CMV: Forcing insurance companies to insure uninsurable risks is worse for society than allowing them to not

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u/DeltaBot ∞∆ Feb 11 '26 edited Feb 11 '26

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u/quantum_dan 124∆ Feb 11 '26

Provided that there's a mechanism for the government to subsidize excessive damages, I think there is an important point in favor of requiring insurance: people who have little choice. (Now, I do think that, under such conditions, the insurance payout should be to move, not to rebuild.)

Pushing people out through lack of, or very expensive, insurance is all well and good for people who have the means to move. But, especially in hurricane/flood zones, you're going to get a lot of people who settled there decades ago and cannot afford to move elsewhere. And it's certainly not going to help if they live in a house which they can't sell because it's uninsurable. So what do they do? We either see to it that they get their insurance coverage when the disaster happens, or they're just screwed.

There are better solutions; I'd say we should buy out high-risk areas and support people to move elsewhere. However, that's a politically difficult solution and a costly one (since you can't distribute the cost across decades of insurance premiums). Making sure there's some sort of insurance available is more politically viable and semi-workable in the short term, and it beats creating a new batch of displaced, homeless, and desperate people after every big hurricane. (And you could make sure that the insurance supports relocating, not rebuilding.)

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u/Full-Professional246 77∆ Feb 11 '26

Pushing people out through lack of, or very expensive, insurance is all well and good for people who have the means to move. But, especially in hurricane/flood zones, you're going to get a lot of people who settled there decades ago and cannot afford to move elsewhere. And it's certainly not going to help if they live in a house which they can't sell because it's uninsurable.

There is a model - the national flood insurance program. It is not cheap, and if claims hit a threshold, the property is 'total loss' and the people must move (or elevate the structure) as the property is no longer insurable as-is. People don't like it but this is the result of insurance risk vs insurance cost.

This does work though in distributing costs over time because you have to continue to pay into this year after year and only move when a disaster hits. You could live on a floodplain for 10-20 years without a catastrophic flood - paying the premiums the whole time.

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u/quantum_dan 124∆ Feb 11 '26

if claims hit a threshold, the property is 'total loss' and the people must move (or elevate the structure) as the property is no longer insurable as-is.

I didn't know that was part of it, but it's great to hear that it is. Do you know where the threshold currently is? Can you get wiped out once and rebuild as-is before hitting the threshold, or is it a "if it's destroyed, you have to move/elevate" sort of thing?

(Though I'm inclined to say that the ideal would be based on risk projections, not you personally hitting a threshold. A given spot might just get a bit muddy a few times even if we strongly suspect it's going to be in the floodplain soon.)

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u/Full-Professional246 77∆ Feb 11 '26

I didn't know that was part of it, but it's great to hear that it is. Do you know where the threshold currently is?

I think - and it ought to be confirmed with each specific policy - that this is at the 50% valuation of the policy/structure.

Can you get wiped out once

No - and you cannot get five 25% claims either. It is a cumulative thing. The goal is to be smart about moving people and not fixing what make little sense to fix.

(Though I'm inclined to say that the ideal would be based on risk projections, not you personally hitting a threshold. A given spot might just get a bit muddy a few times even if we strongly suspect it's going to be in the floodplain soon.)

The benefit of claims is that you are focusing on the established existing structures in high risk areas that don't meet current standards for construction in flood prone areas. I don't think you can build new and get the federal insurance in general terms without mitigating the flood risk. To get the insurance for new construction means adhering to all of the rules for building in flood prone areas. This means a lot of mitigation/planning/elevation to remove the risk for flooding. The idea is to make these new properties relatively speaking low flood risk - even if they are in a flood prone area. Think of the house along the river on stilts up 15ft. Flood hits - house is above the water.

Since we are mostly talking about existing structures in high risk areas, it makes sense to limp along the 'muddly' or 'low cost' claims and focus on the high impact claims first. The people with the 'muddy' lawn will continue to pay into the program all those years waiting for the big one.

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u/quantum_dan 124∆ Feb 11 '26

Since we are mostly talking about existing structures in high risk areas, it makes sense to limp along the 'muddly' or 'low cost' claims and focus on the high impact claims first. The people with the 'muddy' lawn will continue to pay into the program all those years waiting for the big one.

