I don't really understand the privacy concern here. To wit: insurers can demand actual inspection of your home when making underwriting decisions. The condition of your house is very much their business. Why is an aerial photograph of your roof, which everybody in the world already has on Google Maps, such a big deal?
I'm less concerned about the spying and more concerned about insurance companies arbitrarily non-renewing policies with no recourse for the consumer. Insurance is heavily regulated for good reason, and insurance should be a source of stability instead of anxiety.
Alright, I spent years working and building 0-1 insurance products. Let me peel back some stuff that’s been happening behind the scenes.
Some officials are elected and some are appointed which all depends on the state. Appointed officials are usually more reasonable and elected are not because higher rates = mad voters = re-election chances lower.
For a long time, insurers have struggled to get sufficient rate changes approved. A literal quote for you during Covid was, “Son, I’m looking out my window at downtown {city} and I don’t see many cars on the road. We won’t approve the rate increases.”
This was with actual data of losses increasing due to supply chain disruption of auto parts, labor increases and many more things.
We basically had to write policies and hope for the best despite knowing the data / trend lines forecasting major losses.
Fast-forward and what do you have - major losses by all of these companies - and so these companies have two choices: - Try to get rate approvals - Exit the market or line of insurance
For California, the latter is the better option because at least for auto you cannot use credit, telematics or other very predictive attributes to price the risk. This results in essentially pooled risk which in aggregate drives up rates for all. Simply put, California officials did this to themselves.
For other states, the first option works but the rate increases are now significantly higher because it was near impossible to get any adequate rate increases last few years.
So, the bill has come due and it sucks for everyone as it’s either a) higher prices or b) can’t get insurance (Florida folks for certain types) or c) limited suppliers not being able to get reinsurance to share the risk results in higher rates that customers can’t afford so they go without.
Why are insurance rates regulated by the government?
I understand that the state has a strong interest in ensuring that insurance companies are adequately capitalized, but I don’t understand the state interest in directly regulating premium prices. (Or is that not what you are referring to?)
Why is basic insurance for ordinary people a for-profit business at all, rather than something the collective (administered by the state) does to soften any misfortune that hits any of its members?
Mathematically, if you sell insurance at break even, you're guaranteed to go bankrupt - on an infinite time scale, the "spike" of a random walk martingale (this last word means, it doesn't make a profit) will exceed every level, i.e. it will wipe out any amount of collateral / capital / equity the company might have.
This is why you have re-insurance
https://en.wikipedia.org/wiki/Reinsurance
If the final insurer is the government, you don't have the risk of ruin because you have control of the money printer.
Reinsurance isn’t magic. This helps with one-off losses, but if you’re fundamentally not able to make a profit, they’re not going to cover you, because all you’ve done is shift the negative expected value to them.
It also probably increases the odds of total ruin... think a Katrina or an Andrew but a bit worse. On a smaller scale, it's never gonna be just one car in a town with hail damage.
It also probably increases
If money printer goes brr… you’re losing, not winning.
What a bunch of nonsense.
If you believe that in an infinite time scale the spike of a "random walk martingale" will exceed every level, then you also believe that you'll go bankrupt even if you don't sell insurance at break even. Maybe mathematically incorrect, but entirely irrelevant in the real world.
IN ADDITION, the money that insurers make isn't just the underwriting profit but also the investment profit. You you're talking twice as much shit as the average HN commenter.
I don’t ”believe” in math, I can prove it.
If you don’t sell at break even, it’s not a martingale, so the Law doesn’t apply.
You can prove mathematical propositions, you obviously can't make truthful conclusions about insurance. And that's really the crucial parts. Anyone can make prove mathematical statements.
Reminds of the guy who lost his keys in the darkness and was looking for the keys under the lamp because that's where he can see. Likewise, you're using your tools and hoping that the tools have some connection to real life.
You sound like one of those "that's all good in practice but it would never work in theory" type of people.
The real world is much more complicated that mathematical models.
But if your business goes bankrupt with probability 100% with even a simplified mathematical model, I wouldn't want to invest in it.
If you do that, you must also regulate the sort of vehicles ordinary people can buy and the sort of homes they can own.
After all, we can't have the community suffer an unsustainable loss because some guy earned too much money and selfishly bought a Camaro.
So, obviously the collective should create a list of cheap and economical cars ordinary people are allowed to buy.
If that doesn't feel right to you, remember, the so called "freedom of choice" is a bourgeois value. Transcend it.
you must also regulate the sort of vehicles ordinary people can buy and the sort of homes they can own.
Yep, we already do that. Vehicles and houses have to conform to a set of standards that provide security and safety measures for others, e.g. "Street legal" car restrictions, fire hazard safety requirements and building permit regulations and state codes that adhere to city guidelines, etc. Might need to include a few more talking points from the political pundit you're regurgitating views from for a better argument.
If you do that, you must also regulate the sort of vehicles ordinary people can buy and the sort of homes they can own.
There are two provinces in Canada (British Columbia and Saskatchewan, since 1973 and 1945 respectively) who have a crown insurance corporation and require everyone purchase insurance through the government.
Neither of them force everyone to drive a Lada.
Even if the government ran the insurance program, you wouldn't be forced to charge everyone the same amount for their insurance. The Camaro driver could pay more for their coverage.
Why is basic insurance for ordinary people a for-profit business at all, rather than something the collective...
There are mutual insurance companies [1], including the largest insurance company in the US (State Farm). At the end of every year, if the amount of money left over exceeds the formula they have set, every policyholder gets a refund.
At the end of every year, if the amount of money left over exceeds the formula they have set, every policyholder gets a refund.
That's commonly a requirement of regulation too. I've had refunds from car insurance and healthcare insurance because claims were lower than expected.
Also, fraud.
In some places and markets it is – I believe if you live in British Columbia basic vehicle insurance is done through the province.
https://en.wikipedia.org/wiki/Insurance_Corporation_of_Briti...
Because state insurance programs have perverse incentives. Insurance itself is a moral hazard. You buy insurance and then do something risky you wouldn't otherwise have done because if it goes wrong you're insured. It's also an opportunity for outright fraud. If the book value of your property is higher than its true value, you carry insurance and then set a fire.
Private insurers have the incentive to price this in. If they can predict you're going to be high risk, or uncover evidence of arson, they can charge you higher rates or refuse coverage. For state insurers the cost goes on the taxpayer and if claims are refused for legitimate reasons, the perpetrators go to the media and accuse the state of bankrupting their family. This puts pressure on elected officials to shift the burden of this fraud onto the taxpayer, whereas private insurers would push back because they have a direct financial incentive not to eat the cost of fraud and mispriced risk.
For the same reason credit card interest rates are regulated: there's an asymmetry in bargaining power.
Car prices are not regulated because there are plenty of options for the consumer.
If there is such an asymmetry in bargaining power then why do most people pay less than the statutory maximum? If there are multiple insurance companies, how is it not the consumer who has the bargaining power, since they can just take the lowest price?
The actual reason is that some consumers are extremely high risk, the market rate for those consumers is correspondingly extreme, and then they whine to legislators that they're getting ripped off when in fact the rate reflects the risk. And then the company either refuses their business if they're allowed to or raises rates on everybody else to compensate if they're not.
Eh, or without regulation when people switch risk categories due to a loss they get completely screwed because no company will insure them anymore. At which point, there is strong incentive to only claim the most outrageously bad losses, and for people to only actually get insurance if they have real reason to suspect a loss that is non obvious to others.
It’s a market type that is fundamentally messy and prone to abusive behavior by both sides.
Eh, or without regulation when people switch risk categories due to a loss they get completely screwed because no company will insure them anymore.
This only happens when regulations cap premiums, because otherwise there is always a rate at which selling insurance is profitable. Even if you have a 50% risk of a claim (extremely high), you'd still be able to buy $100,000 in insurance for a little over $50,000. Of course, you may not be able to afford this, but then maybe if your risk is that high you should just refrain from engaging in that activity eh?
At which point, there is strong incentive to only claim the most outrageously bad losses
That's what insurance is for. If you have a 20% chance of losing $100 every year, you don't need to pay $21/year for an insurance policy, you just lose $100 once every five years.
and for people to only actually get insurance if they have real reason to suspect a loss that is non obvious to others.
The reason to get insurance is if there is a low probability high cost risk, like a house fire. You don't expect it to happen, but it could, and you'd rather pay $1000/year, have it and not need it, than lose the value of your house in the event of a random accident.
Hard to ‘refrain’ from buying health insurance in the middle of cancer treatment eh?
Or ‘refrain’ from buying house insurance because someone tripped in your house and is suing you for $1M worth of damages, or you discovered your house was built in a high risk fire zone.
Or ‘refrain’ from buying vehicle insurance after an accident because the state will not let you drive without valid insurance.
That’s the whole point.
Because for normal humans, there is no difference between ‘insurance won’t be issued’ and premiums shooting up from $100/mo to $90k/mo. especially when the policy renewal period is in the middle of whatever is going on. Like trying to live. And if insurance companies didn’t have caps on premiums, that’s what they’d do - or just cancel it to avoid even worse PR.
At least ‘pre existing conditions’ aren’t automatically a death sentence when trying to switch insurance anymore eh?
Hard to ‘refrain’ from buying health insurance in the middle of cancer treatment eh?
The thing you're insuring against in this case is a cancer diagnosis. If you're insured when that happens, the insurance company should now be on the hook for your lifetime worth of cancer treatment regardless of whether you pay them any more premiums. That isn't how we implement it, the existing regulations don't work like that, but that's how it would work if what you were buying was actually insurance. The insurer eats the cost at the point when the unknown risk becomes known.
Or ‘refrain’ from buying house insurance because someone tripped in your house and is suing you for $1M worth of damages
You don't have to buy liability insurance if you own your house. Of course, then if your negligence injures someone they're going to get the house instead of the insurance company's money, but that's up to you. And can be avoided in either event by not giving people valid legal claims against you.
Notice that a single claim is generally not enough to make insurance unaffordable, and multiple large valid claims is generally a sign that you're doing something wrong.
or you discovered your house was built in a high risk fire zone.
It's not the insurance company's fault that you bought a house without checking what it would cost to insure. The cost of insuring houses there is supposed to be high, to deter people from building them there.
Or ‘refrain’ from buying vehicle insurance after an accident because the state will not let you drive without valid insurance.
So you take the bus or move to a walkable neighborhood. What's your alternative, that someone can total two new cars every week and still get insurance for the same rates as anyone else?
Because for normal humans, there is no difference between ‘insurance won’t be issued’ and premiums shooting up from $100/mo to $90k/mo.
But why should an insurance company be required to insure you at all? "Known arsonists can't get/afford fire insurance" is fine. "People who get into a major car accident every week can't get/afford car insurance" is fine.
especially when the policy renewal period is in the middle of whatever is going on.
That's not how insurance works. You buy insurance, then something happens, then you file a claim. They can't retroactively raise your premiums, they can only raise the future ones because there is now evidence that your risk is higher, and then you get to decide if continuing to carry insurance is worth it, and you still get the money from the claim that happened while you were insured. Then you can either choose to pay the higher rates, go uninsured going forward or stop doing the thing you need insurance coverage for.
At least ‘pre existing conditions’ aren’t automatically a death sentence when trying to switch insurance anymore eh?
This has a similar effect to putting the full lifetime cost on the insurance company you had when you got diagnosed, except that you can then change insurance companies. Which is weird and has perverse incentives, like there is no reason to carry good insurance against long-term cancer treatment until after you find out you have cancer. Which makes the good insurance much more expensive because buyers would self-select and only people who know they have cancer would buy it.
Then we try to avoid that by tying health insurance to employment which makes it harder for people to switch when they get a diagnosis, and that in turn has a ton of other negative effects because now there is much less competitive pressure in the health insurance market.
Regulators seem to really suck at thinking through the consequences of what they're doing. Or they don't and someone is getting paid to do it this way on purpose.
You can’t get a mortgage without house insurance.
Things like fire danger risk tend to change after the home is built as new data comes in.
Health insurance isn’t implemented that way, as you acknowledge, exposing folks to exactly that risk.
You seem to be stuck in theoretical. I’m talking about actual behaviors.
More than that, you can choose to go without a credit card. Insurance is mandatory for most people. Either the law requires it or a lender requires it in order to approve the loan.
Insurance rates are regulated for the same reason most states regulate utility rates. You can’t really opt out and the markets where price regulations have been removed have left most consumers worse off.
Not a good comparison - you can also choose to go without buying a house, its a very US thing to measure success in life with such (massively incorrect) yardstick.
That’s not really true anymore. Try booking a hotel or a flight without a cc.
I thought there were also requirements that insurance rates are profitable (in expected value) to prevent some loss-making customer acquisition strategies and to reduce some long-term risks from insurers going bust. I’m not very confident in this claim.
Yes but less so on the rates themselves & rather do you have enough cash to stay alive without going under.
They’re obviously related but less regulatory focus on rates, more on cost of business and that.
Edit: Basically you can run at a loss (most do) for a limited period of time but have to show that you will be liquid on the other side of the losses.
Every state requires you to hold some minimum level of car insurance, mortgages require a level of homeowners insurance, etc. The underlying problem is that it's a significant barrier for people if they get priced out of the market (even if it's for good reason). If you can't afford car insurance or no insurers will offer it to you then you legally cannot drive a car, and in the US that becomes a problem that spirals into bigger problems.
I would say overall there's no good answer to this problem that everybody would be happy with, just maybe one you consider "less bad" than the other ones.
If you are such a risk when driving no insurer will touch you, I would like you off the road.
I'd prefer that nearly all of us were off the road, but in practice we've not built a world that allows such a lifestyle.
In practice what actually happens is that these people will drive anyways and cause damage before being pulled over, except now they have no insurance and it’s a whole mess.
It is also the theory behind universal healthcare coverage, because people will have medical issues that eventually end them in the ER regardless of coverage status and someone has to get paid for services rendered. And also insurers will literally take any excuse to deny coverage if they can.
While there’s a lot I dislike about the Mass auto insurance rules, the rules for “no insurance company will voluntarily insure you” are pretty friendly to drivers who are otherwise uninsurable.
https://www.mass.gov/info-details/massachusetts-auto-insuran...
Ten-to-one you can go back to when the regulation started and find there was rampant, blatant abuse going on. That’s the usual story behind these kinds of things.
There is a saying that regulations are written in blood.
They may not have been well designed, or they may not wear well. But most of the time they are put in place because somebody got badly hurt, one way or another.
Industry could usually design itself better regulation. But unless it finds a way to mutually enforce compliance, the task will fall to government.
There are votes in it.
Or, to be precise, the benefits are concrete go to precise groups of people, the costs are abstract and diffuse. Same thing as protective tariffs.
Votes are the sort term answer. People are losing their houses in Florida. Mortgages require insurance, and if you insurance goes up thousand a year, and hundreds a month, some people can't afford it, and lose their houses.
Longer term, this is bad for a society in general, and politicians do know this.
There are all sorts of potential societal consequences to people losing homes that cost the society (us!) money (homelessness, vandalism, entire neighborhoods going the way of Detroit suburbs, and much, much more). Society doesn't want this to happen.
state interest in directly regulating premium prices
The state interest stems from the political interests of elected officials. See comment above by @broprogrammernot.
“When it comes to rate regulations for overall insurance, according to state regulations they should not be excessive in any way. This means that they must be affordable, and are not set too high in relation to insurance claims. Insurance rates should also not be inadequate. This means that they should not be marketed at a rate that is too low. The Insurance rates should also not be discriminatory in any nature, meaning that all insureds are charged similarly for similar coverages. These rate regulations are imposed on insurance companies in order to protect consumers. (Dorfman and Cather)”
Source: https://www.lawteacher.net/free-law-essays/judicial-law/gove...
Premiums is what I’m referencing, yeah.
So, it’s a complex thing but the state has a vested interest in drivers being insured because of state / federal funding for roads, infrastructure and all of that.
The original intent was to stop humans from being greedy assholes and to provide a stick for when they messed up. Without the states involvement, insurance would likely go the way of used auto with “buy here pay here” lots which is a net negative for the state & society as a whole.
They want to make sure that “fair” prices are set so that there isn’t an overly disproportionate amount of people who need the insurance not having insurance. In reality, the less risky drivers do for all intents and purposes help off-set the cost of the more risky people but all of that is hidden in the premium logic.
At the end of the day, what has happened though is the state’s regulatory group overstepping their bounds (in my opinion) and ignoring good faith proposals with data showing why rate increases are needed which leads to situations we’re in now.
Having been in that world (I left it) I can honestly say there has to be some regulations or regulatory body because a lot of these folks spend so much time looking at numbers (actuarial science in general) they forget the fact there are humans behind those numbers.
Why are insurance rates regulated by the government?
Why wouldn't they be?
The only reason why you might believe they shouldn't be is if you fell for the "free market knows all" nonsense.
I’m not seeing you motivate or justify the rate increases.
The insurance companies are loosing money. Rates have to go up.
And yet there's seems to always been enough money for stock buybacks and disgustingly excessive executive compensation.
In insurance companies?
In most publicly traded for-profit organizations.
i think "most" isn't necessarily right since selection bias applies : ones not making money get delisted from public trading, so don't pull down an average, skewing it.
another couple quirks: stock buybacks generally inflate the value of remaining shares (not bought back) for the public traded company shareholders...what they hoped for when acquiring shares. some companies increase dividends to return value, rather than fiddle with share prices.
but, yeah, agreed to your general observation.
Or cut expenses, educate the insured on safer behavior, ...
or pull out of the market...
And not just a bit. Insurances have lost money for most of the last 5/6 years.
They are not all losing money.
Why should any seller have to justify their prices? Just don’t buy their policy, buy someone else’s.
Insurance in general is more heavily regulated than this. There are a few reasons: because society doesn't want these companies racing to the bottom on price and leaving their customers high and dry when the catastrophe does hit, because society finds insurance pricing based on certain personal aspects, such as race, odious, and because the government mandates some types of coverage and they don't want to let insurers rinse customers that are forced to buy their product.
For all these reasons, insurers typically must justify rate increases.
While it’s certainly accurate insurance is a regulated industry, nothing you listed explains why it’s a good idea to allow government to set or approve rates vs. ameliorating those social concerns through other means.
Because insurance isn't optional. If the law demands insurance then the law must assure equal access to the legally mandated insurance.
Which law demands home owners carry an insurance policy?
In the US, it's a requirement of mortgage lenders. This makes it less of a legal requirement and more of a de facto requirement, as most homes are purchased via mortgage in the US.
What I saw was "supply chain got more expensive so $/claim went up and is outpacing premiums".
Many industries are regulated and have to provide good faith justifications for price increases. The burden of proof is on them, not the service recipient.
I’m not sure you read my post then as it explains I’ve seen first-hand actual loss data because of supply chain & other costs leading to an unprofitable offering being denied by the state without any valid rationale other than “he didn’t see any cars outside his window”.
The point is that regulators have not been allowing rate increases with good faith justifications for years and now that they see their actions have caused companies to pull out they’re pointing the finger at the companies when it’s their poor judgment for years coming to fruition.
I'm seeing it: "This was with actual data of losses increasing due to supply chain disruption of auto parts, labor increases and many more things."
Value of claims going up while number might be slightly down... Means that outgoing money that is returned to buyers has increased. They are "winning". But house cannot keep losing or they go bankrupt.
I thought risk pooling was the point?
Risk pooling is fundamental to insurance, but not all pools are the same.
The observation is that if you aren't able to discriminate at all or subdivide the pools, the only response is to up the average rate to cover the aggregate risk as best you can estimate it. This gets tricky if your ability to change rates is constrained, also.
These things are always in fundamental tension, and also in tension with privacy. It's not an easy problem.
In extreme cases forcing too much pooling can cause market failure. The intuition is that the least risky customers decline to purchase (much) insurance, making the average risk higher, increasing prices, making more people decline insurance, in a vicious cycle. It’s fundamentally similar to Akerlof’s market for lemons.
This is always a fun topic for me.
If everybody is sharing all the risk that’s the same thing (obviously I’m being simplistic) as them underwriting the risk themselves.
They’re opposites though?
Someone underwriting their own risk might as well not have actual insurance, as they’re just on the hook for actual damages correct?
So if they get sued for $1M, then they are on the hook for $1M (as an individual).
If everyone is sharing the risk, then everyone is on the hook for $1M/number of people.
So the individual that gets sued for $1M in a large state, might only be on the hook for a couple cents for their own lawsuit. Though they’d also be in the hook to the same degree for some other asshole getting sued.
Which is why insurance creates moral hazard (for things someone can control), and reduces catastrophic damage to individuals (for things someone cannot control).
Yup, exactly.
Even worse for the consumer is that insurance rules say you have to “offer” insurance in the state to get your license.
Well, you don’t want to drop your license but really don’t want to have a bunch of policies. What do you do?
You make it impossibly difficult to get insurance. I’m not going to name names but a lot of insurance companies in California are doing this.
No online applications, have to call in, have to fax in or mail paperwork required and so on…
That sounds like informal underwriting. If you are forbidden by law from better underwriting, then selecting by conscientiousness is a sensible proxy.
Yup - I have experienced this trying to buy health insurance (pre-Obamacare) in California.
I was very confused until I realized they were doing exactly what you said.
It is...kind of. But we're talking about severely limiting the ability of insurers to distinguish high risk parties from low risk parties and price accordingly. When the insured parties have limited agency over the risk they present — as with, e.g., health insurance for congenital diseases — this kind of regulation can make sense. But when insured parties can control the risk, such regulation usually makes insurance markets much less efficient. Essentially, it takes away the incentive for insured parties to avoid risky behaviors, creating moral hazard. This is a well-understood mechanism for market failures.
We already have this problem with car insurance in California. In the 1980s, at the tail end of a long series of stupid initiative ballot measures, Californians wrote down that there are only 2 strata of risk: good drivers, and everyone else. "Good Driver" is defined as a person who has had a license for 3 years without killing or injuring anyone. Because of this, California is the only American state where the law requires that a middle-aged person who drives a base model Honda Fit, and a 19-year-old with a Dodge Hellcat who miraculously hasn't killed anyone, yet, that we know of, both get the same "discount". And consequently it is unlawful here to offer those telematics systems that charge less to good drivers and more to bad ones.
