California E&S Insurance

> They have reported, if you listen, that they paid the maximum amount for coverage, and the insurance companies are not paying their claims, instead lowballing or denying their claims. Part of the issue is that the insurance model is not intended to work for catastrophic events. It's supposed to work in a system like where 100 people pay for insurance every year. But only like five of them on average need to use it every year. If you want it to work in a system where sometimes 90, 95, or 100 of those people need their insurance all at the same time, you can do that. But obviously it's going to need to cost a lot more money. And homeowners obviously don't want that and it's very unpopular politically. And when you factor in that the insurance commissioner is an elected position, it's very easy to see why we're in the mess that we're in now. > Claiming the free market has some role in helping victims of wildfires is meaningless when insurance companies manipulate the market and the insurance commissioner manipulates the law. If the state wasn't interfering with the free market, the insurance companies would either 1) designate certain areas as uninsurable or 2) make insurance premiums super high for those areas. But either of those actions would significantly impact home values and be very unpopular politically. So the state prevents the insurance companies from doing either. According to MarketWatch, the average cost of fire insurance in CA ranges from $900 - $3,600/mo. Do you think that if fire insurance premiums were double, triple, quadruple, etc. what they are now that those homes would be worth as much? 100% they would not be. But because homeowners don't want that, and the costs have historically been below premiums, the insurance companies put up with it because it made sense to do so. But that's not the case anymore. State Farm said it paid $1.26 in insurance claims costs for every dollar in premium collected last year. Do you think that's sustainable? Would you take a job that pays $100k a year if you had to pay $126k a year to work that job? Does that make sense? > The insurance commissioner has repeatedly given the insurance companies what they wanted without public review then made excuses why he can’t enforce the law for policyholders. The reason he hasn't done anything is because he has absolutely no leverage. The insurance companies know it and he knows it too. People expect to elect an insurance commissioner that will take a hard line with insurance companies and make them do what they want to keep costs low and keep people insured. Because it's an elected position, if the insurance commissioner doesn't do that, voters will vote them out the next election. But if insurance commissioner tries to do that, the insurance companies can just drop more policy holders or leave the state altogether. The state can't force insurance companies to insure people. So that will just push more people onto the FAIR plan which had a risk exposure of ~$650 billion around six months ago. So doing that will just make it higher and is not a long term solution. The truth is that there is no path forward that does not involve: 1. designating certain areas as uninsurable or significantly increasing premiums for those areas 1. increasing premiums for everyone to cover catastrophic events for those otherwise uninsurable areas or 1. removing the states interference with the free market and let the insurance companies set premiums based on their risk and home values. But ALL of those options are very unpopular politically. Until people decide which of those options they want to accept, things will not get better.

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