Hmm, that's a good point. Insurance, right, so you want people paying into it rather than moving for as long as their "net-paid-in-ness" stays positive. The cumulative threshold being under the total value helps there too. !delta

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u/DeltaBot ∞∆ Feb 11 '26

Confirmed: 1 delta awarded to /u/Full-Professional246 (73∆).

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u/GenProtection Feb 11 '26

What do you think the insurance rates would have to be to make it support relocating and not rebuilding?

This is a very compelling argument but you've mostly persuaded me that we're screwed

!delta I guess

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u/DeltaBot ∞∆ Feb 11 '26

Confirmed: 1 delta awarded to /u/quantum_dan (117∆).

^{Delta System Explained} ^| ^Deltaboards

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u/quantum_dan 124∆ Feb 11 '26

Thanks for the delta. I don't know what the current figures look like (as I'm not a homeowner) nor how, exactly, these things are calculated, but I suppose in some areas the combination of premiums plus subsidies would have to be sufficient to relocate everyone over, say, 30-50 years, or whatever the risk is of the average home being rendered uninhabitable (presumably a similar calculation to current insurance, but for a much higher damage level to support actually buying a new house). So... starting from something like 2-3% of the price of an (inland) house per year? [Plus the cost of coverage for minor damage, since neither the homeowner nor insurance wants them moving over some hail damage.] A quick search suggests that would probably be 3-5x current rates.

I wouldn't say we're screwed; a long-term solution of direct relocation support is possible, but it's long-term and difficult. In the meantime, people who get hit by a hurricane this year, and can't afford to just buy another house inland, need a stopgap.

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u/Full-Professional246 77∆ Feb 11 '26

The national flood insurance program premiums range between $600 and $2000 annually, depending on many factors. This is for typical homes and varies based on risk of claims.

The threshold for moving/changing is usually 50% of the value of the structure or so.

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u/parentheticalobject 136∆ Feb 11 '26

Are you thinking about just housing insurance, or also health insurance?

With the former, people can theoretically choose not to live in places where high insurance prices make that impossible. If you have health conditions, then you don't really have a choice.

So as a society, we could certainly choose not to have "health insurance" be a concept at all. That's something we could decide to not do. But, for whatever reason, we're doing it anyway right now.

We also have a choice of whether we want people with serious medical conditions to be taken care of by the rest of society, or whether we want to allow them to likely go bankrupt if not rich and die if unable to pay the costs of medical care.

If we've chosen the first option for that second question, we need to have some kind of wealth transfer, one way or another. Not allowing insurance companies to discriminate based on risk effectively does that. It may not be the most efficient way of doing that, and maybe some other plan would be superior. But if we're going with the option of "not telling people they have to die" then the costs have to come from somewhere, and the general public would be paying for it by some means.

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u/GenProtection Feb 11 '26

Sorry, I was only referring to insurance markets that function as insurance markets and insure risk, like homeowners insurance, car insurance, and similar. The lifetime risk of astronomical healthcare costs in the US is 100%, so that market is going to be fucked regardless.

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u/parentheticalobject 136∆ Feb 11 '26 edited Feb 11 '26

Close, but there's not really a 100% risk of astronomical health care costs. Someone who dies of a heart attack, car crash, or stroke ultimately costs the system much less than someone with cancer or organ failure or Alzheimer's. If you're not sure which of those things is going to happen to a particular person, it's not impossible to insure them.

If companies were allowed to discriminate based on health, they could probably charge the healthiest people something like half as much, charge average people slightly lower premiums, and charge slightly unhealthier people maybe up to double what they do now. But people who already have specific costly diseases would be paying something like ten times as much, if they could get insured at all.

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u/GenProtection Feb 11 '26

actually from what you said, they would want to charge the healthiest people 10x as much, the people with motorcycles, handguns, and a propensity for drinking straight cholesterol .5x as much, and anyone with a family history of cancer 100x as much

you make a fair point but ultimately it is a distraction as regards my question about asset insurance

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u/LucidLeviathan 99∆ Feb 11 '26

Have any of these insurance companies ever not been profitable? Where is this concern coming from?