Yup, I hated reviewing California based book of business.
Everyone is upset their rate is going up but the issue is lack of ability to use predictive underwriting because of what you said and more.
I think it needs to also be acknowledged that insurance itself is a moral hazard. Focusing on the "efficiency" and moral hazards of only the insureds is an incomplete analysis.
Insurance is a for-profit enterprise and as an expert told me, "the goal of insurance companies is to not pay claims". It essentially wants to be passive income at the end of the day.
Modern capitalism runs on insurance but should it? Health insurance is a great example: it shouldn't exist, and is unnecessary in single-payer systems. Car insurance is another example, where you can argue that insurance is locked-in to hide the fact that cars are systematically unsafe. Note how you don't need insurance to ride the subway.
The point is, insurance exists to make rich people richer off of risks that could be addressed socially in other ways. When we see that entire states are losing home insurance because of other systematic problems like climate change we should look at the system itself. Maybe making profit off of people's unavoidable risk isn't a great idea.
EDIT: in response to parent, my point is that focusing on the ills of regulators harming efficiency needs to account for the impossible job regulators have in the first place, which is making an unfair system (insurance) fair.
I thought risk pooling was the point?
The point is pooling unpredictable risk. You don't know ahead of time if your house is going to flood. You do know ahead of time if your house is on a flood plane. Therefore, people with houses on a flood plane pay more for flood insurance.
The alternative is that low risk customers can't get insurance because they'd have to pay the same as high risk customers and that isn't worth it. Additionally, then people build tons of houses in extremely high risk areas because they can buy insurance for the same price as someone not doing something stupid, which is a moral hazard. Existing regulations have already caused this to happen in many cases.
The point is pooling unpredictable risk.
This is important point about knowledge which I feel leads towards another kind of hazard: Which party is capable of predicting risk and how that information asymmetry may be exploited.
We already spend a lot of time thinking about one direction, where the insured hides a pre-existing condition or their nefarious plan to commit arson, or whatever.
But what about the other direction? What about when the insurer has tools and relationships to determine something but doesn't tell the insured?
That might either be because there's not enough competitive pressure to make them lower the premium, or perhaps they raised the premium to cover the higher risk but refuse to disclose exactly what the risk is or how they determined it.
That is the problem solved by competition. If insurers know that your risk is below average then they'll want your business and therefore want to underbid other insurers in order to get it. But so will the other insurers, until your premium comes down to reflect your risk. This works even if you don't know your own risk because all you have to do is pick the most attractive price.
Of course, if you don't have enough competition that doesn't work, but then your problem is that you don't have enough competition. Which, especially in insurance markets, is generally caused by regulatory barriers.
is on a flood plane.
You mean like this one? https://www.yahoo.com/news/united-airlines-flight-diverted-t...
…I’ll see myself out.
You want to risk pool a specific cohort of people. You want the pool to be as large as possible without masking clear adverse indicators. For instance, from an example downthread: you probably don't want to pool people with trampolines in with everybody else. Most people don't have trampolines. To an insurer, the sole function of a trampoline is to generate lawsuits. If you pool trampoliners together with everybody else, you necessarily raise everybody's rates to subsidize trampoline lawsuits. Better to factor the trampolines out and price them directly.
It is through reinsurance mechanisms and the way you build the portfolio.
If you can’t use predictive attributes, many not allowed in California, you’re not going to get reinsurance interest because you can’t really balance the risk across different risk types for drivers.
So the end result is the customer pays more, despite their driving record being clean, because that’s the only way to manage through the risk.
Here in British Columbia, our provincially owned insurer (ICBC) saved significant money because of fewer claims during Covid. They even issued a rebate to most drivers. Though they also noted losing some revenue due to fewer or lower premiums being paid. The amount saved was far greater.
https://assets.ctfassets.net/nnc41duedoho/BNR4qtOTGPJuyQADtK...
I wonder if the difference was largely because of Canada's more strict lock downs. The roads were nearly dead here for quite awhile.
And Canadian auto-parts prices are through the roof anyway. If there's a factory-gate price increase/supply issue, there's room for margin compression instead of raising prices. Maybe?
I'm with you on that 100% Scoundreller.
Hi, This is a very informative post. I am trying to learn more about how the insurance industry works. Would you be open to sharing any resources (websites, books etc) that teach the 0 to 1 of insurance? Or can I DM you with a couple of questions? Thanks!
Yeah, sure shoot me a DM and when I’m back later at my computer I have some.
I didn’t deal much on commercial insurance btw, I have _some_ awareness of that.
This results in essentially pooled risk which in aggregate drives up rates for all.
For all? I'd think it reduces rates for some and increases it for others.
And yet there's seems to always been enough money for stock buybacks and disgustingly excessive executive compensation.
supply chain disruption, labor increases
All of these things have either reduced or stabilized over the last two years, but prices seem to keep going up. Strange!
One key part of the formula omitted is most major insurers while posting underwriting losses in certain markets, etc in 2023 posted annual net profit over $1.0bn. Am I right in thinking these sweeping rate increases and market exits are justified by protection of $250mm+ per quarter net income? If so, then are we right to blame anybody other than the insurers shareholders and owners for this current state? Wouldn’t $25mm per quarter net income be sufficient? Why does runaway profits maxxing have to apply to every market including public good markets like insurance?
No one, including companies, should not be forced into contracts they don't want to enter into.
In practice, you are going to find they are never arbitrarily doing it. They are doing it because the price no longer covers the cost of providing the insurance. Just like when I decide the price of X isn't worth it anymore, I stop doing the transaction. The reasonable response would be to increase the price, but in some situations it's not possible due to regulation.
Except when those companies have lobbied to create laws to make the use of their industry mandatory.
Car insurance isn't mandatory; proof of financial responsibility is. In California, you can get a compliant insurance policy, deposit $35k with the DMV, setup a compliant $35k bond, or a self-insurance certificate which requires a larger deposit and is really for commercial motor vehicle carriers. I don't think it's unreasonable to require means to pay for damages when operating a motor vehicle; it doesn't take much to cause damages well in excess of California's deposit amount; washington state requires $60k.
For home insurance, usually it's a mortgage requirement, which is not by law. In condominiums, the community may require it of individual owners, and then it's not really law either.
Side note here on how ludicrous it is that you can substitute a $35,000 bond for a real insurance policy, given the likelihood that any driver is going to cause losses far in excess of $35,000.
The 35k bond doesn’t preclude getting sued for an unbounded amount. Presumably the idea is that a 35k bond demonstrates you have more available in case of a judgment.
That said, that seems like a risky idea in a world full of LLCs, trusts, etc.
Not having any insurance coverage at all doesn't preclude you from getting sued for an unbounded amount.
No. it demonstrates exactly the same minimum ability to pay as the alternative minimum deposit or insurance coverage, which are also $35k.
Minimum insurance in California only covers the same $35,000. $15,000 for injuries to one person, $30,000 for injuries to multiple people, and $5,000 for property damage.
It's completely insufficient, but it's not nothing. A reasonable person would carry much more insurance.
$35,000 is also the minimum liability coverage ($30,000 for death or injury to multiple people plus $5,000 for property damage.)
In either the bond, deposit, or liability insurance scenario, the responsible party remains on the hook for whatever is not covered in advance.
Fair, but there are lots of places, like Canada which require some types of insurance by law.
I'm unfamiliar with Canadian law, can you provide an example jurisdiction and required coverage?
In Ontario, the Compulsory Automobile Insurance Act [1] requires that all owners/lessees of vehicles take out insurance policies. The Insurance Act [2] sets out that the minimum amount should be $200,000.
$200,000 is a much better floor than, for example, Ohio's $25,000. An Ohioan friend was injured by a motorist who had the minimum coverage. Her care cost more than that. The motorist who caused the injuries didn't have a lot of assets and she was unable to recover the excess from the motorist.
Still, there are some perhaps unintended downsides. Canadian rental car companies, as the owners of the vehicles, are obliged to provide $200,000 insurance as part of every contract. As a result, it seems there's not much market for them to sell excess liability insurance, and none do that I'm aware of. I, as someone who has plenty of assets to lose if I injured someone, would happily buy a higher liability insurance. Doubly so when I rent a car to travel to the US, since the terms of the contract are often "the rental car company will provide the minimum insurance required in the jurisdiction where the claim is incurred".
[1]: https://www.ontario.ca/laws/statute/90c25 [2]: https://www.ontario.ca/laws/statute/90i08
Thanks! That is mandatory insurance.
I agree that 200k is a much better minimum. Although I would think a deposit of $200k should be just as good as a policy of $200k... But the Ontario law doesn't allow for a deposit.
I wonder if there's a speciality business available in Ontario for single customer insurance, so individuals or businesses can self-insure without risk pooling.
The links below beat me to it.
Auto insurance is mandatory, and it can be government run, or private.
Other areas of insurance can be indirectly required, say one side of renting, etc. Effectively lenders can set the conditions they desire.
I could be wrong, but I don't think there are any states where you are required by law to have home insurance. The issue is that banks won't underwrite a mortgage for an uninsured house, because without insurance it's a completely unsecured asset whose value would go to zero at any time. (And if a bank won't write a new mortgage for it, the value drops dramatically even if it's already paid off, because now the potential market is limited to cash-only buyers for a risky asset)
You're free to go without insurance on a house that you own, but so long as the bank owns it, they're going to make insurance mandatory, and that has nothing to do with lobbying.
whose value would go to zero at any time
No, it wouldn't. It would go down to the value of the land (where a construction is permitted).
Nowadays, that's often more than 90% of the price.
Woah, where can you buy a house that 90% of the money you spend is land? Is that even true in expensive downtown US cities like SF and NYC?
Construction is pretty expensive too.
My home has pretty much 80% of its value as land. And it's not in a anormally expensive location in my city.
value of the land
Only very approximately - it depends on contextual situation.
We had a ton of uninsurable "as-is" houses after the Christchurch Earthquake. Prices for those houses dropped massively because without a mortgage you only get cash bidders so demand was relatively low compared with supply. The price someone is willing to pay for an as-is property depends on many factors, and it can easily be below land valuation.
Firstly desperate or naive sellers would accept well below the land value. You assume that that there are enough buyers to compete. There were not enough buyers shortly after the quake because not enough had cash so there were very cheap properties. Plus you were buying risk too - you simply couldn't price correctly because there were too many unknowns - when whole suburbs are uninhabitable a new construction is irrelevant. The city population dropped significantly.
You could offer below land value on some properties because you are also purchasing a liability e.g. the council required some houses to be demolished & removed (demolition costs were tens of thousands - and demo companies were busy as fuck).
You might pay a lot more than land value:
• Some places could still be rented (uninsurable is not uninhabitable) so potential income mattered.
• Many places just needed work done - sometimes not much - but often a new foundation e.g. lift house and put in new foundation. New foundations had to be compliant with earthquake strengthening rules so usually very very expensive. The as-is homes were often sold by the insurance companies because they were uneconomic to fix.
I advise everyone to be very careful buying property in suburbs or cities where all houses have common/correlated risks of an event - floods - fire - etcetera. Insurance premiums will rise until it is unaffordable - then all houses will not maintain value. Disclosure: I do live in a flood prone suburb but I can afford to self-insure and most people cannot do that.
Even worse: insurance did not cover the financial losses for many people in the Christchurch Earthquake. Especially small businesses. Then again - many other people ended up with huge payouts and were financially much better off. However even then money is usually a poor substitute for emotional costs.
You are not wrong at all.
Home insurance isn't mandatory, but refinancing your mortgage is impossibile without one.
Do you live in CA? In recent years that's the majority of arbitrary cancellations I've heard about - companies pulling entirely out of CA.
I 100% agree with landedgentry. I don't really have any problem with insurers using drone photos - anyone can take drone photos of anyone else's property - and I'm not really a fan of the article calling it "spying" to imply some special kind of nefarious behavior.
But I do think the total bullshit is that companies are just using it to come up with essentially fake reasons to drop customers:
Cindy Picos was dropped by her home insurer last month. The reason: aerial photos of her roof, which her insurer refused to let her see. ... Her insurer said its images showed her roof had “lived its life expectancy.” Picos paid for an independent inspection that found the roof had another 10 years of life. Her insurer declined to reconsider its decision.
I also don't have a problem if an insurer decides to leave a state entirely - that decision is essentially saying the state has made it impossible for them to adequately price risk, and that's something the state should fix if so desired.
But these BS cancellation reasons seem like a case of insurers wanting to have their cake and eat it too. I'm not very familiar with state-by-state insurance law, but I'm assuming they have to come up with some reason to drop a homeowner that already has a policy, so this looks like they're trying to find BS reasons to just drop potentially less profitable parts of their portfolio.
Independent inspectors almost always say what whoever is paying them wants to hear (see: Florida). 10 years left on a roof usually means the next large wind storm will take it out, they’re not paid to look for that.
But independent inspectors usually generate a report that explains at least some of their rationale. Even if it is biased, it can at least be scrutinized.
That is in sharp contrast to the insurance company that is supposedly making their determination based on drone photos that they won't even let their clients see.
If multiple insurance companies say you need a new roof, you need a new roof. Full stop. There’s no justification necessary.
Quite literally, what are you talking about? There were no "multiple insurance companies", there was a single insurance company that dropped the policy holder quoted in the article.
Besides, the article quotes from insurance company agents that directly refutes what you are saying: "Brink, who worked for Farmers in Michigan, said some customers were dropped based on aerial images that were two or three years old. One person wasn’t renewed because of a roof, despite its being brand new."
Full stop. (I just like how people think that adding "full stop" to their comments somehow makes their position unassailable or something...)
I’m not sure why you’re sherry picking the article, it very clearly says multiple insurance companies are doing this, and you claim this is some sort of bad thing that would stop someone from getting insurance.
Your logic is completely falling apart, that’s why you’re confused.
Why aren’t insurance companies required to operate like market makers in the equities markets, where they’re free to choose the price they’re offering, but must offer a price in the market they’re in?
If the roof needs replacing (in the insurance company’s view) then charge whatever the rate is that covers that and still makes them a profit. Don’t just deny coverage.
If you ever look at the options chain on a thinly traded equity, you'll notice small volume and very large bid/ask spreads. Sometimes the bid/ask spread is so large that it looks like a computer glitch.
The primary insurance market is even more illiquid than thinly traded options.
They will just charge the customer the price of a new roof, there’s no point in what you’re asking for.
Similar reports are coming out of Florida. Generally, it seems the industry is pulling away from higher risk to climate change issues from larger storms or fire risk.
That's not the issue in Florida. The issue in Florida is that "although Florida only accounts for 9 percent of the country’s home insurance claims, it is home to 79 percent of the country’s home insurance lawsuits".
That's from https://www.bankrate.com/insurance/homeowners-insurance/flor..., which explains how the roofing scams work in that state. The legislature is working on it.
The legislature already worked on it. It had its way with it, totally. Despite the "work" that was done rates have skyrocketed. We're so deregulated there's no room for any additional work that doesn't break down the front door and walk out with stuff
What's actually happening in Florida is the insurance companies are Janus entities. One part is an insurance company that's subject to rate regulation and the other part is a consulting firm that gets paid large sums of money from the regulated company and that's where all the profits live.
What do you expect when the market collapses and most suppliers leave? Of course everyone else will raise their prices. Now Florida needs to wait for insurers to come back and competition will happen.
There’s a saying in the insurance industry, there’s no such thing as a bad risk, only insufficient premium. Natural catastrophe risk is definitely increasing, but the insurance industry can handle that. The fundamental issue is that regulators in many states (including CA and FL) won’t let insurers charge enough to compensate for that risk.
Yea I think that is exactly correct
Thats exactly the problem with insurance.
If I have any sort of risk mitigation (file backup, fire alarms, spare tire, a generator, whatever) I can test that it works periodically. So I know I'm actually safe for the event.
For insurance, you can't know what bullshit they'll come up with to deny a claim when the time comes for it.
You're left with having paid for the insurance all that time for nothing! Much better to have put that money in a piggy bank instead.
I’ve known plenty of people who had legitimate accidents not of their own fault where insurance made them more than whole, and they would have not been able to afford the replacement if they had simply been saving for the same amount of time.
If you actually feel like you could recoup of the cost of paying for insurance by instead keeping the money in a piggy bank, you are buying too much insurance. There’s a sweet spot for insurance and overpaying for too little insurance is a you-problem.
I’ve known plenty of people who had legitimate accidents not of their own fault where insurance made them more than whole
And I know plenty of people myself, who had legitimate accidents not of their own fault who were left $10-15K out of pocket after insurance and settlements.
Let's start with a car that was two years old, I owed $22K on. Car was totaled and most of the comps from the insurer was $25-28K. Oh good, says I. And then they find one 150 miles away that is $13,500. This drags the value down to about $20K. While there's obviously something wrong with this entry, "Doesn't say salvage title in the ad, so it's a valid comp".
It takes them over a month to figure this out, all the while they have me in a rental, and then try to tell me that they're only covering one week of rental coverage. Had to threaten to sue to get compensation for my injured wrist/arm (which was hyperextended when the airbag went off as I was holding the steering wheel).
I still ended up losing out on $6K 'equity' in my car, having to come up with another downpayment, and months of calls from various medical providers who were having a hard time getting my insurer to pay their bills.
For another driver who ran a stop sign, t-boned me, and whose insurance had admitted 100% liability within 48 hours.
You assume it’s bullshit. Difference.
Well technically you were paying for their obligation to pay for you. Which is a real thing of value.
But, profits.
How else are execs going to pay for that third vacation home?
Does that third vacation home get spied on from the sky as well?
I’m sure it does but he knows Bob and Bob can just flip a bit in a database to make it “compliant”.
This sort of opportunity to find a rationale for cancelling an individual insurance policy will inevitably by used for evil. See: Insurance Redlining.
Or you thought cancelling cable was hard now…
In some states it's the heavy regulation which is causing policy non-renewals. When governments fix prices below the market rate that inevitably leads to shortages.
It's a stressful situation for many property owners. They may not realize the impact that recent high inflation has had on repair costs, especially when prices tend to spike up higher after major disasters.
Nobody can be forced to insure you if they don't want to. I learned that on CNBC the other day, here's the segment talking about the state of home insurance in US.
I don’t think insurance companies should be forced to protect you from your own outsized risk taking at a government capped price.
Can’t really force people to do business like that…
What you can do, which the U.S. already does, is government-run insurance, socializing the losses among a population. Flood insurance, for example.
I'm not usually a "actually this is the fault of regulation" sort of person, but in this case it really is the fault of regulation. A bunch of states have laws saying premiums can't rise more than X% in a year, or can't rise at all without the approval of the state insurance commissioner. If circumstances have changed (e.g. wildfire or hurricane risk is now worse than we thought, and also labor market tightness and inflation means repairing/rebuilding is much more expensive) such that the insurance company can't insure you profitably without a rate hike they're forbidden to do, then of course they're going to drop your policy.
If insurance is individually priced to this degree, what's the point of insurance?
Why would insurance being individually priced negate its value? The benefit of insurance is the pooling of the risk. The more individually it is priced, the more efficiently it works. (Not that I'm a fan of insurers spying on their customers from the sky...)
Why would insurance being individually priced negate its value?
Perfectly accurate insurance pricing would be for each policy to cost exactly the amount of covered losses in the period covered plus the overhead of managing the insurance, which obviously would be pointless.
That wouldn't be pointless, because you would have a predictable expense instead of an unpredictable expense. What you're describing is actually the ideal scenario for both individuals and companies.
That wouldn't be pointless, because you would have a predictable expense instead of an unpredictable expense. What you're describing is actually the ideal scenario for both individuals and companies
No, if the expense were that predictable, the best case would be dispense with insurance entirely, since it effects the cost not at all and imposes overhead, especially insurance where the rates are accurately computed over short periods.
Without uncertainty, there is no point in insurance.
If you can manage your finances well, then sure. Many people would see that pile of cash in their savings and spend it. Paying a monthly amount to a third-party is safer in many ways, even if you have some % of overhead.
so in your world, it's irresponsible to own anything unless you also put its replacement cost in escrow. house burned down two weeks after closing? fuck you, take the loss and enjoy being broke or homeless. that's asinine. think more before posting in the future.
I'm open to having my mind changed, but when you post with this attitude it achieves no purpose.
You assumed my views without asking.
My comment only referred to there still being a benefit in choosing to have insurance even with perfect information about risk and expected benefits. At no point did I even imply that I thought "it's irresponsible to own anything".
I don't care how well you manage your expenses, it doesn't make sense to keep enough cash on hand to rebuild your house if it burns to the ground. (Not to mention that is completely impossible for almost everyone.)
If insurance can predict when losses will occur accurately and price accordingly, even this arguable temporal-cost-spreading benefit is lost.
If you dispense with insurance entirely, how do you deal with catastrophic expenses? The key things I think you are not considering are:
1. If you choose not to take out an insurance policy, and instead save the money yourself, you will not have the lump sum immediately available to cover catastrophe. Whereas as soon as you start paying insurance premiums you are covered.
2. The payout you receive when you make an insurance claim does not just come from the premiums you have personally paid. In fact, for a rare event, the size of the payout likely exceed the total cost of all premiums you could pay over your entire lifetime. This is because the risk is pooled over all customers, and not all customers will make claims.
Neither of the above 2 points become any less relevant as the insurance premiums become more and more accurately priced.
If you dispense with insurance entirely, how do you deal with catastrophic expenses?
If insurance can accurately predict losses that will occur and price accordingly, you are paying exactly the same amount plus overhead, on a similar schedule for insurance as directly paying for losses yourself without insurance.
The cost spreading effect (both over time and over individuals) is a direct consequence of the inability to accurately predict losses and the resulting inability to price accurately.
If insurance can accurately predict losses that will occur and price accordingly, you are paying exactly the same amount plus overhead, on a similar schedule for insurance as directly paying for losses yourself without insurance.
The hypothetical that I'm working with is that the insurer can perfectly price insurance by perfectly estimating the _risk_ or _expected loss_ for each individual customer. They can then pool this risk, take a profit, and everyone wins.
