California E&S Insurance

Homeowners insurance in CO I have worked for multiple companies in property insurance, writing policies nationwide, and I get a lot of questions about why insurance has been going up so much and why is so expensive. This is what your agent won't tell you, mostly because it's a lot of numbers. Colorado is one of the more expensive states for homeowners insurance. Averaging 2015-2019, we had had the 2nd most hail claims, 3rd highest risk of wildfire, and 7th highest for overall number of claims. Hail is a huge part of it, costing over $2 billion in claims in a SINGLE STORM in 2023. Reinsurance has more than doubled in the last 10 years as well (that's insurance for insurance companies, with coverage for catastrophic losses after a massive deductible is met). Homeowners is not *quite* the scam that health insurance is, and the industry is certainly not raking in profits from premiums. You can Google any company + combined ratio to find out how they're doing. It's a publicly available number that shows what percentage of their premiums they pay out in claims. Note this doesn't count salaries or any other operating expenses, it's just claims vs premiums. Per the CO Department of Insurance, the largest homeowners insurer in CO (State Farm), had a loss ratio of 118 in Colorado in 2023, so for every $1 they collected in premiums, they paid out $1.18. USAA (#3 in Colorado) had a combined ratio of 126.96 in 2023, meaning they paid out almost $1.27 per $1 of premium. Most insurance companies aim for a combined ratio of 90. 2024 saw rate increases and fewer catastrophic claims (CAT losses), with USAA at a combined ratio of 91.8 and State Farm at 99.7. I could do other companies if anyone wants, but I think you get the point. In terms of climate change, 4 of the 5 biggest fires in Colorado history have occurred in the last 5 years. Statistically, the Springs is overdue for a fire, and insurance is All About statistics. Don't get me wrong, I think CEO salary is ridiculous, but I don't think that's a significant part of the problem. The CEO of USAA made about $10 million in 2024. Meanwhile, the total premiums collected was about $37 billion (note this includes more than just Colorado and more than just homeowners). So his salary is less than 3/10 of 1 percent of the premiums. State Farm collected about $100 billion from insurance premiums and pays their CEO $24 million. I think he's one of the highest paid CEO in the industry, but his salary is still miniscule compared to the premium and claims amounts. Given those losses, how do insurance companies stay in business? Most of the profits you hear insurance companies reporting come from the investments they made in between collecting the premiums and paying the claims. Nationally in 2024, State Farm paid claims totaling $6.1 billion *more* than they collected in premiums, but their investments made almost $130 billion, so they still had a net profit. This means that if the economy crashes, a lot of insurance companies will be in a lot of trouble, and Colorado may be one of the states they start to drop. This would mean that the remaining companies are covering a bigger percentage of the risk, which is the opposite of what they want in difficult markets. Source: I sell insurance nationwide. Have multiple industry certifications. Also, these articles for the specific stats: USAA and State Farm annual reports https://doi.colorado.gov/sites/doi/files/documents/2023-Colorado-Insurance-Statistical-Report.pdf https://coloradosun.com/2024/09/07/colorado-homeowners-insurance-costs-premiums/ https://www.cpr.org/2024/12/27/colorado-homeowners-insurance-going-up-blame-natural-disasters/ Edit to add: Several solutions have been proposed in the comments, but each of them is overly simplistic. As I mentioned, the companies are only raising rates to keep up with claims. It's not like they have a huge profit on premiums, when they're literally paying out more than they're taking in. Option 1: Cap rate increases. Capping rate increases is what California tried, and the result was (1) companies pulling out of the state entirely because they had combined ratios of like 150, meaning they were paying out $1.50 for each $1 they received. Why would you ever do business there? or (2) If they did stay, they had to raise rates in the 49 other states to make up the shortfall. I don't think either of those is a great idea. Option 2: Legislation to limit insurance companies' overall profits, but the only way they make money at all is through investments. Do we really want to put a cap on how much a company can make in investments? Why? What would be the effect of that on the stock market? I'm not saying I have a solution. I think people are building houses in really stupid spots, like on the beach in a hurricane zone (looking at you, coastal FL) or on a major fault line in a region known for wildfire (looking at you, California). I think that the price of 1k board feet of lumber went from $232 in 2015 to $1545 in 2021 to $614 today. I think that, owing to supply chain issues going all the way back to covid, AND to labor shortages in auto mechanics, AND to more complicated cars with more electronics (bumpers are no longer a tube of steel but now full of sensors, for instance) car repair costs have increased 20% *in the last year.* Personal injury lawsuits have increased by over 300%, with the average liability claim rising from $16k in 2015 to $26k in 2023. The number of the number of accidents per year has increased. I think climate change is adding energy to the world's weather patterns, leading to more storms, more severe thunderstorms with hail, more lightening strikes starting more fires, etc. I think economic stresses have decreased the average emergency fund, meaning that fewer people can handle the repair themselves, and thus more people are forced to file claims. Each of those is a complicated problem with complicated solutions. Trying to find an easy answer, like "cap rate increases" isn't going to solve anything.

{
  "score": 0,
  "title": "Homeowners insurance in CO",
  "subreddit": "ColoradoSprings",
  "num_comments": 56,
  "scrape_method": "apify"
}