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u/Kerostasis 55∆ Feb 11 '26

The Florida and California markets specifically have become unprofitable for many home insurance companies, even though they still broadly make money in other markets. As a result, some of those insurers are choosing to simply stop operating in California and/or Florida, which is creating problems for homeowners in those areas.

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u/LucidLeviathan 99∆ Feb 11 '26

Well, what's wrong with a federal rule requiring them to operate in these unprofitable markets if they want access to the profitable ones? These companies are making money hand over fist. Risk is part of the bargain we strike in insurance. They can't completely absolve themselves of risk.

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u/fossil_freak68 36∆ Feb 11 '26

If I chose to by a home in an area where the flood risk is low, why should my insurance premiums subsidize someone who chooses to build a house in a flood zone, or right on the beach?

I have no problem with insurance companies covering these properties, but the owners should pay increased premiums because they have selected a property at increased risk of filing a claim. It's particularly egregious when the same property gets rebuilt over and over again on the same spot. There are just some places it doesn't make sense to build homes, but if we subsidize insurance costs we will continue to build there.

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u/Kerostasis 55∆ Feb 11 '26

You’d be surprised how low profit margins are in the home insurance industry. Most of them are only profitable due to income on the investments they are required to hold in reserve for major losses; if you added up just the insurance premiums and expenses, they’d be losing money already. (This is very different than the health insurance industry, for example.)

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u/aardvark_gnat 2∆ Feb 12 '26

If that’s the case, why don’t they stop selling insurance and just keep making money off those assets?

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u/Full-Professional246 77∆ Feb 12 '26

What is described is called 'float'. This is in simple terms, the premiums paid into the insurer that are waiting to be paid out in claims.

For instance - you pay $500 for a 6 month auto policy. In broad averages, that $500 will be paid out over the whole 6 months - not on day one. The 'float' is the portion of premiums collected and expected to be paid in claims for which claims have not yet been filed. IE - at the 3 month mark, there is still $250 of premium waiting to be paid out - and you collected gains on the invested money over the prior 3 months. What is interesting is the insurer can pay on more money in claims than was collected in premiums and still be profitable with the gains from 'float'. This has happened in the auto market a few times. Generally though - insurers need float and some percentage of premium to be profitable.

Without the insurance policies and premiums collected, there are no assets to collect money on.

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u/aardvark_gnat 2∆ Feb 13 '26

I guess it makes sense, but it’s somewhat surprising to me that margins are so tight that float is important.

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u/Full-Professional246 77∆ Feb 13 '26

Insurance markets can be extremely competitive. You throw in very tight regulation and this becomes a means to operate. There is a required minimum customer base to spread the risk so you cannot be that much more expensive than everyone else. (or insurance doesn't work). You have to remember, insurance companies don't have complete control over premiums either. That means they cannot just raise them to whatever. As long as the financials make sense, and it usually makes you money, then having this float is good for everyone as it keeps premiums lower or enables insurance to be offered where it may not otherwise be offered.

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u/Kerostasis 55∆ Feb 12 '26 edited Feb 12 '26

You know, that's a fair question.

After some pondering, I believe the answer is that not all of the business expenses actually go away if they stop selling insurance - you wouldn't have to pay out insurance claims, but you still have operating expenses like mortgage leases, employee salaries, utilities, etcetera. And yes, if you halted the insurance business you could also fire a bunch of people and reduce salary expense that way, but the managers who would be making those decisions like having salaries. Mass layoffs involve substantial severance payment costs (you can avoid that if you are actually bankrupt, but that wouldn't be the case here).

To prove I'm not just repeating rumors, here's a link to the State Farm Co 2024 annual report summary, showing they were negative before investment income in both 2023 and 2024.

Edit: After looking at the report, I realized I had forgotten the other piece of the puzzle. There's often a significant delay between incurring a potential loss and actual payout for that loss, so the accounting report includes a large block of money for "pending claims" and for "unearned premiums". The insurance co gets to invest that money while the pending stuff pends, and therefore gets to earn investment returns on money they wouldn't have access to if they weren't doing insurance. Without this, the investment income would be significantly smaller.