This is what I assumed you meant by "perfectly priced insurance". But I've realized you're talking about the case where insurer has perfect knowledge of the future losses each individual will take. I agree in this case insurance will not make sense. Insurance would be free for most individuals and impossibly expensive for those doomed to catastrophe. (The latter group would be screwed, even if they shared perfect knowledge of the future with the insurer.)
The hypothetical that I'm working with is that the insurer can perfectly price insurance by perfectly estimating the _risk_ or _expected loss_ for each individual customer.
So is mine. But my premise is that the true risk (that is, what uncertainty cannot be eliminated with sufficient information about the current state physical universe) is small, most of the apparent risk is just insufficient current data or an insufficient model; things like the drone data gathering are an attempt to narrow the first problem, and the second will improve over time with scientific progress.
As those improve, the expected loss converges toward the actual loss (and does so at any given proximity on progressively shorter timelines.)
Yes, so the insurance company should underwrite your roof for a fixed cost (adjusted for inflation) on your home. After 20 years of paying into that pool they shouldn't be able to just drop you now that your roof is old and pocket all the money and walk away and leave you with a roof that needs replacement.
What I'd expect is that you pay into the pool and then after 20 years you've more than paid for the new roof and so you get a new roof.
It should be slightly stochastic financing of your new roof and since a roof has a finite lifetime there should be a new roof at the end of it. It shouldn't be "hey, looks like your roof is about to have issues now, and we only insure new roofs, thanks for the profits, byeeeeee...."
Insurance protects against unexpected losses during the policy period. An insurance policy is not a home warranty.
If your roof has a finite lifetime and is approaching the end of its life, the cost of insuring your roof will be close to the cost of a new roof. If your insurance company is not allowed to increase your rate to match your risk (which seems to be the case in California), they will drop you as a customer.
Your previous premium payments insured against the risk of unexpected loss during those earlier policy periods only. They have nothing to do with your current insurance rate.
Insurance incentives would drive them to want to predict as accurately as possible who is going to cost them money, and then deny them coverage. They make money from selling to people who are afraid of a calamity but likely won't experience one.
Why are they in the business of denying coverage? They are insurance. They estimate their payouts from the entire pool and price your premiums accordingly. Paying out should therefore not really affect their bottom line if they price the premiums appropriately.
Home insurance companies are leaving Florida because it's not profitable to operate in an area with so much vulnerability to hurricane damage.
Also, the only thing stopping medical insurers from denying coverage or increasing prices for people with pre-existing conditions is the Affordable Care Act.
There is an important additional factor, regulators are setting limits on rates / rate increases. Florida is not profitable with those limits. If the insurance companies are free to set any rate, they would happily cover a high hurricane risk area.
You can get insurance on very risky things. The way it's done is high rates and "reinsurance" which means the insurance company shares the risk (and premium) with a pool of other insurance companies. For policies with a large possible payout (e.g. a big ship or aircraft) this is always done, to avoid issues for the insurance company that gets unlucky enough to have to pay out.
Well apparently it's not hurricanes or regulation against accurate pricing, it's rampant fraud fueled by a state supreme court decision to incentivize winning cases for policyholders
https://www.iii.org/press-release/triple-i-extreme-fraud-and...
"Florida, however, is the site of 79 percent of all homeowners insurance lawsuits over claims filed nationwide while Florida’s insurers receive only 9 percent of all U.S. homeowners insurance claims, according to the Florida governor’s Office."
The whole point of insurance is that there is a relatively low probability of a relatively high expense event happening. In all likelihood, the thing won't happen to you, but if we all pool our money together and you are the unlucky person then you're covered.
A pre-existing condition is not a low probability event. It is a 100% certainty that you have to pay for it. In that case the insurance is just a middleman who is increasing the cost of the thing you definitely have to pay for. You pay the insurance company, they take a cut, and they pay the healthcare provider. Why not just pay the healthcare provider directly?
Tail risk / volatility.
At some point the cost of insurance would approach the cost of simply self insuring. Why should I pay the insurance company to maybe replace the roof if I can just keep $20k in a savings account in case I need to replace the roof?
First of all: the payout you get from insurance does not come only from the premiums you personally pay. If you make a claim, your expenses are covered by the pool of money of all customers, even those that do not make any claims.
Second of all: when you take out an insurance policy and pay your first premium, you are immediately covered. If you are "self insuring" by setting aside the same amount monthly, it will take you a long time to even begin to accumulate enough funds to cover yourself in case of catastrophe. (And due to the first point, you may never reach that point.)
Finally, yes, of course, there is no need to take out an insurance policy for a risk that you can afford to pay out-of-pocket. It's like how if you have the cash to pay for a house, there is no need to take out a mortgage.
Because at the limit, the size of the pool is one...you.
Accurately pricing insurance doesn't reduce the size of the pool.
When you buy insurance, you aren't just pooling risk with other customers with the exact same risk profile as yourself. You're pooling with all customers of the company. (Plus all customers of any reinsurance company, etc.)
It's not being individually priced, people at higher risks are being forced out of their insurance options leaving only low-risk individuals priced in! Non-renewal isn't just some rate adjustment
It is just a very high rate if they could charge it, but that's the point: when the uncertainty is nil, the premium will always be the replacement cost when the replacement is about to happen, so that there's no insurance.
Put another way, if the insurance company isn't taking on any risk then you are.
Are there a lot of downsides to that for home/liability insurance?
Obviously with something like medical insurance, where people often carry risks that are no fault of their own, there are downsides.
Exactly. And insurance is still a good deal even if the expected value for that one member pool is negative. In fact, insurance as a market doesn’t work unless the average customer loses out. This is not a bad thing!
It seems perfectly reasonable to treat someone taking singular risks differently than someone taking average risks.
The insurance paradox. If you can price every risk precisely, meaning the variance on your prediction is zero, there's no point to insurance because it would be the same as a savings account.
There's no pooling of risk at all.
Even if you know the probability of an event precisely, you still don't know if it will actually occur. And even if you know it will actually occur, you still don't know when, so insurance still provides diffusion over time.
There is no "diffusion over time" with variable premia and short terms. Insurance companies already know the probability of an event within a risk pool over a term. That's not what this is talking about. They are looking to condition on more and more information so as to slice a risk pool towards a 0-1 risk, which, because they are positive EV, will make their profit more and more certain. They are looking to eliminate the negative tail, the existence of which is the whole point of paying out that positive EV.
In the end, this is going to happen. Insurance companies will be soothsayers and get paid for essentially making advisory predictions, not offloading risk, while society will have to agree to bear the cost of known outcomes over which people generally have no individual agency.
If you can afford to rebuild your house after a fire, there will be no point (and there never was a point).
Insurance has always been a negative-EV trade for the average person, but there have been mispricings that make it positive-EV when you have more information than the insurance company. However, the inefficiency meant that you also had to pay for the uncertainty on their estimate of your risk.
With less uncertainty, the spread in the market should go down, and your premium should converge to something close to your actual risk plus the cost to assess your risk.
Plus the salaries of the sales teams and the marketing budget and the executive bonuses and fancy offices… or were you rolling all that up into “cost to assess”?
Insurance is (theoretically) a competitive market, so no, those salaries are actually not included - aside from the compensation of the people building and conducting risk assessments. I'm not convinced most insurance companies make a ton off of home insurance specifically - I have heard that healthcare coverage (which is barely an insurance product) is the big profit maker, along with car insurance.
Most home insurers aren't really in the medical insurance business. And, as you indicate, most medical "insurance" companies no longer actually bear much risk. They make their profits by administering health plans for self-insured employers. The profit margin for that is low but the volumes are huge.
Insurance has always been a negative-EV trade for the average person
Negative EV in terms of dollars, but not necessarily utility. For most people, a 1% chance of losing their $500k home is worse than paying a $5100 premium.
If you could predict which house will burn down, there would be no point:
“All I want to know is where I’m going to die, so I’ll never go there.” - Charles Munger
But we don’t actually know the future that well, so even if we know that some houses are riskier than others, it’s still worth buying.
To make you whole after a loss that you would be unable to pay for out of pocket. Fire, major water damage … that’s about it.
Higher liability means they need to extract more money from you. That's the point of insurance. See: wildfires in California and flooding in Florida causing insurers to pull out. Once the insurance companies lose money, the risk is too high...
If your roof is 20 years old and one hailstorm is going to take it off,
It amazes me that people in the US would even consider installing a roof that would only last 20 years.
In the UK, you wouldn't consider reroofing anything that your grandparents remember being installed. Ie. Stuff doesn't get reroofed till it's 100 years old. Even then, you'll normally inspect and only replace the damaged bits.
My 350 year old house still has part of its original roof and slate tiles etc.
It’s called “money.” That is the reason. Slate roofs are common in the UK, and using synthetic slate is $7-12/sqft, whereas bitumen/asphalt shingles which are common in the USA cost $0.50-$1.00/sqft. Average home in the USA is 2,200 sq ft with a roof size of 1,700 sq ft. So $1,700 vs $11,900 is quite a difference (and that was being most generous, excluding installation costs, etc) So basically, average person who owns a house has a big house, and big roofs are already expensive. Regardless of wanting to get a high quality roof that would last more than 30 years, that requires capital - more than the average owner really has access too. Sources: https://www.architecturaldigest.com/reviews/roofing/slate-ro... https://www.architecturaldigest.com/reviews/roofing/shingle-... https://www.rocketmortgage.com/learn/average-square-footage-... https://www.rubyhome.com/blog/roofing-stats/
Also the cheap materials roof weighs less, and so the whole building under the roof can get away with being built cheaper.
In order to have a better roof, you probably must have a better entire house under it also.
This. Houses in the US are tinker-toys. They don't gave the structural strength to support a decent roof.
Where I live in Europe, roofs are usually ceramic shingles, which should easily last 50-100 years or more.
Of course, the down side of higher quality building standards is cost. Building a houses here costs a minimum of half-a-million, and quickly hits a million...
US roofs are commonly built to deal with snow loads of ~50 pounds per square foot. I don't think it's gonna be a big deal to support tile using the same techniques (it would just need to be accounted for).
50 lbs/ft2 is pretty much the upper limit in the continental US. Most of the Midwest is around 20lb. Maine and Alaska go significantly higher. Pretty much the entire South is 10lb or less.
I've lived various places in the US. With the exception of one older house, the roof trusses were a joke: so-called 2x4's (really much thinner than that), widely spaced, held together with a few nails and little or no cross-bracing. They might theoretically hold up to the weights listed, but I sure wouldn't stand under them during a test.
Where I am now, in Europe, the roof trusses are roughly 6"x10" laminated timber. That will hold a snow load.
I was talking about the techniques being up to the task. What you observed in houses not built to handle higher loads doesn't really inform that question.
Plus you can repair individual shingles essentially indefinitely. There really is no predictable life.
A tar roof has an unavoidable time limit on the whole thing.
Materials may cost that, but you are not getting a roof replaced for $1,700. Maybe $17,000 and even then it’s pushing it on the coasts especially. Labor and other overhead costs have really gone up and contractors don’t want to deal with small jobs. Sad really.
I’ve never seen slate roofs in California, so not sure if these are to code here. We looked at metal and other materials, but the problem is the weight is different, so now you are engaging an engineer to evaluate structure, submitting plans, dealing with code updates. Or just new asphalt shingles every 15-20 years. The payoff isn’t there and folks don’t tend to keep houses for generations, unlike in the UK.
Slate isn't the only material with decent longevity. Ceramic and concrete tile should both last 100+ years.
In my comment I said we looked into metal and other materials, but all increase weight, requiring engineering evaluation of the house and likely reinforcing the structure. Ceramic and concrete tiles are common here, but have the same problem. Don’t know about slate, but for the tiles you mention underlayment still needs to be replaced every 20-30 years at least requiring these to be removed and reapplied. Since labor is the major cost driver, it’s basically like paying for a new roof.
There is very little acceptable roofing slate available in the USA. PA has a few quarries that provide it, but according to roofers (in PA) that I talked to, it is still nowhere close in quality to, say, Welsh slate. Too many voids which when coupled with much more severe freeze/thaw cycling in much of the USA leads to early failures.
I think you may be overestimating the extent to which UK houses are held for "generations.
And even if you import Welsh slate, you may have to import workers, too.
Because if you're trying to use building materials that the local contractors are not familiar with, you're going to have a bad time.
that requires capital - more than the average owner really has access too
It sounds odd to my ear to matter-of-factly state that the US is deprived due to being capital-poor.
I mean, I'm not disputing anything specific, but where do middle-class people have better access to consumer finance than the US?
If you'd asked me what single fact represents American homeowners to people interested in economics around the world, I would've guessed it's the access to 30-year fixed rate mortgages.
As far as I know this is a deliberate policy in the US, that has not been emulated by those envious of the American economy, but why I haven't a clue.
Who is on the losing side of interest rates going up while 30 year fixers are presumably paying something like 2%?
Insuring all those fixed rate mortgages is very expensive. The US has never actually had to do so, the closest being the 2008 Fannie Mae and Freddie Mac recapitalizations which cost $238B in loans that were finally paid off in 2022.
In Europe a lot of the government fiscal crises were a result of small countries having to backstop giant cross border banks that happened to be headquartered there, and there is little appetite for tighter fiscal union.
US has a lot of different weather patterns than the UK. UK sits at a latitude similar to that of states like Washington, Montana, and North Dakota. The choice of roofing materials is also influenced by building regulations and codes, which can vary between countries and even within regions, dictating the use of certain materials for fire resistance, insulation, and other safety and performance standards. Cost-effectiveness is a factor. Like Florida with crazy hurricanes, no reason to be spending money on something besides asphalt architectural style shingles. Some people do get metal roofs. But if its going to get blown off, then why?
Like Florida with crazy hurricanes, no reason to be spending money on something besides asphalt architectural style shingles. Some people do get metal roofs. But if its going to get blown off, then why?
Tile and metal roofs last much longer than asphalt roofs in Florida, and while it's definitely more up front, they're generally more resistant to extreme weather (tiles are very heavy and metal is generally fastened down very well) and may get you an insurance discount. It's also for aesthetic reasons, as tile roofs are a very classic Florida look, and the stereotypical Key West house has a metal roof.
Tile roofs are a more Spanish style look and crazy expensive.
Otherwise I agree with you
per year
The weather in the US can be wild compared to what Western Europe is used to. England doesn't have to deal with the same events.
Those Ukrainian concrete buildings can take a bomb and still stand...
No one is building homes to last 150 years in the United States, and very rarely do people want to buy homes built a century ago.
Where I live we call a century-old home a "tear down" because it's probably in horrible condition. There are a handful in my neighborhood but they get sold at a discount, usually for new construction.
That's wild. I live in one of the oldest cities west of the Rockies (granted, that isn't -that- old) and there are whole neighborhoods of century homes, and they're considered desirable. In the last 10-20 years a bunch have been gutted and upgraded -- new pipes, wiring, windows, etc. Maintains the charm but modern efficiency, convenience, and safety. Sure, some become tear-downs, but a pretty high percentage are sticking around. That old growth doug fir is awesome.
I just sold a century home myself, after my mother passed. There was a little bidding war for it, even in this market. There's a character to the century homes that you cannot get in a new home at anywhere near the same price point.
The UK has a massively milder climate than most of the USA, which provides significant assistance to things lasting.
As I noted in another comment below, roofing slate is essentially unavailable in the USA due to geology - what does exist is of much lower quality than a good welsh slate. Still, in some ways I agree with you: roofing materials in general in the USA are far less durable those used in the UK and Europe, for reasons that I don't entirely undestand.
That said, it amazes me that huge numbers of people in the UK live in essentially uninsulated and almost uninsulatable buildings. Sure, winters are mild, but anytime you have the heat on in the millions of homes built post-WWII, a huge amount of is just leaking through the brick walls. US stud framed construction has its problems if done carelessly, but it does have the benefit that its easy and obvious to insulate your walls to some degree, and not hard to do it to Passivhaus standards.
The UK has a massively milder climate than most of the USA, which provides significant assistance to things lasting.
That makes sense. Roofs last a pretty long time in the PNW as well, for similar reasons. Mostly we just get rain. Not a lot of particularly hard freezes, our idea of big hail is 1/4 inch, etc. It's pretty routine for a garden variety "25 year roof" to actually do all 25 years, and even 30.
If you think that's wild, consider that the standard practice in Japan is to buy land and build new...even if that means tearing down the building that is currently built there. As a result, buildings are built more according to the rules of fashion, and building to last longer than the current occupant would seem like a foolhardy waste of money.
Although one thing to keep in mind is that earthquake-proofing building standards are also renewed about once per generation. I would absolutely refuse to let my family live in a house built before the post-Hanshin 2000 reforms (just look at the houses collapsed in the recent Noto earthquake, most of them predated even the earlier 1981 reforms)
Has your 350 year-old house been hit by hail, some of which is the size of golf balls, in enough volume that the ground is as white as if it had snowed? Because that's a not-uncommon occurrence here in the midwestern US.
Ceramic tile and concrete tile roofs will survive that, and are also common in the UK. (Although tend to be only ~150 years old by now)
My house is about 100 years old and still has the original concrete tile roof, with a stack of spare tiles under the house ready if needed.
An extension that was done in the 1980s has had to have its roof replaced once already due to what I have to assume was poor workmanship by the builder.
That sounds very nice. What would a competitive rent for your house be? Is it near London?
For Americans who don't know anything about housing in the UK, there is an interesting article at: https://en.wikipedia.org/wiki/Council_house
Being Wikipedia in 2024, I wouldn't assume it's not all AI hallucinated references, but still, it's interesting.
Different types of storm are one thing.
I think the biggest difference, though, is that the stereotypical single family US home of the 19th/20th century US expansion is on a large plot of land and has - so far - been one to get remodeled/expanded/revised several times in a hundred years. Houses are generally treated as mutable things, and people also often expect to move within a few decades, spending more to put in something that will hold up a hundred years instead of twenty seems foolhardy to many. If you sell it the buyer will likely want a cosmetic refresh; if you keep it, you likely will too.
Undeclared trampolines? What kind of insurance is this?
I don't remember my house insurance (or medical, or any other kind really) being this detailed. I just picked rough estimates for the value of my structure and the items inside, and that was about it? There might have also been a waiver about not doing any hazardous activities like open fires or storing chemicals on the property.
It definitely wasn't this detailed.
After reading that, my mind is generating weird scenarios in which undeclared trampolines are causing tragedies.
Trampolines can indeed cause accidents but is that big of a risk to have one? That feels so out of place it's beyond comical.
Generally yes, because the liability for injury would be on you, as the trampoline owner. Compare the probability of a guest breaking their leg when visiting your home vs if you have an unsafe trampoline. Insurers are prepared for the small risk in the former, but have not priced in the latter risk to a standard policy.
Trampolines are obscenely high risk and injuries are very common. On top of that, if a neighborhood kid comes in to your yard and breaks their leg on your trampoline, your home owners insurance is going to be involved.
Is this something we just don't worry about in Canada? Because we only pay to park at the hospital?
Probably the liability is also different? You're much more likely to be liable for some things in the US compared to other places.
In my part of Europe, if someone breaks something while making normal use of your trampoline that would be considered an accident. You would only be liable if you had grossly neglected maintenance on the thing, knew that (or would reasonably be expected to know that), and they can prove that this has caused the injury.
Possibly. Also in my country (in EU), the home insurance doesn't cover your liability for an accident like this. That would be another type of insurance you buy extra.
Possibly. Health insurance companies may want to sue the home owner insurance company to try and recoup costs.
You still have to cover the extended medical care in Canada and they are often bigger than the initial hospital stay in the most expensive cases in either country (years-long therapy, chronic injuries, etc.)
The tortable aspect (compensation for causing personal injury) must also be covered.
This is the main thing. Insurers know that the home owners are not going to file claims for their own family members. It is the ambulance chasing lawyers that target the insurance when guests are injured on your property. There have been claims against poorly maintained walkways when the ice is not removed when someone slips on your property. Much like how retail stores all now have Wet Floor signs from all the people getting "injured".
Family members are often excluded from the coverages. I know they are excluded from medpay, for example.
Yes. Growing up I saw my friend’s foot pointed the wrong direction after a “double bounce” caught his foot in the gap between the trampoline surface and the supports. We were careful kids.
Idk how any of us survived the 90s with trampolines in constant use! We would jump off them into pools, jump onto them from the roof, double bounce each other half a dozen feet in the air. I even mastered the “art” of jumping off of it and landing on the ground (from 6 feet up), rolling and popping back up.
We also sat in the luggage area of a station wagon with 5 kids on the way to the swimming pool... That would probably get the driver arrested if you did it today.
A few of us didn’t, I guess. I don’t think they’re dangerous to ban, but I would never own one for my kids. Sorry, kids!
Neat. Survivorship bias.
It's probably about risk more than anything.
Trampoline installed well (i.e. staked down) with proper netting = who cares
Trampoline unsecured, no net = wind risk, personal injury risk, death risk
Honestly from growing up the riskiest bit was when the springs gave out from holding the material. Net or no kids are going to drag it over to the garage one day and jump from the roof onto it. Better hope the webbing the springs mount into is in good shape.
Trampolines break a lot of bones.
https://www.mayoclinic.org/medical-professionals/pediatrics/...
Probably a case of trying to get something out of the information that happens to be available. Maybe they’ll also adjust your rates based when you get your roof redone or whether you park in your driveway?
N=1 but there was a news story from a few years ago where a teen severed his spinal cord on one from landing on his head after a flip. I'm sure most of the claims are from simple orthopedic injuries with $5-$25k amounts but it only takes one paralysis claim to wipe out your risk model.
Homeowner insurance isn't just about the liability of the damage to your home from weather elements. A major part of it is liability you have to others who may have medical or other damage associated with your property. E.g. tripping over a paving stone, tree on your land falling on a neighbor's structures, dog attacks by your dog, etc.
Last insurance quote I got asked about trampolines, playground structures, dog breed, known risks like aluminum wiring or polybutylene piping, whether all doors had deadbolts, distance from nearest fire hydrant, and probably a dozen other things like this.
