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Is the world becoming uninsurable?

(charleshughsmith.substack.com)
478 points spking | 6 comments | 17 Jan 25 00:32 UTC | HN request time: 0s | 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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chii ◴[17 Jan 25 05:26 UTC] No.42734376[source]▶
> unregulated insurance market; price gouging.

with sufficient competition, it is impossible to price gouge.

So if there is supposed price gouging, then there must be insufficient competition. Therefore, the source of the lack of competition would need to be removed (ostensibly, by gov't - such as increasing business loans so that new insurance companies can be started).

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kstenerud ◴[17 Jan 25 05:44 UTC] No.42734443[source]▶
Or, you need to be pragmatic, realize that you're not gods and won't create a perfect system that can't be exploited, and instead tackle the issue from multiple angles while revising your approach as the exploiters attack.

Don't let the perfect be the enemy of good enough.

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1. Panzer04 ◴[17 Jan 25 06:37 UTC] No.42734731[source]▶
What are you trying to say here?
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2. kstenerud ◴[17 Jan 25 06:58 UTC] No.42734838[source]▶
I'm saying that running a government is a lot like running a ship:

You can't just let the currents and tidal forces ("the invisible hand") run the show unconditionally because even though they can propel you great distances at very low cost, they'll eventually throw you upon the reefs.

And you can't just let the rowers and tillers (legislators & executive) run the show unconditionally because they'll end up exhausting themselves with little to show for it as they fight against the winds and currents when they should cooperate.

It's a balancing act that requires some science, some experience, some luck, and a steady hand - and a capable and honorable captain and crew who believe in the mission.

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3. Panzer04 ◴[17 Jan 25 07:07 UTC] No.42734878[source]▶
I still don't follow.

If I'm reading it right, and the prior context, we shouldn't allow private insurers to charge the prices they want for insurance?

What do you want us to do? Ultimately someone has to pay for the bad outcomes happening here - either that's homeowners in risky areas, insurance shareholders or the general taxpayer, depending on where you fall.

If you don't make the ultimate originators of the risk pay for it (people in risky areas) they won't stop doing the stupid thing and others will bear the cost. Arguably that is the greatest strength of the "free market" - directing the efforts of everyone in the same, positive, direction.

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4. kstenerud ◴[17 Jan 25 07:15 UTC] No.42734907{3}[source]▶
Because although in the recent LA case we're dealing with rich folks who could shoulder the increased burden, often it's the poor areas that are riskier, and where the people there have little choice over where they can live.

There's no universal solution. A "free market" approach will work in some areas, and fail spectacularly in others. Same goes for a full-on centralized control approach.

And in all cases, you also have the confounding factor of bad actors gaming the system - and your current tools may be insufficient to meet the challenge.

So you need a human guiding hand to make sure things don't go too far out of whack.

This isn't an either-or decision. Stability doesn't care about whose motives or approaches are more "pure".

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5. eric-hu ◴[17 Jan 25 07:43 UTC] No.42735029[source]▶
Where do we find an honorable captain in this day and age? And how do we get them into the captain's seat?
6. Panzer04 ◴[17 Jan 25 09:38 UTC] No.42735742{4}[source]▶
Agree to disagree.

The "human hand" guiding outcomes still needs to get it's resources from somewhere, presumably from government tax income. I disagree this will necessarily result in better global outcomes than the free market.

In cases where almost everyone agrees people should always have access to a service (healthcare) I think it does make sense to obligate everyone to pay. I don't think it makes sense in this specific case of wildfire insurance.

The free market here seems to be failing by your definition because it can't make money. To me that's it succeeding. It's demonstrating that it's underpriced, and people being unwilling to pay the necessary prices shows that they need to find somewhere else to live.

Amusingly enough, the lack of housing itself is another problem caused mostly by human-guided hands in government, not the free market. Enlightened despotism always sounds great when they agree with your perspectives, the reality is rarely so smooth.