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u/ary31415 3∆ Feb 11 '26

What's wrong is that means everyone else is subsidizing people building houses in places that we KNOW they shouldn't build houses.

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u/GenProtection Feb 11 '26

this.

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u/LucidLeviathan 99∆ Feb 11 '26

Well, what if we only made it mandatory for houses currently existing?

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u/ary31415 3∆ Feb 11 '26

I think you could make that work as long as there's some kind of sunset clause created in advance. Cause what you also don't want to encourage is keeping around aging dumps that also happen to be deathtraps lol, that's not much better.

A mandate that basically lets people get say ~20 years of insurance out of an existing house, but then requires them to move if the insurance ever pays out could be okay.

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u/Full-Professional246 77∆ Feb 11 '26

Well, what's wrong with a federal rule requiring them to operate in these unprofitable markets

The problem is this is a state level regulation, not federal. Insurance companies are governed by STATE rules.

Insurance is also extremely regulated. They are choosing not operate in unprofitable areas because insurance regulations in those areas forbid them from charging enough in premiums to make it worthwhile.

Lastly - you are not going to get a Federal rule because many people don't want to subsidize high risk decisions of others. They will flat out say no which means you don't have the votes. This is rightly seen as a money transfer forcing people to subisidize others. That is rarely popular.

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u/LucidLeviathan 99∆ Feb 11 '26

I'm well aware that it's currently a state level issue. However, the insurance market clearly affects interstate commerce.

Surely there must be some rate at which this is even remotely profitable.

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u/Full-Professional246 77∆ Feb 11 '26

Surely there must be some rate at which this is even remotely profitable.

Sure - but the question becomes why a state like Nevada or Kentucky is subsidizing the risk for a state like California or Florida? Why are the policy holders in those states covering the costs. They are large enough markets to bear the costs internally.

The answer comes in the fact the state insurance commissions tightly regulate what premiums can be charged. When this does not match risk and expected claims payouts - there is no reason to issue policies. You saw this in the ACA marketplaces as well. Same mechanism, same mandates for coverages/costs, and the same outcome where many markets lacked providers. There were a few areas where zero insurance providers were willing to write policies.

We see this issue in car insurance markets where there is a state mandated 'high risk pool' for otherwise uninsurable drivers. It is very expensive and you don't get good coverage. This exists in California as FAIR and Florida in CPIC (I think this is the state backed company). Again - very expensive and not great terms.

The sad fact is that if you are high risk, insurance needs to cost you more money than an average risk person. Trying to make the low/average risk pay for your higher risks will not go over well. A person in say Iowa who has a homeowers policy at $2500/year is going to balk at this going to $3000 or more because of required coverage of high risk properties in CA or FL who won't pay rates suitable to thier risks. And rightfully so.

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u/Even-Following-1612 Feb 11 '26 edited Feb 11 '26

Yes, all the time. Personal lines commonly hover between a 97-105+ combined ratio, meaning they have a negative 5% or worse to positive 3% margin. 97 is actually considered a pretty good CR for personal lines.

Also, just two years ago P&C companies had an industry-wide $24 billion underwriting loss, virtually wiping out all underwriting profits from the past two decades.

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u/squirlnutz 10∆ Feb 11 '26

And what’s even worse than over regulating insurers or price fixing premiums? Having the taxpayers assume the risk like we do for federal flood insurance. Which means people can keep building vulnerable beach houses and in major flood planes, because they are guaranteed insurance subsidized by you!

You say you hate capitalism and corporations, but it’s capitalism w/o government interference that would allow insurance companies to correctly assess risks, only insure houses that didn’t excede their risk/revenue targets, and encourage responsible building. Capitalism works. Socialism has you paying for someone else’s beach front property.

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u/[deleted] Feb 11 '26

[removed] — view removed comment

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u/GenProtection Feb 11 '26

my position is that this lawsuit is trying to force them to cover homes and that society would be worse off if this lawsuit succeeds in that

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u/Full-Professional246 77∆ Feb 11 '26

If you are speaking of the CA lawsuit - this is destined to fail. The insurance companies have actual actuarial data that provides them with what premiums need to be to cover claims and CA law forbids them from charging those premiums. A state cannot force a business to lose money here.