Hello ! I writes software that deals with Home insurances. 1. Staggering number of people are getting seriously hurt on trampolines each year, so other people can sue you (=> insurance company) for injuries. It is on your property (((. 2. Same thing with pets and "vicious" dogs breeds on your property.
In my life, I've gotten three home insurance quotes, and every single one has asked about trampolines. And I do know at least two people who have been seriously injured on trampolines, so I can't blame them: they'd be liable for accidents.
I was asked about a trampoline with two major carriers. I believe they would have been satisfied to know it was netted, similarly to how they want pools fenced.
I'm going to assume that nobody's insurance premiums or deductibles are going down from this data. No analysis is making the insurer say "Oh, that roof is in much better condition despite its age."
Insurance feels like the biggest scam in the history of the world. You are legally obligated to pay us for nothing, most of the time.
This doesn't make sense. If an insurance company wanted to charge higher premiums, they would just do so. They wouldn't need to spy on customers.
The point of them trying to quantify risk as accurately as possible is to be able to extract profit while also offering competitive rates.
It's the same as with any other company. They try and operate as efficiently as possible (ie. reduce costs) to try and make more profit, while competing on price.
Ah, classic mistake here.
If bargaining power is asymmetric between the insurer and the buyer, then the extra information is used for additional price discrimination (eg. Its better for you if the picture is never taken regardless who you are).
So the question is: does the insurer or the insured have the bargaining power here? Competition helps, but is only one part of it.
Seeing that insurers seem very profitable in the US, a decent proxy for bargaining power, I'd argue this is a bad thing for the consumer.
If insurance was very profitable ‘in the US’, top-tier insurers would not be leaving states like Florida and California. There is a reason why they decide to no longer cover wildfire losses or hurricane losses. In the case of Florida, rampant fraud has turned the market into a basket-case.
* If an insurance company wanted to charge higher premiums, they would just do so.*
That’s not an option in many cases. The first homeowner featured in the article is in rural Northern California. CA’s insurance regulator has been extremely restrictive about letting insurers raise rates, especially in that area, so her insurance premium was probably a fraction of the expected cost of insurance claims.
My insurance company sent an inspector to check the house. As a result he adjusted some details of the policy that reduced the rate slightly.
from reading this article, it seems like there may be some odd short-term pressures, or incentives internal to the companies, that mean policies are getting cancelled based on clearly inaccurate information.
Insurance carriers have an incentive to compete on price like any other business. There are plenty of options. The margins are generally pretty small, and there is a lot of regulation around what portion of payments must be used for claims.
There's a few obvious exceptions, but plenty of insurance isn't required.
They might have an incentive to compete, but I think they also have an incentive to collude. Last time I shopped around for insurance it seemed like the latter was taking place.
You're required to get homeowner's insurance if you have a mortgage, and you're required to have car insurance if you want to drive a car on public roads.
So the majority of Americans are forced to purchase at least one of these in order to live their normal lives, which makes demand inelastic.
You aren't required to purchase a home or drive a car. If you chose to, as most Americans do, then yes: the demand is inelastic.
But that doesn't imply what you're saying unless the supplier has monopoly power, which they, by law, do not.
Collusion is nearly impossible in commodity insurance (i.e. policies you can buy on a website), it’s just way too easy to detect and whistleblowers know they can make a fortune by reporting it.
It’s mostly your own governments fault if you can’t find a cheap policy, there are millions of people who will probably never have to file an insurance claim in their life making up for government decisions to insure people who wouldn’t normally be able to be insured because of poor decision making skills.
For the car, you only need liability, and you can generally post a bond instead.
You're not legally obligated to pay for homeowners insurance.
It is probably required if you have a mortgage.
And of course it's a practical requirement for anyone whose net worth is primarily in their home.
That's not a legal requirement, that's people with money being unwilling to give it to you if you're reckless enough not to insure your collateral.
The insurance scam is, classically, someone getting a policy on an asset they know is worthless, going to catch fire, suddenly die, etc. -- and you do pay higher rates as a result.
I'm going to assume that nobody's insurance premiums or deductibles are going down
That's exactly backwards. If you have better information than a competitor, you have an effective strategy to steal their lower-risk customers and still make a ton of money.
This absolutely will happen. And the rates for the higher-risk customers they are left with will absolutely go up.
No analysis is making the insurer say "Oh, that roof is in much better condition despite its age."
That’s exactly what they do. There are people getting paid millions of dollars to create software that does this.
Do you know how much money an insurance company can print if they can undercut the competition by selling a bunch of policies to people who won’t file a claim?
People pick insurance based on price, and if someone is selling you a cheaper policy because they know your roof is better, you’re going to buy it from them.
They win because you’ll pay a premium without filing a claim, and you win because you can have a cheaper policy. That’s how it works in the real world.
This aerial stuff now enhanced by AI is a privacy rights nightmare - in Australia, local councils are utilizing high res images shot by plane, which are AI analysed for infractions - ie. Illegal outbuildings, cut trees, earth works greater than a metre in depth, solar panels placed without auth etc. This kind of tech is going to be abused by both the private and public sector to no end. The images have a resolution to the point where veins on a tree leaf are perceptible.
We are literally going to be monitored from the sky by AI for a lot of things, and from a legal standpoint at this stage there is nothing to stop anyone from doing it.
(Am Australian lawyer) there's no privacy recognised in any of those things you're talking about. Simple solution is don't lie to insurers or the government.
Of course we can elect politicians that change the law. Might be a hard sell if the motivation is to stop detection of illegal things.
Sources: (no general right to privacy) https://en.m.wikipedia.org/wiki/Victoria_Park_Racing_%26_Rec...
The Privacy Act (https://www.oaic.gov.au/privacy/privacy-legislation/the-priv...)
Haha, by your reckoning why not monitor all comms for any lies? This is why we can’t have nice things. We are walking into a new Robodebt scenario run by AI - it’s all too much living in a constant state of surveillance and it’s not a world I want to live in.
Don't give aussies any ideas, they tried to make mathematics illegal. Sometimes they take the worst aspects of the british and americans and make it their own
By far the worst thing we have is lack of protection on whistleblowers. There's multiple facing decades in jail right now. Even a change in governments didn't stop the prosecutions
By far the worst thing is what we don’t have: a bill of rights.
I don't represent any view point on the law just telling you how it is. There's always multiple competing priorities. Ultimately not a politician so it doesn't really matter what I think.
If we're talking morality I don't see how it's moral to ask the law to protect you from being found out doing the wrong thing. If these people don't pay their fair share the rest of us have to pay more.
What if a law change prevents the government from enforcing environmental legislation from illegal land clearing or dumping? What if a farmer illegally diverts more water than they are allowed to from a river or with a well? It's not just about you and me but the whole country.
On robodebt: that has nothing to do with privacy, tax records aren't private from the government? That's just bad tax enforcement.
We have communities which can manage their own local issues internally - rather than aerial surveillance tech and AI keeping watch of our every move. We all know this will be used for minor infringements and revenue raising, more paperwork and more red tape. Like I said, by your token, monitor all comms and detect lies and infringements. Ban blinds and curtains too so we can get changed in public view.
This is not a technology or privacy problem - it's a legislative one. If it's illegal to do X, then it seems reasonable for the gov't to enforce that - the more efficiently the better. And if enforcing it seems wrong, then maybe it shouldn't be a law.
For another toy example, what if speed laws in the US were fully enforced 100% of the time - they would be yanked immediately, because they are dumb and mostly just used to fund the police. We only tolerate them because they aren't enforced on us very often as individuals. It's like a medium-skill lottery to see who pays for the police.
The US is very lax about enforcing speed laws compared to other countries.
Compare to somewhere like Australia where you get fined for just going a few km/h over the limit and the use speed cameras extensively.
https://www.qld.gov.au/about/newsroom/increased-penalties-fo...
Whereas it seems to be common in parts of the US for everyone on a freeway to be 10 miles/hour over the limit and nobody cares
What is the Australian citizen’s sentiment toward these speed laws?
And what are the limits on a typical freeway?
I'm not from Australia (in NZ) but I'd expect the usual range of views. However fines are a voluntary payment to usually attract less opposition
Typical limits are here. 100 km/h on most freeways, 100km/h on ones built to higher standards.
what if speed laws in the US were fully enforced 100% of the time - they would be yanked immediately, because they are dumb and mostly just used to fund the police
Or maybe people would adjust their behavior and respect speed limits? Laws that are sporadically enforced at the discretion of police officers are awful. It just enables discrimination.
Totally agree! People might adjust their speeds. Or continue speeding and accept the fines. But getting mad and forcing the law to change seems more likely to me.
But partially enforced laws are the worst.
The technology is an enabler and it creeps into everything and before you know it we are where we are today.
Insurance is a borderline scam. You have to have it by law or in case the worst happens. When the worst does happen get ready for a fight as they will do everything they can legally do to wriggle out.
You don't have to have home insurance by law, at least not in the US
If you don't own your house outright, the bank that owns part of it may require insurance as a prerequisite for loaning you money.
You're right about the ultimate legal situation, but there's two problems I see with dropping insurance on a paid off home. The first is that the companies, seemingly operating in lock step, will heavily penalize you if you change your mind and want to go back to insuring. The second is the liability component, whereby simply owning a piece of real estate means you're a juicy target to be found jointly liable for a whole host of things that most people would consider unreasonable - eg someone trespasses, injures themselves, and then sues you.
I've long said that one major threat that "regular people" would suffer from the consumer surveillance industry was going to be insurance (another being fine-grained price discrimination). It looks like both are really starting to come into swing. The best time for US privacy legislation (including something analogous to the GDPR) was 20 years ago, the second best time is now.
I have never valued insurance more than the moment at which I owned my house outright. If you're so financially secure that the loss of an asset that large is manageable, I sort of don't much care about what you think about insurance rates?
Apparently in your book anybody that isn't effectively negative on assets (everyone needs a place to live) is so rich they're not entitled to an opinion on insurance rates? This kind of weird aggro-dismissal seems like an inevitable result of "privilege" politics based around dragging everyone down to the lowest level. Having a place to live where one isn't burning heaps of money on rent should be our expected societal baseline, not some exceptional thing to be attacked.
But back to the topic - a total catastrophic structure loss would indeed be a problem. But from what I've seen, most insurance claims are not for total losses but rather things like water leaks and roof damage that have much higher sticker prices than what it actually costs to maintain/triage/mitigate/calmly repair. I've known people that have submitted claims for ice dams, oil burner blowbacks, new roofs ("wind damage"), finished basement water damage, etc. I will never submit an insurance claim for those type of things, and so it makes sense to at least consider self insuring, especially when rates are doubling every few years.
You can have whatever opinion you'd like about insurance rates, but if insurers are sustainably incurring losses, rates have to go up, one way or the other: either insurers raise their rates, or they exit the market, decreasing competition and raising rates.
There's no way to moralize out of this!
Regarding minor claims: I think what I've learned about homeowners insurance is: don't make minor claims. That's not what the product is for. Homeowners insurance (1) protects you from total loss of your primary asset (ie, from fire) and (2) protects you from being bankrupted by lawsuits. If you use it to repair leaks, you're going to take a bath.
Have you applied for a homeowners policy recently? Literally one of the first questions insurers ask is: "have you made homeowners insurance claims?".
I didn't try to "moralize out of this", apart from the condemnation of many types of personal liability people will find themselves on the receiving end of based on simply owning real estate? That could certainly stand to be reformed, but the criticism is aimed at the prevailing laws rather than the insurance companies for working with them.
Personally my gripe is that I wish insurance companies would update what are seemingly quite obtuse pricing models, rather than pushing customers into invasive surveillance tech. For example I'd appreciate if it were possible to raise my deductibles by an order of magnitude and see a meaningful drop in premiums. But instead it seems like the only coverage knob that has an effect is the max coverage limit (which when you think about it, actually shouldn't even be a thing. the whole point of insurance is to cover the long tail risk). My gripe is a little more pronounced for auto, where I quoted out dropping the miles driven on one vehicle to nearly zero and it reduced premium by a mere 10%.
Re minor claims, maybe I'm underestimating how much future premiums went up after those somewhat frivolous homeowners claims I mentioned, and they effectively just ended up forming loans rather than affecting the overall expected value of losses.
The first... The second
Sure, but neither of those are due to it being required by law.
In the first case there I don't know what's happening, I guess maybe insurance companies have figured out that people dropping insurance and then picking it back up correlates with increased claims due to stuff that happened during the interim.
In the second case there, you can definitely get liability insurance separately from homeowners. And it's wayyyy cheaper. Or, live in a country that isn't as crazy litigious as e.g. USA.
But again, neither is a legal requirement, which is all I was getting at initially given the top comment in this chain.
My uncle didn’t have insurance for a house he’d paid off. An arsonist burned it down six months later and then he proceeded to get letters from the city telling him to mow his lawn for the next ten years.
What does that have to do with insurance?
Just because you don't have a livable structure on the property means the property is exempt from any of the property regulations. What a weird rant.
If it’s a scam then don’t buy it. Pay cash for everything and put up a bond with your state, you don’t even need car insurance at that point.
You don't have to have home insurance if you own the home.
Without insurance, we’d be living in much different circumstances. Just consider parts of the world where insurance is just not available to much of the population.
Related, my vehicle insurer keeps jacking up the rates. I've never been in an accident or had a ticket, and I drive 2000 miles per year. But every year up up up. Then they offer I install a tracking device on my car to get my rates back down to a reasonable amount. There seems to be a pattern of insurers wanting to know everything about everyone, and using irrationally higher rates to coerce consent. And I have to pay it or consent to tracking because insurance is mandated by law.
that’s because the insurance model is not based on individual performance but based on a collection of data points.
Insurance will jack up the renewal rates for everyone because there are increased number of accidents in your zip code or area. Cars are more expensive now. Often adjusters just declare vehicles no longer worth the repair. Some vehicles if they get dented will result in a shit ton of work to get it repaired (ie, Rivian truck).
You are paying for the insurance companies increased risk because the people around you can’t drive worth shit.
Got to love car centric transportation …
You are paying for the insurance companies increased risk because the people around you can’t drive worth shit.
Insurance companies are supposed to be creating risk pools. If everyone in my zip code drives like shit the insurance company should be splitting them up into pools with better drivers from other areas. There's no reason at all to pool everyone geographically. If the insurance company can't manage risk pools they're fucking up.
You can lobby your politicians to mandate coarser rating territories. This will ironically increase premiums more than they otherwise would be. Just like banning credit, gender, homeownership, occupation, etc.
You’re free to change insurance companies, aren’t you?
You're also free to find companies whose contracts don't have binding arbitration clauses. Good luck.
They're ALL raising rates. You might be able to change to a cheaper one this year, but next year your cheaper company will have implemented a 20%+ increase.
Maybe the rise in the prices of new cars, used parts, and labor has an impact.
repair cost goes up, up, up on average -> insurance goes up, up, up.
That may only be part of it, but it's definitely part of it.
There seems to be a pattern of insurers wanting to know everything about everyone
I see an exciting new revenue stream in their future.
My insurer jacks up the rate even with the tracking device. The rate more than doubled in the last 3 years.
One of us needs to win a lottery; and force (er, strongly incentivize) Congress to pass a law banning the lowering of insurance prices based on tracking devices.
Car manufacturers are building telemetry into the vehicle, which they can sell directly to insurance companies. If you buy such a car, your insurer doesn't need you to install anything.
https://www.nytimes.com/2024/03/11/technology/carmakers-driv...
My opinion is that the opt-in hardware might have afforded you some discount, maybe. I doubt the same is true for the manufacturer-insurer relationship. I think that pattern is probably more likely to establish a higher baseline for all drivers, and the presence of data can only ever (1) maintain the baseline or (2) harm you.
I used to work for Verisk, an insurance tech holding company, who owned a company that took pictures of people's roofs using airplanes and special cameras. They got sued over a patent violation with EagleView[1], who claimed the tech idea as their own, and settled.
The strategic alliance allows customers seamless and integrated access to EagleView technology within Verisk’s Xactware platform
Xactware is a product that customers (read: insurance companies) use to figure out how much money to pay on a claim.
The whole idea is to speed up the claims process. Insurance agents don't need to go out to people's houses to examine roof damage. But we also had a department doing some pretty sophisticated stuff around preventing claims fraud, so I'm not surprised.
1: https://www.verisk.com/company/newsroom/verisk-and-eagleview...
I recently started going through many big data collectors and expressing my rights to know, delete, and stop selling my information.
Verisk makes the process notoriously difficult compared to other companies, you have to start an "ethics" report in their ticketing system
https://secure.ethicspoint.com/domain/media/en/gui/69464/ind...
Real question: is something like aerial photography of your roof really subject to privacy laws?
IANAL, but in the US, it depends on whether could have reasonably expected that their stuff was hidden. If your roof is sloped so that a person on the street could get the same information by walking around the block, then aerial surveillance is just a faster way to get that public observation.
In contrast, if you set up a high fence around your pool in order to sunbathe naked, aerial photography would probably be an invasion of your privacy? If your roof was designed in a similar way, one might be able to argue it was wrong for the company to observe aspects of it without permission. (Although they might have gotten permission via the insurance contract...)
I think this legal standard becomes tricky (or at least ought to receive more scrutiny) when we start talking about pervasiveness and permanence. Just because I know that an arbitrary person might take a picture of me in public doesn't mean I expect every single thing I do outside to be recorded forever by a technological invisible stalker hovering over my shoulder at every outdoor moment.
Privacy in the US is defined as property rights, and your private property does not extend infinitely upwards into space. Anything over a certain high is public and regulated, and so if it is visible from above, it is not protected.
Otherwise, it would be illegal to fly a plane or even a hot air balloon pretty much anywhere, and even things like google maps satellite view couldn't exist.
I work in privacy (as a dev, so the breadth of my knowledge isn’t necessarily comprehensive), and to my knowledge there’s no privacy regulations that would prevent this. Effectively, they’re saying that the roof at a certain address is in a certain condition. I don’t see how that could be considered personal data.
No.
Why is that the real question? Shouldn't the real question be: do we want, as a society, to allow something like arial photography of your roof freely accessible to data brokers so that they can form a shadow profile of you and determine how much you pay for insurance?
That a law against such a practice does or does not exist today is rather besides the point.
I’ve thought about doing this myself and I wish there was a service that made it easier.
The one thing in the back of my mind is also that there’s a risk of this backfiring over time. When you are unknown to potential creditors, employers, etc in whatever platforms they choose to use to look you up, that’s the ultimate sign of risk.
Yes. Similar to being a young person trying to establish a credit history, if there is little to no info to go on companies will tend to assume the worst about your riskiness and charge accordingly.
I recently started going through many big data collectors and expressing my rights to know, delete, and stop selling my information.
Can you share how to go about it? Do you have a blog post?
Is there a list of companies out there you can share, or are you going about it on your own?
Did either of the parties move to invalidate the patent claims as obvious as, say, a camera on a stick or a toy airplane with a camera?
Vexcel doesn’t use drones. They use manned aircraft. Drones are almost never used for insurance. There are a couple of companies that do, but the costs are still too high for it to make sense.
I don't think the problem people have with this is the type of air vehicle used to take the picture
Surprisingly, it seems to me that you are wrong. People will absolutely lose their minds whenever they hear about an unmanned aircraft, but never talk about manned aircraft. There have been tons of news articles about "police drones" an other kinds of scaremongering, that never seem to note that the cops using an airplane to follow you in the dark has been a thing for decades. The only new thing is the pilot does not necessarily need to sit in the aircraft.
I would definitely mind if the police were following me personally in an airplane…
Did you recently rob a bank or carjack an old lady? If not, I sincerely doubt that anyone would go to the trouble of following you around.
Yes, but clearly an insurance company will go to the trouble of flying a plane around my house. Whether it’s manned or unmanned is immaterial - I wouldn’t want them to do it.
You want to have insurance but you're not willing to let your insurer inspect the covered assets?
LOL. Police around here will routinely use rotary for grocery store thefts, fixed wing for pursuit of non-violent suspects. In fact a couple of weeks ago, they deployed a State Patrol fixed wing to come south about 40 miles to here to look for "a group of young males dressed in black that were graffiting numerous buildings in town".
Someone is in incentivised! Maybe x miles in the plane to get it again next year?
Due to the cost of doing so, right. If the aircraft were suddenly unmanned and significantly cheaper to fly in potentially great quantities, it’s easier to justify doing so “just in case.”
It’s concerning to think that because police have traditionally had tools that were quite powerful in single use to balance out technology limitations of the time, this balance should not be rethought when the usage becomes significantly more efficient.
If you have to get a black van and big dish microphone to surveil someone’s single conversation in the park, it’s going to be employed when there’s already a strong suspicion, seems fair. Now if you’re able to hide a wireless microphone in every tree, computer-transcribe everything that’s said 24/7, and match it with cameras that can capture facial recognition data, you can build a file of everything everyone says in public, just in case you have to find something against them. What’s more, you can have an AI scrutinize every single conversation and sentiment on a scale that is not otherwise possible.
All of this uses the same fundamental rights, but clearly the outcome poses a huge problem.
Haha exactly. Same thing for military drone strikes. I've noticed way too much of the debate focused on the "drone" part and not the "hey do you have an adequate process for target selection, civilian review, and consequences for targeting the wrong people?" The specifics of the hardware should be irrelevant to that question.
I suspect the only reason they don't use drones is range. Once they have a match, it'll be drones all the way.
5 years ago, a family friend got an angry letter from the city because he had cleared slightly too much lakefront weeds (and by slightly - I mean very lightly, enough to anger the algorithm lightly). How did they know? Drone. And this was suburban Minnesota.
Not even insurance - this was the city of Newport on a power rampage. Turns out there’s also no shortage of general corruption in the police department…
https://bringmethenews.com/minnesota-news/footage-shows-newp...
rules are rules. you complaining about this is like football fans complaining about the tight offside calls.
Imagine if I put cameras all over a city that charged you $10 every time you exceeded the speed limit by 1 MPH. With an additional $10 fee for each additional MPH measure over the limit. Also, this is per camera, so if you pass 6 cameras on your commute going 70 in a 65, you’re getting a $300 penalty.
