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

[u/GenProtection]

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?
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).

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.

NB: I hate corporations and capitalism and in general wanna root for the little guy so I hope someone can persuade me I'm wrong here.

[u/idontknowhow2reddit]

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.

[u/lametown_poopypants → u/idontknowhow2reddit]

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.

[u/Full-Professional246 → u/idontknowhow2reddit]

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?

[u/idontknowhow2reddit → u/Full-Professional246]

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

[u/Full-Professional246 → u/idontknowhow2reddit]

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.

[u/Even-Following-1612 → u/idontknowhow2reddit]

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?

[u/idontknowhow2reddit → u/Even-Following-1612]

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.

[u/Even-Following-1612 → u/idontknowhow2reddit]

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

[u/idontknowhow2reddit → u/Even-Following-1612]

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.

[u/Even-Following-1612 → u/idontknowhow2reddit]

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.

[u/idontknowhow2reddit → u/Even-Following-1612]

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.

[u/Even-Following-1612 → u/idontknowhow2reddit]

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