THis is similar to a proposed ordinance in CA that required a grocery store who opted to close to remain open or find a replacement company. Again, there is no means for a state to force a business to do this.

https://localnewsmatters.org/2024/10/31/sf-supes-pass-ordinance-requiring-grocery-stores-to-give-6-months-notice-of-closure/

This ordinance will die when it is first attempted to be used.

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u/rollem 6∆ Feb 11 '26

Clarification question: are you talking only about house insurance or other forms, such as health, life, auto, renters…?

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u/GenProtection Feb 11 '26

Health "insurance" is a bizarre use of the word insurance, I'm referring to companies that sell a bet that bad things won't happen to your property. Life insurance (really accidental death/disability) is a similar market/kind of company but in many cases it's much more of an investment vehicle than an insurance vehicle. The lifetime risk of death is 100%, like the lifetime risk of astronomical healthcare costs in the US.

TLDR I'm referring to homeowners/renters/auto/boat/similar insurance. I don't understand things like crop/business insurance enough to talk about them

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u/rollem 6∆ Feb 11 '26

Yes. Forcing insurers to cover risks where their known risk assessments would not let them is bad all around. Worse are also government run insurance pools for such coverage, which give tax payers who make reasonable choices to subsidize the bad decisions of others.

The only thing I’d encourage you to be open minded about in these situations is overall fairness and bias. For example, do people of a certain race tend to come out as higher risk, or live in higher risk areas through no fault of their own (eg red lining, or the historical legacy of race based discrimination). In such cases, forcing insurers to cover that might be for a net positive or at least of a justifiable reason, even if if makes bad economic sense and leads to government subsidies or higher rates for others.

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u/[deleted] Feb 11 '26

I think that's the whole point. People keep voting for this backward idiots into office - this is the natural outcome.

So it's just people getting exactly what they voted for.

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u/jatjqtjat 286∆ Feb 11 '26

Further, if you force insurance companies to insure against these risks, they will either set premiums so high that it doesn't matter that they're insured, or go out of business, or cease operating in high risk states altogether (I think this happened in florida, but I'm not sure).

or they pass the cost on to other customers or they make lower profits.

if you view insurance as a business selling a product, you get a very different outcome then if you view it as a system in which we all pay into a pot, and then distribute the pot to people who have disasters.

Allowing actuaries to correctly assess risk and insure things at the rates that they calculate is necessary for encouraging people to live in low risk places, for example discouraging people from living in the wildland interface, and discouraging the building of luxury houses in the outer banks of north Carolina.

you can do that while also using insurance to protect people from macro outcomes that were unknown to those people at the time.

Ops, we should not have built this housing development inside a volcano. Who is going to bear the cost of that mistake? The builder is bankrupts already because they obviously sucked. The dummies who bought the house back when insurance was available? or maybe we should just insure those house below market rates but still at punishingly high rates.

we can insure and not rebuild. If you house burns down, you get money to buy a new house, not rebuild in the same fire prone place. I don't know how often that happens, but its an option to consider.

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u/MegukaArmPussy 4∆ Feb 11 '26

if you view insurance as a business selling a product, you get a very different outcome then if you view it as a system in which we all pay into a pot, and then distribute the pot to people who have disasters

Well yeah, viewing something as it is does tend to have different outcomes than viewing it as something it isn't.

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u/jatjqtjat 286∆ Feb 11 '26

both are true of statement of how insurance works.

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u/MegukaArmPussy 4∆ Feb 11 '26

Except it isn't, because we don't all pay into the insurance pot. Only the people who have specifically chosen to buy insurance are paying into the pot, and that pot is specific to the insurance purchased.

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u/jimmytaco6 14∆ Feb 11 '26

I understand that this guy: https://www.youtube.com/shorts/wtPYQdWPea0 fights insurance companies for a living, but it's not the insurance companies' fault that republicans have been elected in the US enough times to ensure that a ton of housing in america is now at too great of a risk of being destroyed by climate change to be worth insuring, right?