Rules are rules.
You're quite accurately describing traffic enforcement in Switzerland and recently larger Belgian cities.
It's an equitable system. Ideally there would be a clear indication as soon as each fine happens, perhaps a sign with your plate number.
This way individuals can correct their dangerous behaviour immediately, rather than accidentally accumulating a large fine.
ahhh, see, there's a fatal flaw in your premise. I don't own a car, so this would never affect me. So, yes, rules are rules.
Hmm, works like this in many places. That is 6 different infractions. Probably also means suspended license.
I'm not sure how exactly you're drawing that parallel, but, IMHO, that would be just fine. I suspect people would speed a lot less.
What does drones detecting weeds have to do with "general corruption"?
If anything, overzealous adherence to the letter of the law, while annoying, seems the exact opposite of "corruption."
Insurance works on the basis of (a) quantifying risk and (b) charging fairly for the protection. In the long-term, getting better at (a) and consequently, (b), is in everybody’s interest. For far too long, certain risk covers have been under-charged. At the end of the day, difficulty in finding affordable insurance, or any insurance at all, tells you something about the level of risk and the ability of insurers to charge appropriately for it. Regulators are often way behind the curve, to the detriment of insurers and consumers.
If this were true, health insurers would have taken a cudgel to the US hospital system decades ago and come up with a more efficient system. They haven't because an opaque system allows them to maintain their own opaque practices.
Health insurance companies don’t care about what your doctor earns in the same way home insurance companies don’t care about the cost of the roofer. They’re going to price in whatever that cost may be and call it a day.
Health insurance has it easier too because there’s not really a concept of correlated risk in human populations. Most people do a decent job avoiding hurting themselves but when a flood comes, there’s not a whole lot anybody can do.
COVID?
Health insurance companies do actually care, unfortunately. They're incentivized to embrace higher prices since they have to spend at least 80% of premiums on payouts. If you have a fixed margin, well, you have to increase premiums to increase profit, so higher prices means more profit.
Property insurance and health or life insurance are very different markets.
And (c) in the long term influence the risk. Insurance companies have long worked to improve auto safety. This benefits everyone. This needs to be applied to more significant risks, like fire flood and storm.
I think we have to get much more serious about prevention. People are doing this:
Fire safety:
https://www.npr.org/2023/08/24/1195331310/red-roof-house-fir...
Storm safety:
https://abcnews.go.com/US/mexico-beach-home-survives-hurrica...
We need to mandate this kind of building in new construction and modified construction.
It may be worthwhile to subsidize this, to help with turning existing high risks into low risks.
We need to be more severe on forbidding building in danger zones, and more accepting of insurers pricing these based on risk, so they don't have to leave the state, and others can be priced to more common levels of risk.
We also need to not allow rebuilding in areas that will have these problems again, without some way of mitigating. We should not have to pay for someone's third house in a flood zone. But if you can make it flood proof after the first one, great.
This needs to be applied to more significant risks, like fire flood and storm.
It is. The NFPA (National Fire Protection Agency) writes the National Electric Code and other safety codes that get adopted into law as building codes. It was started by a coalition of insurance agencies.
https://en.wikipedia.org/wiki/National_Fire_Protection_Assoc...
Related:
Climate change is coming for America’s property market Insurance is supposed to signal risk. Policymakers should let it https://www.economist.com/leaders/2023/09/21/climate-change-...
Parts of America are becoming uninsurable Blame growth in hazardous areas, climate change and bad policy https://www.economist.com/united-states/2023/09/21/parts-of-...
Insurance bothers me for a few reasons:
1. What pisses me off more than anything else, it enables fraud that otherwise wouldn't exist. People manufacturing calamities and then claiming insurance allows dishonest people to get ahead in life over people who are honest and concerned enough about the future to buy insurance. Additionally, insurance fraud is net bad relative to other types of fraud because it encourages criminals to manufacture damage that wouldn't otherwise happen.
2. There is an obvious incentive for them to chase an endgame of knowing exactly whether you will cost them money or make them money. When they attain this, insurance simply becomes a fortune teller and an instruction manual for Living Without Calamity. If you're denied coverage, you're going to experience something calamitous. If you're accepted, you have the ability to be fine and don't need insurance, unless you aren't sure how to Live Without Calamity. When you are accepted, you're only covered if you surrender your agency and follow their instructions for Living Without Calamity. Basic things like travelers insurance have clauses that void your policy if you scuba dive past 30 feet on your trip.
3. Insurance policies can create toxic incentives for people that hurt society. I filed a claim with Generali travel insurance because my host tested positive for COVID with a take home test, and I canceled my trip. Their web portal indicated that my claim had been received and was awaiting processing. I called incessantly to confirm my claim was good, and was not able to get an answer after several calls that routed through incompetent-by-design help desk employees and into a voicemailbox of a claims processor. Weeks go by and I receive a voicemail from the person I had been trying to contact telling me that I needed a doctor's note confirming that the person had COVID, and a take home test would not suffice. So, a company allegedly tasked with helping the public live safely wanted me to, at the time, ask my COVID infected host to waltz in to the doctor's office and spread around a pathogen that could kill patients. Nice. I guess they weren't medical insurance so they didn't care. And of course no doctor would retroactively go back in time and confirm that a person was positive for a sickness after they had already recovered.
So, a company allegedly tasked with helping the public live safely wanted me to, at the time, ask my COVID infected host to waltz in to the doctor's office and spread around a pathogen that could kill patients. Nice.
No. That is done over the phone or video chat. Not required to physically attend a doctors appointment in order to obtain a doctors note for COVID infection. It's called telemedicine or virtual consultation.
Yes. Here's the actual covered event from the policy:
"The Sickness, Injury or death of you, your Family Member, your Traveling Companion or your Service Animal. The Sickness or Injury must first commence while your coverage is in effect under the Policy, must require the in-person treatment by a Physician, and must be so disabling in the written opinion of a Physician as to prevent you from taking your Trip (either because your condition prevents your travel, or because your Family Member, Traveling Companion or your Service Animal requires your care);"
So if a doctor provides a written note they would reject that note because it was done through a virtual consultation? The doctors note should be sufficient and the fact that it was done virtually should be irrelevant and confidential. How is that legal?
What did policy actually state around medical reasons for trip cancellation? I'm not aware of any insurers that would accept a home COVID-19 test to justify a claim since it isn't reliably tied to any particular patient.
They don't allow at home tests. That's my point. If I had wanted my claim to go through, I would have needed to tell my host, who at the time was infectious, to go have a doctor confirm it.
So the price to defend against fraud--which, related to my point #1, is prevalent enough such that Generali has this policy--is to ask infected people to spread their sickness in doctors offices just so they can use doctors as tools to verify claims are legitimate.
So yes, I should have read the policy, but I would not have asked my host to go into the doctor's office and spread COVID around just so I could get my legitimate claim processed. I just wouldn't have bought the policy in the first place.
The host can book a virtual appointment and get a doctors certificate online. It is easy and done in a few minutes. The insurer should have told you that.
Regarding your situation in point #3, if your claim was of significant monetary value (I'm guessing $>2k) I think at that point I would have cited them some numbers from journal studies on take home tests showing sensitivity of such home tests as at least (78.9)[1] percent of a professionally administered PCR test and that by their actuary logic you should then at least receive at least 78.9% in return compensation of your total claim based on this data and if they otherwise refused a payout your follow up would be with a claims lawyer.
I have no idea how that would play out but it seems like an interesting strategy to take.
I'm not sure the degree to which insurance companies are legally allowed to share information such as aerial photographs with each other.
When I worked at Google I knew a developer who was building a prototype service similar to Google Flights, except for auto and home insurance. I don't think that product ever shipped.
The dev on that team told me that a key thing they learned while doing the analysis is that the optimal strategy with auto and home insurance is to automatically switch providers whenever it's time to renew.
It could be because your current company has collected things about you that they aren't allowed to share with other insurance companies.
I think the most common reason is that insurance companies try to attract new customers with lower rates / discounts and welcome gifts. Switching every year means a new insurance company spends their acquisition money on you every year.
Yeah, people like to think there’s all kinds of grand conspiracies out there when it comes to insurance companies. But they’re all actually very, very boring. All of these pricing algorithms are filed with the DOI, and are public. There is nothing crazy in them. The reason prices to go up at renewal is because that’s just the optimal economics of insurance companies. Get you in at a competitive new business rate and then increase rates at renewal to offset the losses that new business policies incur.
The product the OP is talking about made quite a buzz in the business when it was first released (I do think it came out for a while). It was a price comparison tool, and the reason it failed was because it was hard to get the big brand names on board. The big brand names didn’t want to compete on price alone, because they spent so much money on their brand. They already had a ton of customers coming straight to their website.
Sorry for any formatting or spelling issues here, I’m using voice to text.
But they’re all actually very, very boring.
In fact they're actuarially very, very boring!
https://www.comparethemarket.com/ is the best known comparison site for insurance in the UK.
Is there not an equivalent in the USA?
Each state has its own market.
It's not to always switch, but to re-quote all competitors. Most insurance competition plays out on two factors:
- What companies the customer quotes - What amounts they are offered
You should always quote competitors because stuff changes and there are sign-on discounts offered as well.
Can someone explain to my house insurance is so important? I live outside USA and I never bought an insurance, a common situation in my country.
It’s required if you have a mortgage.
Even if you don’t have a mortgage, your home is probably worth several times your annual salary. Most people can’t afford that loss if it burns down, gets hit by a tornado etc…
Also, consider that for a great many Americans, their house is the only significant asset they have.
A huge number of Americans have no retirement savings at all [1]. For some of these people who do own a house, selling it at retirement is the only way they can avoid poverty (or at least maintain their quality of life), especially with the possibility of a future government significantly cutting Social Security benefits.
Even those with retirement savings often treat their houses as an asset to be leveraged or sold at retirement to help fund the latter stages of their lives [2].
These are all good reasons to carry property insurance even if you don't have a mortgage on the property that requires it.
1. https://www.cbsnews.com/news/retirement-baby-boomers-with-no...
2. https://www.axios.com/2023/03/11/how-americans-are-using-the...
Probably why it is smart to buy a property where most of the value is the land. If you can!
Not sure why the downvie guys!
Say you buy a $800k prop but $400k is land value. Layer it is $1.6m of which $1m is land value. They can huff and puff and blow your uninsured house down, and you now have a $1m development lot.
Now clearly it is better to be insured, but insurance doesn’t always come through so this is a hedge.
tldr; location cubed
Thank you.
“If your roof is 20 years old and one hailstorm is going to take it off, you should pay more than somebody with a brand new roof,”
If you've been paying for insurance for 20 years with one company, then I'd say that is certainly a dick move to drop you right before it might pay out. What even is the point then?
The (lesser) dick move is also pitting customers against each other.
Divide et impera. Works with insurance, social security, and third world countries.
Do car insurances pay the full price for crashed old cars? If roofs are designed with a similarly limited expected useful life lower payout would make sense like for cars?
It is NOT the insurance company's job to replace a worn-out roof. That is YOUR responsibility! If a roof on your home is not up to the proven (albeit occasional) stresses of your local environment (including snowfall, winds, volcanic ash, etc.), whether due to quality, design, or wear, I see no reason why the insurer should not modify its indemnity. I will grant you that a decent insurer would allow you to petition for a review based on any verifiable additional information that you, as owner and insured, might be able to present.
A legal question here: are we allowed to shoot down a drone that snoops over our house?
Just get a high powered laser and burn them, if its good enough for the US military its good enough for me.
just in case this is serious, no
Full choke and magnum turkey loads.
If that doesn't work, there are tutorials on YouTube for building guided anti aircraft missiles.
Auburn, California, is a mistake and should be uninsurable, and I don't want either my tax dollars or my insurance premiums being used to subsidize the treehouse lifestyle of exurban home owners. Whether this specific person's roof is rotted or not isn't really the point. Right now, the real estate sprawl industry is running their printing press at 110% design speed, trying to convince everyone that people who live on the fringes of civilization are getting a bad deal. But from where I sit, in a fireproof building downtown, I see it differently. We need a massive correction in California, under which we stop subsidizing the firefighting, insurance, and roads that serve the sprawl.
The subject property, by the way: https://www.google.com/maps/place/2350+Buttes+View+Ln,+Aubur...
I can understand feeling like both taxes and insurance premiums are too high, but the ability to make choices other than the specifically least risky one is one that fundamentally allows us to exercise our free will.
Those in Auburn are, by the same idea, subsidizing windows that get smashed when parking downtown, or even if you walk, the extra risk that you are hurt by someone while walking in a place with more crime per square mile.
You can live far away from a downtown and have to get your car smogged, because we wanted cars in the cities to provide for clean air.
I don’t mean we need to accept all risk in society, but for me there’s a very worrying trend against ANY risk/cost that doesn’t directly benefit the person advocating against it.
Ultimately I know it comes back to the current economic situation, because if everyone feels like they’re struggling there’s less thought to care for others.
The problem is not the sprawl, it’s the out of control construction costs due to regulation and insurance premium caps due to… you guessed it - regulations
I wish insurance was more flexible with risk and deductibles, 20 year old roof, your deductible is 20000, 5 year old roof your deductible is 500, something that equalizes the risk without the need to drop customers. Heck I would self insure or set an extremely high deductible for rebuilding, but I still need coverage for any liability risk like when the mailman trips on my sidewalk.
You can get basic liability coverage if that’s what you desire. But be prepared to pay out of your pocket in case of total loss. If you have a mortgage you’re almost certainly required to hold coverage.
That's only possible when the regulatory environment allows it. If your insurance regulators won't allow that kind of flexibility, then they have to look for other options.
This is often approached through the lens of consumer protection. As a result, making thing flexible to allow insurance companies to say "Hey, you really need a new roof, but if you choose not to here's the price of that risk" is not prioritized. Approving rate increases is.
I think this is fine, BUT...
I think they should have to give people time to fix the problem before dropping them.
A neighbor literally just got a letter in the mail, "We think your trees are over your roof. Policy cancelled immediately." (The tree was over his daughter's playhouse in the back yard, the algorithm saw shingles obstructed by a tree branch and flagged it. They don't even bother with human review.)
There should be a warning period, "Hey we saw this, and if you don't fix it in 90 days we'll have to drop you." They certainly take money before doing an inspection... they're happy to have you start paying them right away as soon as you move in. Anyway there should be a time period for cut off of service.
Insurance companies are free to do inspections, but there's still the stress that getting a notice like that does to someone.
These days, who even reads letters from insurance companies in the mail?! I mean, I just chuck anything with a logo in the recycling.
And, from what I can tell, the insurance company dropped my neighbor when they sent the letter... so he didn't even know he wasn't insured until he got the letter.
Anyway... these companies aren't your friends. They're all out to screw you.
USAA screwed me over bad recently, to the tune of nearly $300k... they forced me to use their contractor (or we won't cover your temp housing), said not to worry and promised me a "5 year workmanship warranty" on the work done by their contractor... but when the contractor was utter shit, they put me through their mediation, where their mediator said, "Yeah all this work done by the contractor is junk, it all has to be re-done... if they don't fix it, we'll eat their lunch!" but ultimately they didn't enforcing any of that with the contractor and let the contractor off without any consequences -- even insisted I pay the contractor. "Oh you had no right to expect the work would be professionally done..." the contractor said in court. It was all total BS. And they said, "USAA may promise you one thing, but contract we have means we aren't liable for any damages to your house, 35-foot trees we killed, foundations we cracked, garage doors we backed into, things our endless stream of disorganized day-laborers stole, etc..." USAA's mediation process was really just a play to run out the statue of limitations on the contract too, I felt. =P
Live and learn... but insurance companies are heartless bastards. You can't trust them, and even the "good" ones will screw you if they can. Tell you one thing, and do another...
If you have a flood, call your lawyer first, the insurance company second, and the water mitigation folks third. Get it all in writing, take more photos than you ever thought necessary, and hope you have an adjuster who isn't having a crappy day that day.
Disheartening to hear USAA let you down. I've been with them for years and haven't really shopped around because generally their customer service is pretty great. Not worth it to me to save a few bucks and then deal with really crappy customer service when the shit hits the fan.
Insurers telling you how to reduce the risk of accidents and property damage is a good thing.
The article literally opens with a story of an insurer dropping a homeowner for having a roof that's too old with no recourse, even when a third party expert said the roof is good for another decade.
The red-flagged images are providing insurers with ammunition for nonrenewal notices nationwide.
I don't think your comment is wrong, but it's not representative of the problem the article is bringing up.
Works where archive.ph is blocked:
https://cc.bingj.com/cache.aspx?d=1812931943850&w=GaxRXZW2Vc...
Much appreciated
Even if you can't get insurance covering the roof, then ask for that to be an exclusion so you can get other insurance covering your home. Personal liability from lack of insurance can bankrupt you.
We are sprinting towards a dystopia of "computer says no". Decisions taken affecting your life and finances made by computers delivered by minimum wage powerless staff.
I'm sure healthcare insurance companies are inspired by the actions of the home insurance companies. "you declared you never smoked but our drone footage shows you and a plume of smoke in the same area. The AI detected it as cigarette smoke. Your coverage is cancelled and this is our final decision. "
My good friend works as an insurance agent. According to him, insurers are dropping customers based on anything right now. It’s caused chaos in the agency business, particularly in certain states.
My bet is aerial images are just one way of many that they’re dropping customers.
Related idea:
https://news.ycombinator.com/item?id=36268907 ("French tax officials use AI to spot 20k undeclared pools (2022)", 166 comments)
My insurance company asked me for photos of our roof to prove it was metal and not asphalt. From a distance it looks like asphalt because it is metal with a stone grit coating just like asphalt. Could a photo from a drone see this?. Maybe. I also live under the final approach flight path of the local airport so maybe they couldn't verify using their drone.
Allstate refused to offer a policy quote because my house is fuzzed out on its street view photo from 2011.
Probably an US thing, but, do you specifically have to declare you have a trampoline in order to get your home insured?
Related (2010) on finding untaxed swimming pools on Long Island using Google Earth: https://www.nbcnewyork.com/news/local/heads-up-google-earth-...
This tech implementation seems like the worst HOA on steroids. Anyone have a neighbor that complains about one too many daffodils in the mandatory daffodil plot? Well, now they have a new tool for compliance.
On a similar theme [near-future consequences of data-driven technocracy], read the hilarious _Qualityland_, by Marc-Uwe Kling.
that there is any effort at all to point out why this is okay is bewildering. it's antisocial behavior. there is a reason this is on hn, folks. and there is a reason why basic car insurance is not. not today, anyway. its because it is disruptive, obnoxious behavior that juts out and has jagged edges, and people dont stand for that. this isn't about my roof, or yours. people are quick to point out, "fwiw, they could cancel your insurance right now! they arent required to even give it to you, so yeah, they can do that" or, "they're perfectly within the law to do it, next". I paraphrase here, but regardless. I confidently say to that: Hah! then the law got it wrong, then. and the law needs to change. that is specifically the problem. they simply have too much power. and now they're rubbing our faces on it while a bunch of you rush to find why that's [legally] alright, while you only consider why it makes sense to you, not why it doesn't make sense to others. a critical oversight. they could have gone about this 100 different ways. fleet drones. really?
I predict that they are preparing substantial layoffs; thats the only thing that even begins to explain this situation. out with the old, in with the drones
It's been happening for years. Anything to limit the number of onsite visits needed because that takes a lot more time.
I know insurance brokers who have revisited a clients renewal, because Google Maps and/or the council's GIS photography shows activity or buildings counter to the client declarations. Is it a final decision? No. It's used to prompt the client to review their coverage and amend their submitted documents. Sometimes, those amendments mean the brokers are no longer able to get coverage, and the clients go somewhere else.
So wattle-it-be... switch insurers, live underground, or plant trees? Wattles are fast-growing and there's plenty of choice. http://worldwidewattle.com/
Interesting to see this pop up on HN. I once did some work with a large international data broker who had recently acquired a company which specialised on aerial photography and ML for identifying potential insurance risks.
I'm an infra guy by trade and really enjoyed learning about the tech while on their team. Mind blowing stuff to me!!
If satellite launches go as planned, images could be updated daily by 2030, according to Neil Pearson, a consultant who works with imagery companies.
"It could get interesting from a privacy standpoint as... a property could be monitored daily at high resolution," he said. "It is a bit Orwellian."
The problem with aerial photos is that not always do these photos provide enough detail they can provide deceptive data. It is better if insurance companies send field workers to check the premises.
I think the issue is that in some cases the information is inaccurate and there are sometimes limited avenues for a customer to object if their insurance is cancelled based on inaccurate information.
To the extent that the information is accurate, I agree. If you make an agreement with a company and buy insurance based on your statement that you don't have a pool, but then you do have a pool, I don't see any reason why we should be upset that you didn't get away with lying to the insurance company.
Last time I was shopping for home insurance, an agent told me I was too close to a canyon, which I thought was strange because there are no canyons near me. They sent me a screenshot of the fire danger map where clearly it had the wrong location / coordinates for my address (they thought I was about a mile from where I really live).
I pointed them to my address on Google Maps which has my correct location, but they said their system isn't wrong and the address coordinate mapping can't be changed anyway. Go away.
Then another insurance company told me the same thing. I thought maybe I was going to be uninsurable completely based off of a computer error.
Luckily, Lemonade has smarter systems and got my location right, so I was able to get insured with them. But I'm not sure what I would do without lemonade.
Insurers with better information will be able to judge risk better, so they can undercut competitors on lower risk or avoid taking on higher risk. That really is what a competitive insurance market should be like right?
>That really is what a competitive insurance market should be like right?
Should be. But states like California cap insurance rates in such a way that insurers are dropping (non-renewing) policies, since they can't charge market rates.
I don’t understand how states like California don’t understand basic economics.
California is one of the capitalistic states out there. But they have politicians, government, regulation, like any other state. Insurers are also rapidly leaving Florida, so it might not just be about regulation, or those two states do lots of regulation, or something in between.
Its about reality. Both states should be.preventing public housing where reoccuring signifixant hazards effect populations. Instead, they.try to manipulate the insurance market.
