needed to sell bonds.

It's going to suck for a year or two, but prices should go down as reinsurance coverage becomes cheaper, so long as inflation gets under control.

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Thank you for this post, it's the most salient I've read. Thanks to voters with no market savvy, California caps Fire & Casualty rate increases at 5% per year. The recent large catastrophe claims there have put them so far behind they may never catch up so no new business is being written and big exposures are being non-renewed.

A lack of new vehicles rolling off the line and empty car lots greatly increased both used car prices and repair costs. Low supply of vehicles for sale resulted in a low supply of car parts. Many new car dealers were going to auctions to purchase vehicles then ordering parts for vehicles in need of repair prior to putting them up for sale on the lot. This negatively affected liability, comprehensive, and collision losses and rates. Total loss claim payouts were 150% to 200% higher than expected during this time.

Inflated construction costs have really hurt Fire premiums. With 2023 being one of the worst catastrophe years on record, we will get hit with a double whammy. Last year's catastrophe losses will be realized and accounted for through rate increases over the next 12 to 24 months. Add to this the cost of roofs, mentioned earlier, which have been outrageously high for 15+ years. The cost of roofing materials increased sharply the summer oil hit $147 per barrel and have only continued to climb. The cost of a new architectural comp roof is roughly $460 per square in North Texas. Adding an impact resistant roof to save money on claims and premiums only increases this cost per square.

Speaking to regulation, the state of Texas has a file and use rule that has been in place for 20+ years. Insurance companies are welcome to begin charging the rates they file with the state prior to approval, but until the state reviews those rates and the financials backing them, those rate increases are not set. If an insurer chooses to begin using rates they can't prove are necessary, Texas makes them roll those rates back and refund any overpaid premiums to customers. Throw in reserve requirements, commissions paid, and normal business expenses, insurance companies run on a fairly thin margin.

kb2001 said:

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Old_Ag_91 said:

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Heres what i know… i know house and property insurance continue to go up at a crazy rate.

Auto insurance is ridiculous.. i think we are paying for illegal immigrants or anyone who wants to drive and DOES NOT carry insurance.

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Auto-insurance is going up at a crazy rate because the cost to repair vehicles is going up at a crazy rate.

10 years ago, you could replace a headlight for $500 on the high end. Now, for the fancy LED ones, it can be over $5000. Sensors everywhere means when you get front end damage, they have to replace all the body parts, plus replace and re-calibrate sensors, which is an extra $1000. Body panels are much more expensive for some reason. Wheels are generally bigger now, which means more money (17" rims used to be big, now that's the lowest trim size typically).

With all the additional electronics in vehicles, they just cost more, they often have a reprogramming requirement for new parts which drives it up more, and insurance goes up accordingly.

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Dang, I remember replacing the headlight in my old beatup F150 in 1980 for less than $20 at the local Hi-Lo auto store. Unplug the old one and plug in the new. Pull up to the garage door with the lights on at night and adjust the horizontal/vertical screws to align it, and good to go.

Those were also 15 inch tires, much less than today's 20 inch (or so) standard. A 16 inch tire was big.

Of course there was no AC in that truck, although there were window wings that could be adjusted to funnel outside air onto you, like a fan. And only AM radio, but it did have an ash tray.

Quote:

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The biggest stop is to not allow attorneys fees in first party cases against your insurer

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explain, please.

bmks270 said:

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Just get rid of the legal requirement to carry insurance.

It'll be better overall.

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This would be similar to no fault coverage in states like Michigan, the premiums there make Texas look affordable.

Old May Banker said:

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Finn said:

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Start with things that make insurance go up like Regs, Fraud, Inflation, Non-Insured.

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Correct.

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There is a massive "correction" going on right now, at least on the roofing side, and I expect its with all aspects of home/auto insurance. We have carriers denying legitimate claims, automatic switching of RCV policies to ACV (customers aren't told about this, but they agree to it when they sign and don't read changes), and overall reductions in coverages, buried in the fine print. The fact of the matter is that insurance is like a love child between a Ponzi scheme and Las Vegas. You are betting that you will need insurance, so you place your bet. The carrier is betting you won't. In almost ALL cases, the house (insurance) wins. Always. Except...over the past 8-10 years on the Gulf Coast and several hundred miles inland, there have been major catastrophes. The house has lost. A lot. Over and over again. Now, they are making up for those losses by pulling out of states, reducing coverages, increasing premiums, and the like. The concern over fraud, inflation, and non insured is legitimate, to be sure, but it's a relatively small, but considerably unfortunate side problem of the recent weather events making a perfect storm of misery for you, the insured.

We are going to pay for this, or you do like everyone else that can't afford their deductibles, you finance it, or you just don't fix whatever it is you were going to fix. That, or figure out how to make the system work for you.