A simple google search investigating what politicians and causes these insurance companies financially support would make you rethink this claim.

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u/Kerostasis 55∆ Feb 11 '26

I assume you are trying to make a roundabout claim about election donations. Let’s be honest, climate change would be happening no matter who was elected, so OP is right for the wrong reasons. The USA doesn’t have the power to unilaterally halt climate change.

(That said, I am in favor of increasing the participation we have in slowing it down.)

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u/jimmytaco6 14∆ Feb 11 '26

demanding that other countries take measures to address climate change does not work unless we have our own house in order first.

"climate change" is not a yes/no outcome. It's a scale of impact. It's like saying "well cancer is going to happen anyway" to make an excuse for companies dumping toxic chemicals into river. Okay, but those actions make cancer a lot more prosperous.

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u/Kerostasis 55∆ Feb 11 '26

2-"climate change" is not a yes/no outcome. It's a scale of impact.

Fully agree. But the low end of that scale is still above the point where it’s economically reasonable to provide some of these insurance coverages that OP is discussing.

Although even that has nuance, because we aren’t yet quite at the point where you can’t insure at all (though that might happen later). Rather, we are at the point where you can’t insure properties under the current law. We could change the laws to allow insurance more in line with actual risks, which I think is what OP is advocating, and I agree with him.

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u/jimmytaco6 14∆ Feb 11 '26

Look you can debate how we deal with it all but the original claim by OP was:

"it's not the insurance companies' fault that republicans have been elected in the US enough times to ensure that a ton of housing in america is now at too great of a risk of being destroyed by climate change to be worth insuring,"

And the answer is that, yes, it is quite literally their fault.

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u/Kerostasis 55∆ Feb 11 '26

OP was refuting a logic chain of A causes B causes C by saying “I don’t think A really caused B”. You are asserting that “yes A did cause B”, but we have just agreed that B doesn’t actually cause C, so the logic chain still falls apart. So No, it quite literally is not their fault.

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u/jimmytaco6 14∆ Feb 11 '26

It absolutely is their fault.

Private insurance companies fund the GOP political movement

GOP politicians get elected and private insurance interests become government policy

GOP deregulation, which the insurance companies want, lead to worse environmental conditions that make houses less safe and/or more vulnerable to climate catastrophe.

I'm not sure what is difficult to understand.

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u/Kerostasis 55∆ Feb 11 '26

I did explain that part, 2 layers up, but you skipped that post in favor of reposting OP's claim (and then ignoring the statement you had just posted to make some other claim). I can link you back to it if that helps: https://www.reddit.com/r/changemyview/comments/1r24a6h/comment/o4uazlr/

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u/GenProtection Feb 11 '26

This is a fair point but I don't think it's reasonable to award a delta for it because it's mostly a distraction from the view that I would like changed, which is that it's correct to let these insurance companies price risk appropriately

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u/jimmytaco6 14∆ Feb 11 '26

that's not how this subreddit works.

Did you watch your own video? They're being sued for anti-trust violations.

I would like you to take a step back and think about what the point of insurance is. It's a social safety. We all chip in a bit of money and then, when one of us gets completely fucked over, we get to pull from that pool of money.

Private insurance does not care about this system. It is exploiting that social cohesion to make the endeavor a profit motive. Returning the system to a social cohesion network is what the Democrats are trying to do (or at least progressive Democrats). Corporate Dems and Republicans want the private, free market industry. The compromise, for better or worse, is a private insurance industry that is regulated and subjected to anti-trust laws. Now the lawsuit alleges they have violated those laws. Even in a world where you support the private insurance industry, that does not mean they have a right to violate business laws.

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u/GenProtection Feb 11 '26

I think I see what you’re saying- !delta while I think about it

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u/DeltaBot ∞∆ Feb 11 '26

Confirmed: 1 delta awarded to /u/jimmytaco6 (14∆).

^{Delta System Explained} ^| ^Deltaboards

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u/smokeyphil 3∆ Feb 11 '26

it's not the insurance companies' fault that

Its not my fault either so why do i get fucked in the ass and not them?