You have to define reoccurring and significant. Much of CA is on a fault line, so should everybody move to the desert where it’s scorching hot but a bit safer?
FL here. Florida was hit by a wave of roofing fraud. They are changing out the laws (which will make sense).
Or is it about risk? Those places have a fair few large disasters, and one is sinking while denying it.
They do. HN commenters often over simplify complex issues.
They are not oversimplifying it. The law says they can’t use forward looking projections, only historical data to build rates. Coupled with climate change the CA insurance commission certainly doesn’t understand economics and they’ve created a recipe for failure.
It's because California pushes their FAIR plan which is expensive and has terrible coverage. It's a corrupt and unethical solution for the state to recoup its budget deficit.
Do you have evidence that they make money on their plan? My impression is that insurance of last resort isn’t cheap to provide, they’re only getting the people that were too high risk to qualify for a cheaper commercial plan.
No, only my anecdote. The state is offering significantly reduced coverage for more than double the cost of previous coverage. Getting the state plan still requires you to get additional private coverage in order to satisfy mortgage insurance requirements. I think it would be impossible for a layman to just give you "evidence" that will fit whatever arbitrary checkbox is formally needed. I cannot fathom a way the state isn't profiting here and both the state and insurance companies are exposing homeowners to incredible burdens.
Now you frame this like I am too high risk or people in this capacity are too high risk, but that is the whole problem. Insurance cos are inconsistently making these determinations and the state's governance is directly responsible for the lack of regulation and enforcement. Nothing in my area has changed, but the insurance company has enacted the equivalent of ex post facto evaluation due to the state of CA. As example, my roof in great condition, passed inspection when purchase property a few years ago. I don't have certificates or invoices for repairs done to it in the 50 years of my home's life because I've only owned the property for a few years. The insurance company canceled my insurance stating I refused to provide such an invoice. They also claimed I'm now in a dangerous fire zone (I'm not) which I wasn't a year ago. They also claimed to need invoice of repairs for my plumbing, which again, is in wonderful condition. They stated simply providing inspection receipts wouldn't cut it and expensive certificates were needed. Anyways, I doubt you will read this but it's ridiculous and I'm not the only one in this state going through it.
I did read it, thanks for laying out your experience.
The evidence I’d look for is something like their revenue vs payout over maybe the last 5 years?
I think a lot of this stuff can be very unintuitive, because we look around, and everything seems fine, and nothing seems to have changed, but they’re operating at a bulk statistical level, and their models revised on recent trends are probably telling them that they can’t profitably insure you for the amounts they’re allowed to charge. Some of that is that labor to rebuild/replacement cost has gotten much more expensive (we see that in our insurance rate changes despite being in an area with very little catastrophic risk).
And CA politicians’ response is probably some crowd pleasing but ultimately harmful “you can’t profiteer off our people, you’re not allowed to raise rates more than 3%” or something. So the only winning move becomes not to play except in the areas where you can make that work.
It does sound like they were just trying to find a way that they could cancel your policy without getting in trouble with the state insurance commission, though I don’t know enough about insurance to say if/why they’d need to.
They’re losing money on it actually but you missed the obvious. Liberals want everything privatized to remove profit incentive. That’s the reason they’re creating a uncompetitive environment, to kill business. For further proof, see the recent minimum wage increase.
If Google is right 98% of the time, companies might find it not worth the cost to develop and use a better system, leaving the 2% of people caught in the crack unable to get basic services as all companies go off of Google's data. This is a huge fairness problem.
This problem exists across the board, and it’s due to people using, and in some cases abusing, statistics. Instead of using statistics/probability to answer questions, we should instead not use it at all or have a limit on how much a decision can be made based on chance.
Cute idea, but hopefully (for that customer) Lemonade’s systems aren’t so smart that they figure out that they’re the only insurer willing to sell to that address.
A terrible idea when the majority of insured have a requirement to their mortgage. This is an avenue that actually warrants government intervention in the form of regulation. In my case the carrier willfully misinterpreted a map's fire risk in order to cancel me because they want to manipulate higher prices and the government has skin in the game with their own expensive, low coverage, crap plan. Government intervention in the form of state sponsored competition has bred corruption.
In the long run, yes, but Lemonade and other insurtechs have struggled to actually get that right. Their loss ratio (claims paid / premium collected) has historically been close to or above 100% (i.e. losing money), though I think Lemonade has finally been getting that under control recently.
Distribution is also a huge factor in who wins. You can have the best product, but if you can't get it out to enough people, whether direct to consumer or through agents, you're going to struggle. A lot of startups have focused on direct-to-consumer plays, but there's value in taking a hybrid approach to distribution and incorporating agents into your distribution strategy. It's surprising sometimes, for those of us with a tech background, to see how sticky human insurance agents have proven to be. I can make a better potato chip than Frito-Lay, but if I can’t get stores to stock it, it doesn’t matter how good it is.
I wonder if there’s a small-claims court claim here. It’s sort of annoying to have to jump through this hoop, but this is the sort of situation where you have to make it the right person’s problem to get what you want.
Your best bet would probably be to go to your state Department of Insurance. They're the ones who regulate insurance in each state, including issuing licenses and appointments, and agencies and carriers tend to take DOI complaints seriously. It wouldn't necessarily get resolved fast, but they would have the authority to do something about it, if there are any grounds for taking action.
(The federal government, for mostly historical reasons, does not generally regulate insurance except for health insurance, and that only started with Obamacare. So each state has its own DOI, and agents and carriers have to get licensed in each state. It's a dumb, byzantine system going back to Paul v. Virginia in 1869, when the Supreme Court ruled that issuing a policy of insurance is not a transaction of commerce. I don't think that reasoning applies today, but Congress has specifically exempted insurance from things like anti-trust legislation since then. Sweeping insurance under federal regulation would, in theory, cause a giant mess since there's so much law and process built around the current state-by-state system. IMO it would be worth it because the current system is completely ridiculous, but so it goes.)
The State Attorney General might also get involved if you're being denied service based on faulty information.
I know it's not the EU, but under the GDPR you have a right to correct personal information. While you don't have a contract with them, it sounds like your information is in their database (for them to look up?). I wonder if that would be an avenue to fight this were this the EU?
In the framework of GDPR (which I know is not applicable in the US) you have the legal mandate to ask them to correct information about you.
I think that is very reasonable law: If n organisation makes decision about your relations, you should be able to force them to process correct information.
(I have used that clause ones, when a bank wrongly reported that I had an open account of a certain type, which resultet in that I could not open that type of account at another bank.)
Does it cover information about something about you?
For example the insurance company had the correct address for the person (no need to correct) but the wrong information about the location of the address.
I reckon you can argue that they store and use wrong coordinates about the place you reside, which would indeed be illegal - just like it would be illegal to store a wrong address of where your reside.
Reminds me of a few years back when my dad tried to get ATT DSL for my grandpa’s house. ATT told him they couldn’t find his address with their system. My dad reminded ATT they had a landline through ATT for fifty years. “Sorry, different system.” Got cable internet instead.
This is curious. Is it because they hadn’t upgraded the lines out to the residence? I had always understood DSL used existing phone lines.
From the context it's nothing to do with the technology, it's the bureaucracy refusing to accept they already have the address.
I bought a house in when internet mapping was less mature, but still important, and many of the online data sources simply did not have the address. This was good at first, since very few people seemed to have been able to find the open house and bid against us, but it was annoying in the long run because you'd ask for Internet service to be installed and the technicians would blow off 2 appointments driving around the city lost and eventually you would have to talk them to the location turn-by-turn.
The solution was to complain vociferously to the folks that maintained data sources. In those days it was Google, someone else, and it turned out the remainder of the defective commercial products were put out by a predecessor of, I think, the folks who eventually published or supplied the data for HERE We Go. Basically, every few months I would call them or write messages to them, social engineering who might be in a position to fix it. They did respond pretty quickly, for a bigcorp, but it took a few years for the prior versions of their database to cycle out of usage.
You should request your data from CoreLogic and see if the wrong location is in their DB, because they’re the broker for a lot of real estate underwriting data.
I wonder how many such properties are misclassified?
This sounds like a Lemonade ad.
That is some breathtaking hubris.
Thank goodness you learned early that those other insurance companies were incompetent and unwilling to work with their customers even in the face of obvious mistakes on their part. If they had accepted you, you wouldn't want to have had to deal with trying to get money out of them, especially when you'd already be dealing with a stressful situation. They really did you a favor by rejecting you, and you now know to stay away from them when it comes to other types of insurance too.
I had a similar issue with my car insurance. My mother in law, who shared a first and last name with my wife, got into a car accident, on my insurance.
I worked it for a year and was unsuccessful in removing it. Ironically, my wife passed away but the accident is now associated with her car. They did figure out however, that I’m no longer eligible for a multi-driver discount.
Me too. So. many. lemons :-)
They can generally decline coverage for any reason, for what it's worth; they could cancel without aerial footage just on the hunch that you didn't replace your roof, or they could mass-mail their customers demanding proof of roof replacements.
(The article and other things I'm reading suggest that cancellations are because footage finds trampolines and pools --- in which case I don't even understand how anybody can have sympathy. It's fine to have insurance risks on your property! But disclose them!)
It's interesting that insurers will spend money to discover this rather than rely on the pro forma clause that claims proceeding from an undisclosed risk are invalid. I'm guessing they calculate that a jury may not respect that part of the contract when confronted in court by grieving parents of an accident victim.
How is an unversed lay homeowner who is inexpert in the insurance industry (or perhaps even any industry) supposed to know what risks an insurer thinks are important?
Their job, I think, is to accept the quote, pay the premiums, and to keep living life.
On 1-3 occasions over the course of an insured's entire life, they'll be confronted with the paperwork for the insurance contract for the most expensive asset they'll ever buy. They should read it.
And then remember all the relevant details for the next 30 years…
It’s frankly unrealistic to expect most people to remember their home insurance asking about trampolines 15+ years ago.
What you're really saying is that it's unrealistic for buyers to know that trampolines are dangerous.
Bathtubs are dangerous, being dangerous isn’t the only criteria here.
Ok, well, we've reached an argument that is dispositive for people who think trampolines are no more dangerous than bathtubs.
Someone with both is more likely to have a bathtub related death. 341 people died by drowning in bathtubs + 70 scalding deaths + unknown number of falls vs 2 deaths from trampolines. ~3 million trampolines in the US.
The risk of being sued is very different though.
I think neighbor's kid's injury rate is more relevant than general deaths-caused rate for a home liability insurance policy
Thus, “The risk of being sued is very different though.”
However, that just circles back to few people asking what their insurance company might think.
And for people who aren't deliberately missing the point.
I don't see here where anyone has made any supposition that bathtubs are more dangerous than trampolines are, except for your own missive.
Well now you've got me wondering.
What does the data say? Which is more dangerous, trampolines or bathrooms?
I've known a few people who have hurt themselves in the bathroom, but I dont know anyone who has hurt themselves on a trampoline.
I wasn’t actually confronted with the paperwork. When I purchased my house, the insurerer that was selected by my bank informed me (several times) that they were unable to provide the complete coverage details and contract until after the insurance contract was in place.
Even then, it took me several calls and interactions to get them to send me the actual detailed insurance contract. They tried to fob me off several times with a brief summary document.
I would be surprised, based on my experience, if people are actually confronted with the paperwork as you suggest. The default flow of my home purchase made it clear that my request to review the coverage contract was so far outside the norm that they weren’t really sure how to handle it.
You are entitled to find your own home insurance, you do not have to use the bank's choice.
Is that really an option when there are another dozen people bidding on the house though? (I haven’t been through the home buying process yet)
I’ve been through the process once, so I’m certainly not an expert.
My guess is that it probably would have been possible. At that point, we’re already under contract (which means our offer has been accepted), and finalizing the loan and home owner’s insurance was part of closing.
The reason I didn’t dig into it too much at the time is I figured that the bank was probably a more sophisticated purchaser than I would have been, especially given the time pressure of needing to make a (reasonably) quick decision.
So I decided that, despite my immense annoyance and not being able to see the homeowners insurance agreement before the closing was complete, that I’d accept the bank’s choice, and use my first year of homeownership to learn the contract and decide if I wanted to change carriers.
No, you have been played. Signing a contract, any contract without previously seeing it... ask any lawyer how good of an idea is that.
Its doesnt matter what mumbo jumbo they come up with, if you cave to peer pressure then accept the risks. Or vote with your wallet.
I didn’t sign a contract without seeing it. I didn’t sign a contract with the homeowners insurance. The bank contracted with the homeowners insurance.
How could I have signed a contract without seeing it? I wouldn’t have anything to sign!
But none of that was my point. My point was—if asking to see the agreement was this far outside the norm, then how many people are actually confronted with the paperwork? My guess, based on my anecdotal experience, is not many.
This is good advice. One wants to be sure that one is reading the entire policy. Key words here are "certified complete copy" and once someone at the insurance company who is authorized to do so certifies a copy as complete, you can be a little more sure you're dealing with the entire thing than the "copy that happened to be attached to someone's email."
The first page or so will explain who the policyholder is, what is the effective date of the policy, and what forms constitute the insurance being provided. The rest of the policy is (usually) a set of forms approved by the state insurance commissioner that define, in particular, what is and is not being insured. Be aware that something that is very clearly defined on the first page of the first form is very frequently completely contradicted by something on the fifteenth page of the thirtieth form, which makes it very important to have the complete set.
In general insurance law is such that you ought to be able to read the entire policy and make sense of it - no tricks. In practice there are some wrinkles and it's good to consult a professional but if you read the policy you will at least have some awareness of the coverage you can expect.
Indeed. This is how I discovered that my own policy forbade me to own a dog belonging, even in part, to any of a long list of breeds: Pit Bull, Rottweiler, Cana Presario ... IIRC German Shepherd was on the list.
I’m assuming the insurer would ask. How old is the roof? Do you have a pool? Etc.
It's up to them to make their own risk assessments. There's a lot of press when claims get denied but it's not as common or as easy as complainants make it seem. Especially when it comes to roof replacements. That's been a heavily exploited point as well. Lots of shady operators chasing storms.
Some insurance companies will allow trampolines -- at a cost. We had to get rid of ours because the cost and liability just wasnt worth it.
So in the richest country in the world parents can't let their kids play on trampolines because a neighbours kid having an accident on one would bankrupt their insurance company.
Meanwhile, toddlers do active shooter drills like they are fire alarm drills.
Totally logical country you got there with a perfectly reasonable approach to risk.
Hmm, when I was a kid while at my friends house I had a small statue fall on my head from a bookshelf. I still have the mark from it. My parents were informed, and with two of them nurses they decided to just watch me for concussion. My parents didn’t sue them, just chalked it up to accident. A friend of mine broke their arm on another friends giant trampoline. Again, no lawsuit. These days parents will sue their child’s best friends parents for something like that. So perhaps there’s something different with modern Americans that has made them more likely to piss on their neighbors?
Unfortunately this is the normal ebb and flow of populations. And the stage the US is at we just have to wait for severe economic disaster to remind people what trauma is.
Your child is much more likely to be injured on a trampoline than in a school shooting
Ah, yes, the great trampoline versus active shooter drill debate—a classic comparison in risk management. It's fascinating how we can meticulously calculate the liability of a backyard bounce while simultaneously normalizing lockdown drills for kindergarteners. It's like comparing apples to, well, something far less innocent than apples. But hey, who's to say which is more logical in the land of the free and the home of the brave, right?
Most people don’t declare then which is really stupid imo.
Perhaps they figure the risk is worth it compared to the increased premiums.
Also trees can have a lot of impact on your insurance rate, like if you have a neighbor's trees intruding into your property, remember that it is the property's owner responsibility and not the owner of the tree, so they could ding you for that. Or if they notice you are too close to a tree line in an area known for wild fires, etc...
This is part of the risk one takes buying property. It’s more than offset by the benefits of buying property. Or else everyone wouldn’t be telling me what an idiot I am for renting.
No, it's definitely not. No one accounts for the risk of being rejected due to inaccurate information. It doesn't even make sense to do so because the nature of the probability isn't definable.
No, it definitely is. If nobody accounts for it, it means it’s not a risk worth accounting for. But it’s still a risk.
Fellow renter here, what avenues do you have if your renters insurance is cancelled? You don’t have the risk of the main building, but what if your unit suddenly becomes a fire hazard area and you’re dropped?
You’re (and I) are an idiot for renting because after you’re done renting you have no equity. Now compare the rental and mortgage similarly sized units and you’ll realize for about 20% more money you’re suddenly not igniting it on fire every month.
Not a good argument. This only holds true if your rent equals what your mortgage would be. I personally don’t care about similarly sized units — why would I compare those?
I specifically choose to rent small and inexpensive apartments and put the savings (compared to a mortgage) into other investments. So I do have quite a lot to show for myself after 20 years of renting.
I’ve been paying under $1,200 in rent for 10+ years in a neighborhood where houses are now pushing $800,000.
The same as the homeowner does, shop for other options. Fortunately w/ renting it seems like insurance companies (thus far) don’t care that much and use it as an incentive. My partner’s car insurance provider reduced her total bill when she added rental insurance.
You’re either rent controlled or bullshit. Either way your situation is far from the norm and had you bought a house 10 years ago that’d put us right on the tail end of the crap housing market and you still would’ve ended up better buying.
Since you can’t seem to do math well, 10x12x1200=$144k just gone. If you had bought a house, and I’m correct on the 20% number, then you would’ve spent about $173k and still have the equity. Meanwhile my father-in-law bought a house around that same time for $350k and is sitting on about $1.2mil in equity now.
I don’t even know what you’re saying here. Above you claimed this was the downside of having a house, and now you’re saying you’ll just shop around. That would invalidate your first complaint about risk.
You clearly are too young to know what you’re talking about. I really hope you’re not actually investing with this mentality because if so you’ve just been getting lucky so far.
Neither. Shitty apartment and a lot of hunting lol. And it was under $1k until COVID started. Going to be $1300 at my next renewal in July.
Yes. I'll admit I'm not familiar with the logistics but I assume the government refunds the homeowner's property taxes and reimburses for costs like appliances, repairs, landscaping, etc. when the time comes for them to sell?
Good for him! I both can't buy a house in my neighborhood due to the cost and have no interest in owning a single family home.
Like I said, just stupid. I'm over 40.
So you think your landlord is eating those costs and not passing them on to you in your rent? You seriously think they are running a charity?!?
Obviously not, but since my rent is low enough then I don't care. They can only be passing $1200 in costs along to me because that's what I'm paying.
My rent being lower than costs for homes is what works in my favor. I lose money forever but it's a relatively small amount of money. The rest of my money can go somewhere else.
Arent all the property owners telling me they took a risk so they deserve their house to 3x?
In all highly advanced countries (G7 and similar), insurance is insanely strictly regulated. If they cancel your policy for a b/s reason, and your protests are ignored, then tell the regulators. They will fix it quickly and slap a huge fine on the insurer.
You have too much faith in the regulators, that's not how it works.
Insurance companies are violating these rules all the time, only when you can gather a critical mass of complaints against a specific one will anything happen.
Isn't it depressing how someone can make a blatantly dumb and incorrect assertion on the internet and instead of people just shaking their heads and moving in that dumb comment becomes the centre of attention and people spend all their arguing about this obviously waste of time incorrect assertion?
I suspect very few customers have the wherewithal and time and effort to “tell the regulators”. (Who, to issue a fine, would have to show malfeasance so the customer needs to produce evidence of the interaction sufficient to show the insurer broke the law)
Agreed.
I've definitely reached out to insurance regulators in the past and things got fixed. (In the USA.)
Except that according to the article this "hypothetical bullshit scenario" is already happening and there are even several examples of it happening including one where a person was rejected for the condition of their roof when the roof was brand new, and another where a person was rejected because of trees that were nothing more than shadows.
Since you know that it's so easy to "tell regulators" and get things fixed quickly you should reach out to Douglas Heller, the director of insurance at the Consumer Federation of America, because he's under the impression that “The technology is way ahead of any consumer protections” and consumer groups feel that inspections via aerial images are "worrisome because of the limited rights customers have to challenge the images"
You can find Mr. Heller here (https://consumerfed.org/expert/douglas-heller/). I'm sure Douglas would love to learn about how none of this is a problem because "insurance is insanely strictly regulated" and your expertise would mean that he can better help the people currently struggling with this issue and potentially even save others from having to deal with it in the future.
There was a case recently in NZ where home owner tried to defraud an insurance company. Well suddenly none of the insurance companies would work with him. Insurance is a requirement for mortgage so this person is effectively going to loose his house.
False positive with similar circumstances would be a nightmare.
I'm curious-- have a link?
So this wasn't even fraud on his home insurance, but on car...
https://www.rnz.co.nz/news/national/508570/auckland-annivers...
Has anyone in NZ ever had a bank check if they are insured after purchase? They asked on signing the loan. But after that they never check.
They can also use the info to decide if they allow a renewal.
They can decide not to renew for any reason - including that they just decided not to do house insurance at all anymore.
The problem is the culling
Insurance companies are very keen to get as much risk as possible off their books before the climate gets even more extreme in its volatility
Good goes with bad, so long as the bad goes, some good going too is undesirable but OK because they are aware if the catastrophic climate events looming
The insurance companies are behaving logically, probably legally IANAL, but for people who are simply caught in the wash it is unfair
This is part of the huge systematic disruptions we are all going to have to adapt to, or die from, due to climate change
Worrying times
You (say) have a trampoline. I do not. We share an insurer. Our insurer asked, when you applied, if you had a trampoline. Your trampoline materially increases the risk that insurance is going to have to pay to cover a lawsuit on your property. You lied, and said you didn't. I am now paying to subsidize your trampoline.
Why shouldn't I want them to be running drones over our houses? Worrying times... for pirate trampolines!
Wouldn't said trampoline simply not be covered by the policy since you lied about it? The agents are checking a box and the underwriter is sticking in a boilerplate "Customer said no trampoline therefore trampolines are excluded from this policy" text
It’s worse than that actually; say the liar’s house burns down and the insurance adjuster finds the trampoline in the garden after the fact. As I understand it, the insurer can void the entire contract.
