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Is the world becoming uninsurable?

(charleshughsmith.substack.com)
478 points spking | 12 comments | 17 Jan 25 00:32 UTC | HN request time: 0.001s | source | bottom
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Animats ◴[17 Jan 25 04:28 UTC] No.42734092[source]▶
Not uninsurable, but buildings are going to have to become tougher.

It's happened before. Chicago's reaction to the Great Fire was simple - no more building wooden houses. Chicago went all brick. Still is, mostly.

The trouble is, brick isn't earthquake resistant. Not without steel reinforcement.

I live in a house built of cinder block filled with concrete reinforced with steel. A commercial builder built this as his personal residence in 1950. The walls look like a commercial building. The outside is just painted cinder block. Works fine, survived the 1989 earthquake without damage, low maintenance. It's not what most people want today in the US.

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Sabinus ◴[17 Jan 25 04:31 UTC] No.42734105[source]▶
If the market is allowed to price insurance correctly then we can motivate building designs to be more disaster resist. If the McMansion can't get insurance but disaster resistant, modest homes do, then people will adapt.
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iandanforth ◴[17 Jan 25 04:48 UTC] No.42734200[source]▶
"Correctly" is doing a lot of work here. Some readers might miss that this is double edged. Insurance is a mandated product. You don't have a choice if you want a mortgage, or want to run a business. So while it is true that the sustainable price for insurance in many areas is higher than what current regulations allow, let's not forget what happens in an unregulated insurance market; price gouging.
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CalRobert ◴[17 Jan 25 05:54 UTC] No.42734498[source]▶
For what it’s worth, you can get a house with no insurance or mortgage. They tend to be cheap. I had an uninsured thatched cottage for a while, it was 68k
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lostlogin ◴[17 Jan 25 06:09 UTC] No.42734567[source]▶
You can have a mortgage with no insurance (after purchase day) here in New Zealand. The bank won’t like it, but also won’t know.
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1. girvo ◴[17 Jan 25 06:12 UTC] No.42734584[source]▶
Banks in Australia were the same, but some are now starting to demand proof of insurance yearly to counter that loophole.
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2. thaumasiotes ◴[17 Jan 25 07:02 UTC] No.42734852[source]▶
What's the thinking here? The bank is loaning you money and they want to ensure you buy a particular product.

They're the ones with the money. They can easily guarantee that you buy the product they want. All they need to do is give you less money, buy the product themselves, and give it to you.

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3. wakawaka28 ◴[17 Jan 25 07:58 UTC] No.42735117[source]▶
I don't know what you mean. Banks loan out money for you to buy a house, but you don't technically own it (that is, you have no title) until it is paid off. The bank wants the house itself as collateral for the loan. It cannot be collateral if something destroys it in the 30 years or whatever during which you are repaying the loan. Therefore, they demand insurance to make sure that they will be repaid. The insurance requirement protects you but also the bank, because what do you think the odds are that someone who just lost their house in a fire or something is going to keep making mortgage payments for a pile of ashes?
4. hnick ◴[17 Jan 25 08:06 UTC] No.42735162[source]▶
I think what you mean is what I wasn't sure about (but found with a quick search), some banks do offer home loan and insurance bundles here in AU. I found one that offered a discount on the insurance if you get the loan with them, for the life of the loan.

But legally, you are allowed to change insurers at any time. They would probably not be allowed to include that as a contract-breaker clause in the loan itself due to free-market-reasons, or force you to take only their insurance to have the loan (we tend to have a few laws about keeping conflicts of interest like this at arms length but I'm not sure about this case). But if insurance is legally required, I suppose they can ask for proof periodically after you leave to terminate the loan.

5. girvo ◴[17 Jan 25 09:02 UTC] No.42735470[source]▶
The insurance is with anyone. They own the house, not you, and so they want to ensure it's not going to burn down (or more likely get washed away in a flood, where I live) and be irrecoverable, so they require you have the home insured. They care naught for contents insurance, just the house/building.
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6. jstanley ◴[17 Jan 25 09:22 UTC] No.42735624{3}[source]▶
But if they're the ones that want the building insured, it seems like it would be better for everyone if they're the ones that source the insurance.
7. Peanuts99 ◴[17 Jan 25 10:04 UTC] No.42735896{3}[source]▶
Is it different in the US to the UK? Surely you own the house and have a liability on the mortgage?
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8. ndsipa_pomu ◴[17 Jan 25 14:33 UTC] No.42737893{4}[source]▶
When we bought our house in the UK (a long time ago), it was a condition of the mortgage that we had buildings insurance. The theory is that if the house burns down or similar, the bank will want the rest of their money back and the house buyer is unlikely to be able to afford that considering that they needed a mortgage in the first place.

It's basically the bank just outsourcing a lot of risk to the insurance company (via the house buyer).

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9. thaumasiotes ◴[17 Jan 25 15:56 UTC] No.42739098{5}[source]▶
Why would they go via the house buyer? They can insure the house themselves.
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10. ndsipa_pomu ◴[17 Jan 25 16:29 UTC] No.42739768{6}[source]▶
It's common for the house buyer to want extra insurance (e.g. contents) whereas the bank is only interested in the house as a sellable structure, so it makes sense for the buyer to take on the insurance requirement (it's also less paperwork for the bank).
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11. thaumasiotes ◴[17 Jan 25 21:46 UTC] No.42743599{7}[source]▶
Insuring the contents of a home is routinely done as an entirely separate matter from insuring the structure. All renters have to do it that way. You can do it that way in a rent-to-own scheme too.
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12. ndsipa_pomu ◴[17 Jan 25 23:30 UTC] No.42744342{8}[source]▶
We've got combined buildings and contents insurance, but yes they're often separate. My point is that owners want more from the building insurance than a bank cares about.