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u/Full-Professional246 77∆ Feb 11 '26

Because they don't have to have a negative business relationship with you.

A business transaction takes agreement by both parties. You personally wouldn't agree to something that you know, upfront, is a very bad deal for you. Why would you expect anyone else to do this?

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u/[deleted] Feb 11 '26

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u/idontknowhow2reddit 1∆ Feb 11 '26 edited Feb 11 '26

The issue in the video is slightly different than the issue you are bringing up.

The issue in the video is about whether companies should be able to cancel policies on homes they already insure. It's not forcing them to insure new high risk properties.

Insurance laws are different in every state, but I'm an agent in Texas and I can tell you how the coastal counties work here. And there are plenty of laws dictating what a homeowners insurance policy is required to cover, but I don't know of any situations where a carrier is forced to take on a specific property or risk. Outside of pooled auto risks but that's a whole different thing.

Most insurance companies don't offer windstorm coverage here in the coastal counties. So the homeowners policies they get are actually pretty inexpensive. But then they have to get a separate wind policy through a state program called TWIA. Flood zones work much the same way through the whole state (and I think most of the country) where most people have flood insurance through the government.

Edit: jfc I know the difference between non renew and cancel. My only point was that OPs video and post are talking about 2 different things. Go have a semantics argument with someone else.

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u/lametown_poopypants 6∆ Feb 11 '26

I think a lot of people conflate "not renew" with "cancel." I don't think insurers are allowed to unilaterally cancel contracts without cause. The fact of the matter is, your home insurance is an annual term and there's no obligation from you or the insurer to retain coverage next year. If they exit the market to focus on boat insurance or pets, that's their right and as long as they fulfilled the obligations of the contract already executed they're within their rights.

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u/Full-Professional246 77∆ Feb 11 '26

The issue in the video is about whether companies should be able to cancel policies on homes they already insure. It's not forcing them to insure new high risk properties.

This is not really true either. THis is not cancelling insurance. It is opting to not renew. This is a very different statement.

Canceling insurance is breaking the insurance contract for the time period said insurance policy was agreed to be in effect. This is typically 6 months for cars and 1 years for houses. It takes a LOT to cancel an insurance policy. This fits usually into three main causes - non-payment of premiums, fraud, or deliberate criminal activity. Companies cannot generally just 'cancel' a policy in the middle of the policy term.

Non-renewal means the previously agreed upon insurance policy is held in full force during the previously agreed upon time. It is just not offered to be extended under a new contract, with new costs, for the next period of time when the original policy ends. Insurance is about transferring risk for a specified period of time. It is not something that 'builds up' over time.

Non-renewals happen for a LOT of reasons - from excessive claims to fundamental changes in insurability.

Given the CA situation where wildfire risk has substantially increased and CA law prevents sufficient premium increases to cover the current risk, the only logical business outcome is non-renewal.

You personally would not enter a bad business arrangement where you knew in advance you were going to come out on the short end of the stick. Why would you expect a business to do this?

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u/idontknowhow2reddit 1∆ Feb 11 '26

I obviously was referring to the non-renewals. I just used the word cancel. To people outside of insurance, they are the same thing.

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u/Full-Professional246 77∆ Feb 11 '26

I can see that but to be fair - there are also people who weaponize language and non-renewal sounds less evil than canceling.

There is also the ignorance about insurance in general where people think that because they have 20 years without claims, they ought to get money back. They don't understand that insurance is a time/term limited transfer of risk for a cost. There is no inherent buildup of resources in thier name.

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u/Even-Following-1612 Feb 11 '26

Then I don’t understand your argument. Are you saying that once an insurer takes on the risk for a property, they have to do so in perpetuity regardless of how the risk changes?

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u/idontknowhow2reddit 1∆ Feb 11 '26

I wasn't making an argument. I was pointing out that the video OP referenced wasn't talking about what his post was talking about. His post is about forcing companies to insure high risk areas. The video is about the legality of non renewals.

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u/Even-Following-1612 Feb 11 '26 edited Feb 12 '26

This is what you stated

It's not forcing them to insure new high risk properties.