It isn’t always fraud or lying - you apply for insurance. Insurer asks you a million questions. One is “do you have a trampoline”? You honestly answer “No”. The fine print of the application form says you have to tell them if at any time your answers change. After a while, you forget it even asked you about a trampoline. Then, you get your kid a trampoline. Per insurance fine print, you are suppose to inform the insurer of this change in circumstances immediately, but you’ve forgotten that.
Also, it depends on the jurisdiction, but while the insurer can try to void the whole contract, courts don’t always let them do it, especially if the policyholder convinces the court it was an innocent mistake or oversight rather than a deliberate lie.
This is not a good example of "fine print", because trampolines are notorious sources of injury. It's like if you added a pool to your property and didn't tell your insurer because you "forgot the fine print". You can plead that, but if I was your neighbor, I'd be rooting for the insurer. Knowing about the dangers of things you set up on your property is on you.
We used to have a trampoline. We never once told our insurer about it. When I first applied for the insurance (at the same time we bought the house), I have no memory of being asked if we had one (we didn't at the time). I don't remember ever seeing that question from them, although I can't be completely certain it wasn't on some piece of paper and I didn't notice it. If they never ask, I'm under no obligation to tell them.
Look, I hear you, but at some point this has to be on you. The CPSC has a thing dedicated to trampolines. The Mayo Clinic has articles about it. It is a huge cause of injuries of minors around the country. I'll grant that this is slightly more obscure an issue than swimming pools, but there are tons of swimming pool buyers who would make similar claims ("nobody told me swimming pools were that risky, this is just fine print mumbo jumbo"), and I don't think anyone here would entertain those.
Well, I'm not in America, and I'm wondering if this is an American thing?
I just checked my insurance policy. The word "trampoline" never once occurs in it. I don't think my insurer cares about trampolines.
If I think about it: given the absurdly large payouts for some injury lawsuits in the US, I understand why American insurers might be particularly sensitive to things that might induce injury, like trampolines. Given Australian courts tend to be much more modest in the damages they award, I can see why Australian insurers might not see them as something worth paying any special attention to.
Also, even in the US: it might seem obvious to someone who grew up there, but for an immigrant from a country with a different insurance system, it wouldn’t be obvious
To explain the lawsuit issue, here is a perfectly plausible scenario and how it could play out somewhere in the USA.:
1. A person is at a friend's house for dinner
2. Upon leaving to go home, they trip and fall trying to navigate an unlit path to their car
3. Their injury lands them in the hospital and requires a week or so of recovery time in which they could not work, and as they contract out they lose that money
4. The health insurance that fully covered their injury, looks at the medical records and finds that the injury occurred on another property and calls the people involved and finds out about the unlit path
5. They deny payment for the medical treatments and tell the injured person to sue the friend for medical payment because they are at fault and they have home owner's insurance
6. Forced to sue the friend or be out tens of thousands of dollars, the injured person adds to the claim for lost wages (hey, the friend isn't paying for it anyway, the insurance is)
This is how you end up with such lawsuits that the USA is famous for -- people are forced to sue other people in order to not go bankrupt, and things get piled on that.
In Australia, if you are seriously injured, you will be sent to a public hospital, where the government will fit the bill for your treatment. If it is a workplace injury or a motor vehicle accident, they might seek to recover costs from the compulsory private insurance in those cases, but otherwise they wouldn't. Many people also have private health insurance, but the private system usually doesn't get involved in accidents and trauma, it prefers to focus on things with greater predictability and profitability (e.g. hip replacements).
Every country is different, but I suspect in many other countries with either public or hybrid public/private systems, it is going to be a similar story
It isn't just about lawsuits, it is also about damages payouts. In the US, there is a very broad constitutional right to a jury trial, which extends to civil lawsuits; and (in many cases) the law entrusts the jury, not just with deciding whether the plaintiff has factually proven their case, but also with awarding damages. American lawyers have mastered the art of emotionally convincing jurors to make big awards (especially if the defendant is a big corporation, or an unsavoury private individual). And big awards create precedent for bigger awards in the future. Even though judges can reduce jury damages awards, and often do, I think that only partly reverses the impact of juries in encouraging their growth. Also, the fact that many states have elected judges makes them hesitate about reducing jury damages too much, since that might offend the voters and threaten their re-election chances
Compare Australia: we also have a constitutional right to a jury trial, but it only applies to the most serious federal crimes; it does not apply to less serious federal crimes, nor state crimes (regardless of seriousness), and there is no constitutional right to a jury in civil cases. Sometimes, you can get yourself a jury in a civil case (depending on various complex legal factors), but in practice the majority of civil trials don't have one. And even when there is a jury, the norm is the jury only decides whether the plaintiff has proven the facts of their case, and damages is wholly up to the judge. Judges tend to be much more conservative in awarding damages, and as a result, the runaway damages inflation which has happened in the US, has been far less of a thing in Australia. And all judges in Australia are appointed (both state and federal), and the process is mostly insulated from politics, so Australian judges are far less afraid to offend public opinion
The big damages are punitive damages, not damages for compensation. Since we have rather lax consumer protection laws we rely on the companies being afraid of having to deal with a huge lawsuit payout if they act suitably antisocial. Like the McDonalds hot coffee lady only asked for medical bills, but because McDonalds corporate refused to give her those, and continued to keep coffee boiling hot regardless of people getting injured that they knew happened constantly, because it made them money, the jury made it a point to award a ludicrous judgement to teach them a lesson.
Yes, it is the punitive damages which are really astronomically insane. But even merely compensatory damages in the US can be extremely high by the standards of other countries.
For example, in the 2014 Florida case Cynthia Robinson v. R.J. Reynolds Tobacco Company, et al, the jury awarded US$23.6 billion in punitive damages as well as US$16.9 million in compensatory damages, for the death of the plaintiff's husband, a smoker who died from lung cancer at the age of 36. I'm sceptical any Australian judge would ever award US$16.9 million (at current exchange rates, AU$25.7 million) compensatory damages for a single person's death. The trial judge cut back the astronomical punitive damages award, but left the compensatory award intact. In the end, the plaintiff never got any of that money (the appeals court ordered a retrial, on grounds unrelated to the damages, and the defendant prevailed at the second trial). Still, I think it goes to show, it is not just high punitive damages, high compensatory damages is an issue too.
Pointing out outliers isn't really helpful when talking about what could be expected in an insurance claim.
Okay, but the point also remains with respect to averages.
For example, compare how the UK and the US handle compensation for lost future earnings in wrongful death cases. In the UK, judges are guided by the "Ogden tables", actuarial tables published by the British government. The judge will use the deceased's age to look up a multiplier in the tables, which will be multiplied by their income at the time of death, to derive a net present value of future earnings. While the tables are technically only a guideline, and judges have the discretion to deviate from them, plaintiffs rarely succeed in practice with convincing judges to do so.
By contrast, in the US, there are no such formal guidelines – it is largely determined by expert witness testimony before a jury. Expert witnesses have a lot of scope to argue for higher estimates, and often succeed in convincing a jury with those arguments. The result is unsurprising – compensation for lost future earnings is more generous in the US than in the UK.
http://ndl.ethernet.edu.et/bitstream/123456789/28878/1/53.pd...
I agree that the systems are different and one is more oriented towards payout because we have little to no social safety nets so whatever the victims get has to last them for life, among other reasons I described above.
Are you trying to say that one system is bad and another is good? They are different for different reasons, which can be explained by the structure of the society and what we expect courts to provide for us as opposed to other areas of government or private parties.
The argument though is, a lot of the difference is nothing to do with the factors you cite such as social safety nets, it is about the use of juries in civil cases, especially to decide damages. David Bernstein (professor of law at George Mason University) puts the argument better than I can in a 1996 journal article – https://www.cato.org/sites/cato.org/files/serials/files/regu... – see in particular the discussion of juries on PDF pages 3 onwards, and his recommendation on PDF page 6 that state legislatures should remove the power to decide damages from juries and transfer it to judges only
Why are you arguing this? For what purpose would it serve to give up the right to a jury trial in order to mitigate the extreme outlier cases which bump up the averages and which do not actually get any money into the hands of the plaintiffs? You want to destroy a constitutional right because... the tobacco industry got an unfair award, or because you think people are too dumb and swayed too easily by lawyers that we can let them decide life or death but can't let them decide how much money someone is owed?
Why take this position? What justice is it serving and why would society be better off for doing it?
Because I'm interested in comparative law and the differences between the legal systems of different countries, and my honest opinion is this is a matter in which the US system is worse than that of the other major English-speaking countries.
I can also point to examples of the opposite, where I think the US system does it better – e.g. the abolition of the dock.
Bernstein's primary argument isn't about outliers, it is about predictability and consistency – judges are much more consistent in the damages they award than juries are. Where juries are in charge of damages, it can turn into a lottery, where some successful plaintiffs win big, and others win small, just based on the luck of the jury pool draw. He argues that's unfair to those less lucky successful plaintiffs, and I think he is correct there. Of course, there can be a similar phenomena with random selection of trial judges, but the variability due to different judges tends to be significantly smaller than the variability due to different juries, since judges are subject to pressures for consistency which do not exist for juries
Under US constitutional law as it stands, there is no federal constitutional right to a jury trial for civil cases in state courts. The 7th Amendment right to jury trials in civil suits only applies federally, it has not been incorporated against the states under the 14th Amendment. This is unlike the 6th Amendment right to jury trials in criminal cases, which has been incorporated under the 14th (except for the vicinage clause). The piecemeal application of the incorporation doctrine seems rather arbitrary and difficult to rationally justify, but that's SCOTUS precedent as it stands.
Some state constitutions have a state constitutional right to civil jury trials, others don't. For those that don't, there would be no constitutional obstacle to a state legislature implementing Bernstein's proposal to remove damages decisions from juries and shift them to the judge–which is already the norm in every other major English-speaking country. As to those states who do have such a state constitutional right, whether Bernstein's proposal would be compatible with it depends on precisely how that right is worded, and how the state courts choose to interpret those words.
I'm opposed to the death penalty so I don't believe any jury should be deciding life or death.
That said, criminal matters and civil matters are so different, it is rational to hold that juries should be required for one and not the other. Criminal matters are supposed to have a very high burden of proof (beyond a reasonable doubt), where requiring 12 ordinary people to make a unanimous decision can be viewed as an additional protection against wrongful convictions. Civil matters are decided on a much weaker standard (balance of probabilities), so it is not clear whether juries are as necessary for civil cases.
I mean, sure, but really the simpler issue --- and this is an issue in Australia too, but I don't know how it's handled --- is that some kid is going to double bounce on the trampoline at a party, land funny, break their neck, and be paralyzed for life. Average payouts for paralysis cases are in the high millions.
Nowadays, the way it is handled in Australia is significantly different, for two reasons (1) we have a national disability insurance scheme (NDIS), under which the federal government funds lifelong care for the disabled, irrespective of how the disability was acquired (accident, medical negligence or natural causes) (2) whereas in most American states tort law reform is merely a topic of perennial debate in which little actually changes, Australian states enacted major tort reform which significantly capped personal injury payouts. A big motivation for that was to control their own medico-legal risk due to the extensive public health systems they operate
It’s critical in the USA to never tell your health insurance that you got injured in a way that may cause them to sue. Because health insurance is not actual insurance it’s almost always best to assume fault for your injury.
It is an American thing and the WSJ is generally American articles so you are going to get a lot of American-related responses.
I just bought homeowners, it didn't ask anything about trampolines. Am I expected to call them up and inform about one? They specifically ask about a pool and if it is fenced or not.
There were some neighbors down the street from my parents that put a trampoline right next to several decorative boulders. These weren't small - same height as the trampoline (at least 4 feet) and very jagged. Thankfully it disappeared again within a couple of days but my god can people be STUPID.
Glad you’re not my neighbor.
Our economy runs on contracts. If one is able to avoid the terms of the contract by claiming one didn't read it, the whole system falls apart.
(When I bought a house, the sales contract was maybe 50 pages. I went to the escrow company to sign. The escrow agent was visibly annoyed that I leaned back in the chair and set about reading every page. One of the pages that needed to be signed said nothing but "I have read and understood this contract.")
Except, Courts have ruled that you can, at least sometimes, get out of the fine print of a contract by claiming you didn't read it. For example, see the notable 1962 Supreme Court of California case, Steven v. Fidelity Casualty Co [0].
In 1957, plaintiff purchased a life insurance policy covering plane crashes, from a vending machine in Los Angeles, with his wife as the beneficiary. His itinerary took him from LA to Chicago, and from there to Dayton, Ohio. On his return from Dayton to Chicago, he'd scheduled a one night stopover in Terre Haute, Indiana. In the morning, he went to the airport in Terre Haute, and was distressed to discover the flight had been cancelled due to technical issues, and he was going to miss his connection in Chicago. The airline agent referred him to a charter airline, who organised a charter flight for him and a handful of other passengers back to Chicago. Sadly, the charter flight crashed, and he died.
His widow sought to claim on the life insurance policy. The insurer denied the claim, on the grounds that the fine print of the policy said that it only applied to scheduled air carriers, not charter flights, and hence the flight on which the insured died was excluded. His widow sued the insurance company in the name of her deceased husband. The trial court sided with the insurer, on the grounds that this clause was clearly stated in the fine print of the policy, which the policyholder was expected to have read, and he had signed to say that he had.
However, on appeal, the Supreme Court of California overturned the judgement, and ruled for the widow. It held that, for consumer insurance contracts, any clause or exclusion which the policyholder could not have reasonably expected, must be pointed out prominently, not buried in the fine print. Since, it ruled, the policyholder had no particular reason to expect the exclusion of charter flights, and the insurer had not prominently stated that exclusion in the policy (e.g. by using a larger font), it was not legally binding.
And, from what I understand, the rule established in this 1962 case is followed in California law to this day, and has also been adopted by the courts of several other US states
[0] https://casetext.com/case/steven-v-fidelity-casualty-co
Frankly, the court ruled wrongly. The ruling throws all kinds of things in a contract in doubt, and that's no good for either party.
Why should anyone think the fine print is irrelevant? Everything in a contract is relevant, or it wouldn't be in the contract.
That makes sense in a vacuum, but in the real world not everyone is a lawyer and corporations have a vast power imbalance compared with a member of the general public. It's incredibly easy to bury something surprising among many other clauses, such as only scheduled flights being covered and not charters. The idea certain potentially surprising clauses need to more prominent seems pretty reasonable on balance. The onus is still on the signing party to read them, but they are afforded the opportunity to notice among many clauses these are ones that deserve special attention.
That means there will always be an argument around what a reasonable party would consider a surprising clause, but contract law disputes deal with nuance, edge cases, and what a reasonable party would expect all the time. With rulings like this corporations will air on the side of caution when taking big swings in forming their agreements since litigation is so costly and the outcome so uncertain. Consumers gain a little power back (though still far from equal footing).
This should only apply when there are large power imbalances, such as individual people entering agreements with vast multinational corporations. When big corps ink deals with each other caveat emptor should reign; they have equal opportunity to review and understand the terms and therefore have to live with the consequences.
It's not unreasonable to expect a party to a contract to read all of it. If one's case is based on "I didn't read it", the other party should prevail.
The consumer can always say "no". An important feature of a free market is there are no forced contracts. Saying "no" is the ultimate power.
Walter, you are a very smart guy. And this is a site which attracts people with above average intelligence and education. It is easy to forget that not everyone is as smart or well-educated as we are.
I know a guy who has been diagnosed with borderline intellectual functioning (i.e. his IQ is above the cutoff for intellectual disability, but only just). He blames it on his alcoholic mother drinking when she was pregnant. He's able to live independently, he drives a truck for a living. But no way is he ever going to be able to comprehend all by himself the dense fine-print of a contract. The law has to look after people like him, not just people like you or me. There are literally millions of people like him out there – around 13% of the population has an IQ in the borderline range.
Some products, people need to buy to meet their basic human needs and to function in society. For many of those products, there are only a small number of vendors available. If all of them demand you sign an incomprehensible barrage of legalese, you can't realistically say "no" to doing so. It might not be a "forced contract" in an abstract theoretical sense, but it sure is in a practical sense.
The law (in the US and the Commonwealth) already has a concept that captures the difficulty people with intellectual disability have with contracts: capacity.
Why are parts of the contract allowed to be in different size typeface in the first place? There should only be headings and body text, no other sizes.
I mean, the insurer in that case discovered that the client was defrauding them. If you steal $100 from someone's cash register, buy scratchy lotteries with it, win $200, and put the $100 back in the register, you're still a thief. That's the logic here: you gambled on a pirate trampoline and feel like you should have won.
I don't know if it really is the case that your insurance can be voided over material misrepresentations unrelated to your claim, but certainly there's no moral argument that it shouldn't work that way.
It depends on the policy, but either way, this is the kind of risk we're talking about managing with culls: trampolines, and bad roofs. I pay to keep my house up. You (say) don't. Why should I be OK with subsidizing your resulting claims with higher rates?
I think there's a sort of weird subtext in the "risk pooling" discussions on this thread that "risk pooling" is a way for people who don't replace their old roofs to get protection from the people who do. But that's not at all the concept! You refusing you repair your roof isn't an act of god; it's just recklessness.
You seem to be forgetting that this avoidance can work at two times:
1. pre-emptively dropping or refusing coverage
2. claim inspectors concluding the company has no liability for a particular incident.
It doesn't all need to be #2 (and probably should not be), but it also doesn't all need to be #1 either.
#2 is less successful and incurs more costs. Trampolines are a good one because let's say you lie about a trampoline. Ok, great, we don't have to cover any trampoline related injuries. What are the chances that you would then lie and say that a broken arm occured on the steps instead and simply fail to mention the trampoline like you already did.
You, the rogue trampoline owner, aren't really the party that the insurer is worried about. Your kid's best friend's parents are. (And it's not a broken arm they're really freaked out about --- don't make a homeowners claim over a broken arm, probably; it'll cost you more in the medium term --- it's death or paralysis, both of which will put millions of dollars on the line).
Trampoline is a bad example. Pool is not. That could threaten your house’s structure, or cause damage to your neighbour’s in a storm. The article gave an example of an overhanging tree—it makes sense for the population to segregate into those who will manage that risk and those who won’t, with the latter being charged a higher premium.
Pools are insurance issues because people die in them, and their nexts of kin sue the homeowner.
We ought to change the law to stiff the money-seeking families of victims. So long as the pool was fenced or fully above ground (required a ladder to access)
Pools are 'attractive nuisances'
This doesn't stop expensive lawsuits, even if they ultimately don't pay the claim.
Also doesn't stop the lawsuit between the policy holder and the insurance company, which also costs money.
Whereas your ability to sue for a non-existent policy (or one where that was unambiguously canceled) is... much less.
It increases the chance of a claim against the homeowner insurance if a neighbor's kid gets injured on your property. Even if it ultimately will be on you, the insurance company will likely get sued and may settle which increases costs. They'd rather go the cheaper, drone surveillance route to find offenders early and warn them or else.
It would be hard for the insurance company to prove that the head injury was from the trampoline rather than tripping on the porch.
Because it’s creepy.
Insurance companies want money to come in and never go out. If they could they would sell life insurance to dead people and homeowners insurance to the homeless.
The irony here is that's what insurance customers want, too: to incur arbitrary risks and have other more responsible customers pay for them.
Customers want to pool risks with other customers that are lower risk than they are. Florida homeowner want to be on a national market because they are the highest risk group. Obviously the rest of us want Florida to be separate.
It's good to want things! But if you're a bad driver, you don't get to pool with people with zero accidents and tickets.
This is a really bad analogy that doesn’t hold water.
There are good drivers and bad drivers. There are also good homeowners and bad homeowners. I live in Florida, but chose not to live in a flood-prone area. We also have hurricane clips on our roof, and we just changed all our windows to impact-resistant windows (with the help of a state-sponsored program, actually). Our insurance isn’t that high at all. Could it be lower? Sure, I’d love that. And maybe a national program would do that.
Modern building codes require things like impact windows and that the building be rated for high winds. Older buildings should be retrofitted with things like impact windows, but I would only call those homeowners “bad drivers” if they can afford to do so but don’t. I wouldn’t blame an elderly person on fixed income for not affording to do this and call them a “bad driver”.
I’ve walked around San Francisco quite a bit since my company is based out of there, and I’ve seen a lot of people retrofitting their houses with those diagonal beams for earthquakes. San Francisco is waiting for the “big one”; is anyone who can’t dump money into living in a safer building, or retrofitting the one they own, the equivalent of a “bad driver”? Obviously not.
FYI in Tampa, also called the “Bay Area” to locals, we’re also waiting for “the big one” (a CAT-4 or CAT-5 coming directly into shallow Tampa Bay, which would cause an enormous storm surge). That last happened in 1918 or so and it actually permanently changed the geography where it came in, creating an area known as Hurricane Pass. All we can do is prepare and be responsible to our communities.
Anyways, you can’t lump all people in a geography, regardless of behavior, into one group. It does a disservice to the people who are doing the right thing.
Unless your building has been fully retrofitted for [insert local disaster] or you chose to live outside of [insert worst geography in your area to live with regards to local disaster], then you’re a “bad driver” too.
This is a lot of words about a lot of scenarios, but here we're talking about people who (1) secretly install trampolines, (2) secretly install swimming pools, and (3) falsely claim to have replaced their roofs.
Businesses want to maximize profits, but an insurance company that doesn’t pay claims will quickly have no customers.
Except for the mandated ones, like car insurance.
But if there are ten companies offering car insurance and one is known to never pay out, the customers will migrate to the nine who do. Car insurance may be mandated in some states but no one is forced into a particular company.
In the UK, car insurance companies have actually been loss-making recently, despite car insurance being mandatory. It's not a guarantee of profit, especially not given how hyper-competitive the car insurance market is here.
If you could sell your car for a million bucks, you would. So would I.
What prevents it is there are no customers willing to spend $1m on our cars.
This is the Law of Supply & Demand, and how markets work.
That's why we regulate insurance companies in a way not particularly comparable with other businesses.
at least in the United States, home insurance is issued a year at a time. So it doesn’t make sense to cull today in anticipation of some hypothetical future shift towards cataclysm.