The problem is when we're forced to bet against ourselves.

Aggie95 said:

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Insurance companies have lost their ass in coastal events. Couple that with massive value inflation in those areas...you get the crazy high rates or companies pulling out. If I owned an insurance company, I wouldn't write very many FL policies.

As for car insurance....imo, it's about 2 things:
1) recent outrageous increase in car values.
2) the high number of uninsured drivers getting in accidents.

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Correct. With sensors on things, the parts and service are outrageous.

Jason_InfinityRoofer said:

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Old May Banker said:

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Finn said:

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Start with things that make insurance go up like Regs, Fraud, Inflation, Non-Insured.

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Correct.

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There is a massive "correction" going on right now, at least on the roofing side, and I expect its with all aspects of home/auto insurance. We have carriers denying legitimate claims, automatic switching of RCV policies to ACV (customers aren't told about this, but they agree to it when they sign and don't read changes), and overall reductions in coverages, buried in the fine print. The fact of the matter is that insurance is like a love child between a Ponzi scheme and Las Vegas. You are betting that you will need insurance, so you place your bet. The carrier is betting you won't. In almost ALL cases, the house (insurance) wins. Always. Except...over the past 8-10 years on the Gulf Coast and several hundred miles inland, there have been major catastrophes. The house has lost. A lot. Over and over again. Now, they are making up for those losses by pulling out of states, reducing coverages, increasing premiums, and the like. The concern over fraud, inflation, and non insured is legitimate, to be sure, but it's a relatively small, but considerably unfortunate side problem of the recent weather events making a perfect storm of misery for you, the insured.

We are going to pay for this, or you do like everyone else that can't afford their deductibles, you finance it, or you just don't fix whatever it is you were going to fix. That, or figure out how to make the system work for you.

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And for 15+ years I watched roofers pad estimates in order to "waive" deductibles. Any roofer who came by office with this as their marketing ploy had their cards thrown away and never received any referrals from us. It was only a matter of time before the premiums were increased to offset this practice. I'm not sure how the new deductible collection requirement has truly affected roofers but I've heard of a few bigs who got caught waiving deductibles.

The commonality of ACV in policies will greatly change underwriting requirements. I think proof of repair or replacement will be required by companies still offering RCV. Ineligibility will tick up, as well, to a very high extent, no more excusing single weather claims.

BMX Bandit said:

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ttu_85 said:

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bmks270 said:

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Just get rid of the legal requirement to carry insurance.

It'll be better overall.

---

Tough to do when people dont really own their houses or cars-- in most cases they are owned by a lender.
so people have to carry full coverage.

Another example where debt is slavery.

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In Texas, it's not a requirement of law to have homeowners instance. That's a condition of the market.

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I did not know that, thanks for the information. IMHO this is the way it should be, avoid government regulation anywhere possible.

TexasRebel said:

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Teslag said:

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eric76 said:

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Waffledynamics said:

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Let's focus especially on insurance for property like homes and businesses. This is an area where I feel may need some sort of government intervention, which isn't a common thing for me to say. They seem to not want to insure areas like the Gulf Coast or California. If they will at all, they will do so at exorbitant costs. The rate increases are egregious. This impacts people's quality of life possibly even more than all of the other inflation.

Should anything be done about the insurance industry?

---

You just learn to live with it.

Where I live, home insurance is very expensive because we are so far from town. If your house catches fire, it will be pretty much burned to the ground by the time the fire department can arrive. So nobody has insurance. We don't suffer from some idea that we are entitled to have insurance.

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If someone has a mortgage they are required to have insurance

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That depends on the mortgage. It's a requirement of the lender. Find a lender willing to take the risk and they could either charge more interest or get paid back faster.

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Or require collateral that covers the debt.

Kind of difficult to buy a first house then…

TexasRebel said:

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Teslag said:

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eric76 said:

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Waffledynamics said:

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Let's focus especially on insurance for property like homes and businesses. This is an area where I feel may need some sort of government intervention, which isn't a common thing for me to say. They seem to not want to insure areas like the Gulf Coast or California. If they will at all, they will do so at exorbitant costs. The rate increases are egregious. This impacts people's quality of life possibly even more than all of the other inflation.

Should anything be done about the insurance industry?

---

You just learn to live with it.

Where I live, home insurance is very expensive because we are so far from town. If your house catches fire, it will be pretty much burned to the ground by the time the fire department can arrive. So nobody has insurance. We don't suffer from some idea that we are entitled to have insurance.

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If someone has a mortgage they are required to have insurance

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That depends on the mortgage. It's a requirement of the lender. Find a lender willing to take the risk and they could either charge more interest or get paid back faster.

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Have you ever seen such a mortgage? I haven't.

Can I patent a new business model?