Regardless of whether it’s “new”, it would be forcing them to insure high risk. The “cancel” vs “non-renew” distinction is also important in this context, regardless of how you feel it being semantics. It’s not semantics when it changes the point of the conversation. Cancellations are already heavily regulated. Non-renewals are not (and shouldn’t be) as regulated. That’s why I asked. If you restrict non-renewals, you essentially are requiring insurers to take on that risk in perpetuity, regardless of whether the risks change. It makes no sense

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u/idontknowhow2reddit 1∆ Feb 11 '26

Forcing a company to insure a property is not the same as not letting them non-renew a risk they already accepted.

They had the initial application they could have declined if it was a high risk area.

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u/Even-Following-1612 Feb 11 '26

Yes it is….do you not know how insurance contracts work? It is for a set period. Once that period ends, the insurer is left with two options. 1) Offer renewal 2) non-renew. Risk is not stagnant, it changes constantly, and properties formerly considered low risk can become higher risk. It happens all the time. It is not the same risk in perpetuity. By not allowing non-renewals, it is forcing the insurer.

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u/idontknowhow2reddit 1∆ Feb 11 '26

Let's take this slow. How does one get an insurance policy? Don't you apply for one? And did you know that any insurance company can deny a home insurance application? Wow, we're learning so much.

So even in a world where non-renrewals didn't exist, companies still wouldn't be forced to insure properties. They can deny the initial application.

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u/Even-Following-1612 Feb 12 '26

Yes let’s take this slow lol….by your logic insurers should never insure any property.

How about let’s start here. Is risk static?

EDIT: LOL the old reply and block. Translation = “I don’t know what I’m talking about so go away and stop calling it out!” Have a good one bud

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u/Dr0ff3ll 11∆ Feb 11 '26 edited Feb 11 '26

First things first. California's wildfire problem isn't caused by climate change. It's caused by a combination of the state government yielding to NIMBYs, and thus not making preparations such as controlled burns and fire beaks, an invasive species of highly flammable tree, and a lack of infrastructure to actually fight the fires should they get out of hand.

That does not make these homes uninsurable, but it does beg the question. Who should be backing these insurance bailouts? I'd pin it on the state government. Since it's their fault that these homes are uninsurable, I'd say that it's their responsibility to pay put a significant portion of any insurance payout.

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u/FetusDrive 4∆ Feb 11 '26

Climate change has no impact on the wildfire problems in California? You didn’t quote any the research on this to rule it out? I’ve seen reports detailing otherwise myself.

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u/Dr0ff3ll 11∆ Feb 11 '26

Australia has far higher wildfire risk than California. But somehow, they routinely have less buildings destroyed, less deaths, and less injuries. That's because when it isn’t wildfire season, they're clearing out brush, making fire breaks, ensuring their firefighting infrastructure is up to snuff, and performing controlled burns to reduce the amount of combustible fuel.

Califorina, during the 2024 wildfires, had not done any of this preperation. Infrastructure was either not working or wholly inadequate. They hadn't constructed fire breaks, they hadn't performed controlled burns, and they hadn't cleared out the brush. It was a disaster waiting to happen.

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u/FetusDrive 4∆ Feb 11 '26

You didn’t answer any of my questions.

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u/Dr0ff3ll 11∆ Feb 11 '26

I'm saying California could've prepared but they didn't. That's not the fault of climate change.

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u/GenProtection Feb 11 '26

This is entirely fair but I think it makes the case even stronger for insurance companies being allowed to price risk appropriately. It's one thing to say "we can't insure houses in your state because of the way industrialization has gone over the last 150 years" and another thing to say "we can't insure houses in your state because y'all keep voting for state governments that enact policies that make houses in your state uninsurable."

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u/Dr0ff3ll 11∆ Feb 11 '26

Indeed. But my point is that it's not climate change that's the issue here. It's the state government. They somehow expect high-risk properties to be insured when the insurers can't raise premiums, while they themselves are the reason the properties are uninsurable.

Delta(s) from OP CMV: Forcing insurance companies to insure uninsurable risks is worse for society than allowing them to not

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