Also, what is the aerial photo of a roof going to indicate in terms of “cataclysmic climate events looming”?
Also is it a coincidence or a pun that your name is worik and it is common for you to sign your posts with something about worrying?
Lol my dude, trampolines in backyards being a rejection reason has nothing to do with climate change.
Yes climate change has caused an upheaval in some geographical regions.
But there are many economic forces at play, from the treatment of real estate as an investment making every home a million dollars to insurers all being reinsured by a ever smaller pool of reinsurers.
Insurance companies are keen to align risks with premiums. The more accurately they do so, the less volatility they will have. And in the short run, probably more profit as well. This also helps consumers, where lower-risk folks will overpay less, and higher-risk folks will be required to lower their risk or contribute more in premiums.
It’s an issue of scale. Similar to police tracking phones. Police have always been able to assign an officer to follow a suspect, but it’s expensive and therefore rarely done.
If insurance companies can cheaply inspect everyone’s house from space, the end result will be to lower prices for people with homes in perfect condition and raise them for everyone else.
This is potentially problematic because the people with houses in poor condition are the least able to afford added costs in general.
Why is it not a good thing if insurance is more accurately priced? Insurance isn't a redistribution mechanism. And dilapidated roofs aren't a social good. Municipalities have actual redistribution schemes to make these kinds of repairs.
I'll note that there's nothing at all redistributive about sneaking a trampoline onto your property, too.
Further, I'll note that working class people also take pride in their houses and pay to keep them up, and they too are being asked to subsidize people who are getting rate breaks from false assessments.
Later
My municipality will make an interest-free loan of up to $25,000 to cover the kinds of property repairs we're discussing, if you're income-qualified (ie: not too rich to just pay to replace your own roof).
Isn't insurance entirely a redistribution mechanism?
No. It’s a risk pooling mechanism.
If a group of ten people all have a one in one-thousand per year chance of a million-dollar loss each year, then their annual premium will be:
10 x 0.001 x $1,000,000 = $10,000 (plus some administrative overhead and assuming a very basic risk model)
It has nothing to do with who is rich and who is poor or making anyone come out ahead of their own losses.
More importantly, each person in this group has a different chance of a million-dollar loss each year, and it's important if you're going to write a policy to get that chance as accurate as possible.
Some members of the pool have a 1-in-1000 chance per year, others have a 1-in-10 chance.
An efficient insurance market assess who has what risk, and offers premium commensurate with risk. If you're one of the 1-in-10 people you pay more.
A risk pool combines resources to pay out for losses that are otherwise individually unaffordable by each member of the pool. It is explicitly not a mechanism - nor is the intent to - have members with wildly different risk exposure pay the same premium. In fact the only way it can sustainably function is if each member's risk level is accurately gauged to some level of precision.
There are risk pools where the intent is to subsidize higher-risk members, where we believe that such subsidy is a social good - health insurance for example is one of those things.
But I don't see a good argument that home insurance is, or should be, one of these types of risk pools.
Wouldn't an efficient insurance market be worthless since the expected net payout for everyone insured would trend to zero?
These kinds of questions are a little mind-binding. Insurance is a financial services business. If the net EV of insurance was positive, how could any insurer remain solvent?
The EV of insurance is negative, in the sense that the expected money that one can expect to get out of insurance is less than the premium.
Insurance is for catastrophic losses. I don't pay for insurance to make a profit, I make it to avoid the large tail loss of having the house destroyed and having to pay the value of the mortgage to the bank.
Generally insurance premiums are invested into relatively safe assets, like bonds, which yield quite a bit right now.
No, it's still very valuable since I'll never have to pay out of pocket for that million-dollar incident. The point isn't to save money, it's to distribute the incident payments over a long term.
If insurance was just about pooling risk, an insurer that had perfect information about the future would pool everyone into a one-man pool and charge everyone the price of their damage for the year +1 cent for itself.
But that's not what would happen. You would still have insurance because what we really have is 8 billion people in the world (or 300 million in America or 10 million in your state or 1 million in your city or 500 in your neighborhood/village) and each person in that group of people derives some utility from other people in that group not having to pay full price for their broken roof, whether that's because when you go talk to your neighbor he's not complaining about his roof all day or because your neighbor is your doctor and you want him in the hospital instead of running around trying to fix his roof all day or sitting at home wet because he can't afford it. The total amount of that utility multiplied by how much money the entire group makes might be less or more than the price of roofs for everyone in that group.
So it's both. You're trying to discover the network of people (or create/convince that network, sometimes by threat of violence in the case of government-mandated insurance) in whose interest it is to redistribute their wealth to a given person.
I invite you to start selling an insurance product whose sales pitch is "You will get some utility from this product paying for other people's roofs!"
Is there some kind of theory of insurance they teach in business class where they explain this "discover the network" idea? It doesn't sound like the common definition of insurance at all.
I believe the perfect information case you say wouldn't happen is exactly what would happen. The only reason we have insurance is that perfect information is impossible in a chaotic world.
There are actually insurances that to some degree work proactively to reduce the risk of all its members in the pool.
My home insurance offer free pest-control, because they know that if this is neglected, it will cost a lot more for them. Plus, it will be hard to prove that it was a cause of the home owners neglect.
At the risk of getting political, (governmental) healthcare is another one, where regular checkups can save you thousands in repair. It might look like a subsidy but in the end it becomes a net-benefit for everyone in the pool.
Commercial insurances will also often pay for risk improvement works and assessments for their customers' businesses on the basis that it will reduce the incidences of claims and/or reduce the cost of claims if they do arise.
This is part of the theory behind the Affordable Care Act and its subsidies, in that the more people who have health insurance, the bigger and more diverse the pool, it becomes a win-win-win for insurers (bigger pool = good, more money, more customers, more profit) consumers (health insurance = healthier, better life) and the government and country overall (healthy population = better long term prospects for the country).
Of course, true universal healthcare programmes like the NHS simply abstract that away by removing the profit incentive entirely, cutting the insurers out of the equation and turning it into a more straightforward "the government pays for healthcare because a sick population is just a plain bad thing". It's as such not really a "risk pool" or "insurance" in any real sense, because the amount you pay into the system is completely disconnected from your risk of drawing out of it (and indeed, given the correlation of poor health and low income, likely inversely proportional).
Not in the sense evoked by customer purchasing power.
Lol that’s precisely what it is. It redistributes the cost of accidents. Across all its members, paid forward.
Just don’t get insurance and nothing of yours will pay for anything belonging to anybody else.
No, it's not. The idea of a risk pool is that everyone's catastrophic risks cancel out, not that people who replace their roofs also chip in to cover hail and water damage for people who don't.
In fact, you are wrong; insurance in California is redistributive by regulatory design. Farmers (when operating in CA) must offer insurance X% of homeowners in a range of $Y-$Z, subsidizing those customers who are more expensive to Farmers. It's relevant to the story: Farmers is disallowed (for political reasons) from canceling accounts in Auburn due to actuarial climate updates; Farmers has new incentives to closely scrutinize home conditions and utilize any new datasets.
This quirk of California law (that insurers cannot factor in climate risk or anything other than trailing 20 year average costs) is why insurers are pulling out of the state; it isn't generally true of insurance.
If anyone is interested in learning more, this odd lots episode covers the changes to the home insurance market if a fair bit of depth:
https://m.youtube.com/watch?v=BYbSz1MXdFA
Yeah, I just listened to that episode. :-)
It also doesn't have anything explicitly to do with "actuarial climate updates" -- there have been a bunch of correlated losses recently (i.e. fires in 2017-2018) that mean that the insurers are losing money on people who live in certain high-risk places in California. Calling it "climate" just window dressing for local politics.
California won't let them underwrite to accurately reflect the location risk, so they're pulling out instead. It's basically exactly what Tptacek said, only demonstrating it via the stupidity of California's law.
Because everything is turned as a cash-grab by corporations and prices never go down.
But inflation is good TM
In some states insurance rates are regulated. Definitely know they are in California.
That said whether the regulators are effective in keeping costs down is a different issue. But my not-very-deep understanding is that risks are rising, e.g. large wildfires in the US West, and increased hurricane frequency and strength on the Gulf Coast, and the only way to deal with that for the insurers is to raise prices, or drop customers - sometimes to the point of abandoning the market altogether. This sounds like another piece in that trend.
You've never seen anything on sale?
That's exactly what insurance is. The whole premise is that they will dip into other people's payments to pay you if you ever encounter a covered issue. If insurance only ever paid you back some fraction X of your own contributions, why would you ever buy it? It would make infinitely more sense to deposit whatever you would have paid to insurance in a high yield savings account.
Read downthread for repeated explanations of how insurance works. You know you're in trouble when you profess shock that insurance has negative expected dollar value.
On the contrary, I think using expected value to explain the value of insurance from the perspective of an insurance holder is a misunderstanding of insurance. People don't buy insurance to optimize the average case; they buy it to optimize the worst case. But an insurance policy that doesn't redistribute wealth has both negative expected value and negative value in the event of a payout. At which point it is just a personal rainy-day fund held in a savings account with a negative interest rate.
Insurance almost mathematically must be negative EV in dollar terms. It's positive EV in utility terms because of the declining marginal utility of a dollar. If it was dollarwise positive EV, every insurer would be insolvent.
This is pretty basic? Like, it's an economics frequently asked question why buying an insurance policy isn't as irrational as playing the lottery, since both have negative dollar EV.
It's incorrect to assume that more data points implies more accurate pricing, as we're talking about very limited very simplistic models. It's more plausible to envision those extra data points serving to confuse the market and make it less competitive, rather than actually helping to accurately price risk.
Every new data point partitions the statistical population size into two smaller parts, each with their own larger variance (ie the insurance company's risk). The insurance company could statistically combine the risk from each partition into the same original, but it's more likely they'll focus on the higher independent risk figures and raise premiums an outsized amount to cover each individually. And this effect is going to be more pronounced the more lopsided the partition is, leading to similar monoculture incentives as we see in the mortgage/housing bubble. For example, I'd bet there's somewhat of a correlation between insurance claims and whether a house is painted beige.
That is how rates can go up even when the extra data is fundamentally sound. But there can also be just enough extra information to be damning, but not enough to exonerate. For example after the "Do you have a trampoline" question, is there a follow up of "Do you let guests use it" ? Or perhaps a more formal "opt out of all liability coverage for the trampoline" ? Likely not.
Then of course there are places where the model is irrelevant or even outright wrong, because the thing being singled out seems like it rocks the boat. Like the driver surveillance devices that penalize focused acceleration due to perceived association with racing, when it's much more likely that the driver is actually paying attention to driving. Or penalizing people for going over the posted speed limit, when it's actually safer to go the prevailing speed of the road.
I didn't say anything about more data points. I'm talking about insurers being able to properly gauge whether existing customers are adhering to the terms of their policy, or whether they're free-riding off the premiums of their neighbors by defrauding the insurer.
By "more data points" I meant questions like "Do you have a trampoline?". Read my comment again with that understanding.
Elaborating on my second criticism - let's say someone has a trampoline but never has guests at their house. The insurance company asks about the first condition, but doesn't ask about the second condition. If the customer lies about having a trampoline, it's likely that they are actually still being subsidized by their neighbors as their overall risk of liability claims is much lower.
And I've actually got to wonder if lying about having a trampoline is technically even fraud. Are home insurance companies legally obligated to pay/defend liability claims stemming from things you lied about? If not, then it would seem there is no fraud (unless you also lie for the claim) - the claim can just be denied, and liability coverage isn't relied upon by a mortgage.
Another poster here, Scoundreller, recently responded to one of my comments on another topic with this insight:
There's likely a point where the more accurately priced a policy is the less worthwhile that policy is to purchase, which really wouldn't be a good thing for the insurance industry. The use of aerial photography probably isn't enough to put them over that threshold, but the closer they get, the less attractive their offerings will be. Considering that the insurance companies mentioned in the article have billions in revenue and assets I'm not sure they have a compelling need to resort to this level of surveillance in order to make good money. None of them appear to be going broke due to rogue trampolines anyway.
That argument is silly because it misunderstands what "risk" means both in an insurance context and in general.
Yes, if you could 100% guarantee that someone was going to have a $Y valued claim, their premium would fairly be 100% of $Y at least in order to allow for their contribution to the risk pool. Problem is, you cannot 100% predict the future, and there is no model capable of doing so, nor will there likely ever be. Nor can you predict that any other insured risk might not materialise in the meantime.
More to the point, it fundamentally misunderstands what insurance is and how it works, not least the commercial considerations involved. If there is a 100% risk of risk X materialising, the insurer won't rate your premium at the cost of risk X; it will simply exclude risk X from your policy and rate your premium based on all the other myriad risks that might arise that year in an attempt to win your business and collect premium for what, to them, is a better bet.
This already happens, incidentally; travel insurance policies will exclude pre-existing conditions or recurrences of previous illnesses as a matter of course, because if someone (e.g.) has cancer, the odds of them needing to claim on their policy - and as such draw down from the pool more than they paid in premium - skyrocket.
Which makes it odd that there are people who can't get insurance at all because of one factor like a tree or a roof. Instead of these companies (rightly or not) excluding those risks they're just dropping the customers or refusing to insure them.
As insurance companies get more data about you from constant surveillance and data brokers it's possible for them to assume things with far more certainty. Worse, they don't seem to care too much about accuracy either. Your health insurance could cost you more next year because data shows more people in your zip code are spending more time in fast food drive thru lanes. People have had their DNA leaked! Predicting the future (accurately or not) is getting easier every day.
I think that's reasonable for things that nearly certain to happen. It's easy to exclude cancer in a travel insurance policy and still provide some value. It's a lot less likely when it comes to something like flood insurance where your house either floods or it doesn't, although there are certainly houses in places that flood so regularly that they shouldn't be insurable at all and no one should live there. There's a balance that's difficult to strike because the incentive is for insurers to drop anyone who has any real risk.
I’m not arguing what insurance should be I’m merely talking about the end result of this technology.
I guarantee you income is correlated with state of home repair. If insurance companies can more easily access state of repair, lower income individuals will end up paying more than they did previously.
Regardless of whether that is fair, it is a change from the status quo, and it’s obvious why some people would consider that problematic.
You describe theory. In practice, the price will not drop for you at all, but will increase much for others, or they will be unable to get insurance.
In fact your price will propably increase since more overhead needs to be allocated to fewer customers.
The solution seems to be to remove the insurance mandate, and allow purchasing insurance across state lines. That way two locked-in markets are opened to more competition.
Effectively removing the ability of states to regulate businesses in their own jurisdiction.
How is it different from someone outside CA buying Google ads?
It's so completely and utterly different that I'm not even sure what comparison you're making.
What insurance mandate?
Any insurance mandate.
At the risk of being callous, the goal of home insurance is to assess and manage risk. Choosing ignorance in the interests of giving some people a subsidy on the assumption that they may be poorer does not further these goals in any way I can see.
If the goal is redistribution, then using accurate risk data as a starting point seems preferable.
No, risk assessment and/or management is an internal operational concern.
The goal of insurance providers, home or otherwise, is to charge fees such that the insurer collects as much revenue as possible while simultaneously expending as little as possible to remedy claims.
Any justification legally available to an insurer supporting denying or reducing a claim will be employed.
If your insurers goal is revenue i suggest you go look for a new mutual insurance.
(no, this is not some hippie collective thing, in many countries this is the norm, see https://en.wikipedia.org/wiki/Mutual_insurance)
An insurance mutual's goal is still revenue. Your own link spells it out - it still tries to make a profit, it's just that whatever profit arises gets redistributed to policy holders or others. It still has to respond to commercial pressures and the need to run a sustainable business in the same way as any firm.
It's a common misconception that co-operatives/mutuals somehow don't need to make money or will actively try to not make money, but in reality if they don't they tend to die fairly quickly.
I'm not that optimistic.
Nobody will see lower prices. Perhaps these perfect homes might see slightly smaller increases year to year.
The point of the thread is that they're dropping people for random noise in satellite photos. The house might be perfect, it's just the photo that's wrong. But they don't care.
I think that one difference might be that physical inspections don't scale. It seems to me that the current systems working (for regular people) requires that insurers not be too good at assessing risks. The better the insurer is at assessing risk the closer insurance gets to providing no value to the insured.
Insurance can provide value even when risk is assessed perfectly! If everyone has a 1 in 100,000 chance of a $100,000 damage incident, they will have to keep $100,000 of savings to make sure they can avoid becoming homeless from an accident. But by paying $1.25 in insurance, (25% profit to the insurer), they can use their $100,000 for other purposes and generate much more than $1.25 in income from it.
Not Quite - only if risk is spread across the whole pool does it provide the value you describe.
If risk is assessed perfectly, they know that Alan's & Charles' houses will not have a fire, but Bob's house will burn. Alan and Charles (and all the others) pay only the $0.25 overhead/profit, while Bob must pay the $125,000 ratings +profit.
Insurance basically disappears, as it adds no value, and we go back to being self-insured.
Insurers don't on average provide value. If a risk can't be assessed, they will only offer a policy if they think it's value to them at the price they charge.
Insurance is famously negative EV (in dollars, if not utility).
In terms of sheer game-theoretic value, sure, perfect knowledge will reduce value gaps. However, the thing with having your house insured is that you will have somewhere to live if you have a house fire. The +/- for the insurer might be close, but going from having a house to having no house is a bigger deal than going from one house to a twice-as-expensive house.
Demanding an inspection is a process that can be organized and scheduled around.
Your friend brings over a trampoline for Timmy's birthday party, you can take the risk of injury with no intent to claim on insurance. You can remove it before inspection.
Now you get pinged out of the blue by a satellite.
Adults don't need constant supervision. Should you believe they do, why not leave a multi-camera drone above your suburb and every insured house can be monitored for infractions 24/7.
There is no reason for the insurance company to withhold the image as evidence of a problem. Google Maps knows where my trampolines are, why is the insurance company hiding their cards?
An insurance company that surveils you 24/7 and makes sure you comply, is not covering any risk, it's a protection racket.
I'm sorry but this comment makes no sense. Where did you get that insurance companies are now "surveiling you 24/7"?
If my insurance goes up, and it has, because of people defrauding insurance companies then I would fully expect my insurer to protect their bottom line and my rates by dropping those customers playing unfairly.
What I don't agree with is insurance companies punting the decision making process to an algorithm. At that rate we end up with Google "support" from a company that, as paying customers, we should be able to have a conversation with.
The last thing I'll mention is that it goes a long way to know your insurance broker. As an example I've known mine for the last ~15 years and they have helped remediate a number of, what I'll describe as standard process issues, when I've contacted them and in a few cases even proactively.
It was a rhetorical question. Why not increase surveillance to 24/7.
There is no defrauding going on. You don't own someone's behaviour or property simply because you "insure" them.
You get to reject claims and put your opinion on what "fraud" is, through the proper channels.
Taking photos and dropping customers is going around the proper channels and tyrannizing your customers.
How that is not obvious to everybody involved, is beyond me.
Drop the pretense and install a command economy again like the 1940s. You are leaning in that direction anyway.
You can remove it before inspection
Yes, if they do a scheduled inspection, it is easier to defraud them.
A trampoline used with no injury, is not defrauding the insurance company.
I saw one case where a guy was dropped because of an aerial photo of a pile of junk in his yard. I’ve had piles of junk in my yard during various remodeling projects. If the satellite passes over the day before the dump run, there’s no way to tell that the junk was gone the next day. If there’s an inspection, it’s easily explained.
I suppose you could offer an explanation for the satellite photo, but in that case you’ve already been dropped, so getting your policy reinstated is going to be a much bigger lift.
You're supposed to notify your insurer when you remodel!
Ok, “remodel” was maybe not the right word here. Projects large enough to generate a sizable pile of junk, but not ones that materially altered the structure of the house. Replacing built-in shelves with a built-in desk, replacing a non-elevated deck without altering the footprint, etc.
My point is more that a totally reasonable and brief occurrence becomes permanent and without context in satellite imagery.
Given that my insurer has never once stepped foot in any property of mine they've ever insured, the idea that I have to tell them when I replace the tiles in the bathroom seems a little ... crazy.
Obviously, if I add rooms or extend vertically, they need to know. But "remodel" covers a lot.
In these cases, the argument is always of the type you just mentioned.
“What’s the big deal the data is already available, relax”. On top of that, it comes with an air of condescension as if no one had ever thought about that before.
One concern with things like this is that it’s different when you have to send someone out to inspect a home vs inspecting thousands of homes at a time. Once you have data in that volume, you can start to infer things that do borderline encroach on privacy.
What is the case here, and it might be what you were trying to point out, is that this kind of data is already collected regularly and is by the books legal. The concern here is simply at the application.
At this point the cats out of the bag and the best we can hope for is at least some level of protection through legislation.
Again: insurers can and do demand home inspections when underwriting. This is strictly less intrusive than common existing practices in insurance.
The irony of starting a comment with again when you yourself didn’t read the reply.
I acknowledged that all this info is already out there.
That insurance companies can demand to inspect your home.
And even further that that this aerial footage is already widely available.
My comment was specifically calling out that collecting data one house inspection at a time is different than collecting data at high volumes.
But let’s gloss over the fact that someone didn’t even fully disagree with you, but even then you couldn’t get over that one point that you didn’t like.
An insurance company should be required to go through a legal process before they are able to drop people.
Sure, an undeclared pool is a problem. However, the insurance company should have to put the pictures into evidence and allow a legal rebuttal. Bureaucracies get things incorrect like "wrong address" all the time. People need the right to challenge these behemoths.
We've been through this once already in the US--it was called "rescission" in healthcare until the ACA made it moot by requiring coverage of preexisting conditions. It's a bad thing and invariably needs to be made illegal.
We require coverage of preexisting conditions in a bargain that involves coverage mandates (since struck down) and continuous coverage / enrollment periods. And health insurance is the primary payment gateway to a deeply distorted market that relies utterly on insurers to take payments, which is not something that is true of the housing market. I don't think I have too much of my identity invested in whether homeowners insurers need due process to not renew contracts, but I guess I'd argue the other side of that one. Either way: hard to see the privacy issue.