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Is the world becoming uninsurable?

(charleshughsmith.substack.com)
478 points spking | 4 comments | 17 Jan 25 00:32 UTC | HN request time: 0s | source
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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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_tariky ◴[17 Jan 25 06:24 UTC] No.42734644[source]▶
In Yugoslavia, in 1969, one of the biggest earthquakes occurred, destroying several cities. After that, the country’s leaders decided to change building codes. Even today, although Yugoslavia no longer exists, the countries that adopted those codes have homes capable of withstanding earthquakes up to 7.5 on the Richter scale.

My main point is that if we face major natural disasters, we need to take action to mitigate their impact in the future. As a foreigner, it seems to me that Americans prioritize building cheap homes over constructing better and more resilient ones.

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Panzer04 ◴[17 Jan 25 06:40 UTC] No.42734751[source]▶
Why bother building a better home when it's cheaper to buy insurance and rebuild later?

This is why prices are important - sometimes it's sensible to build cheaper houses without these safeties if the risk isn't there, but if the risk does exist then it needs to be priced right to provide that incentive.

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miohtama ◴[17 Jan 25 07:44 UTC] No.42735032[source]▶
Maybe be there is no longer "cheap" and that's the issue
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fishstock25 ◴[17 Jan 25 09:27 UTC] No.42735664[source]▶
I don't understand the downvote. I think this hit the nail on its head.

People whine about insurances pulling out. All they want is for somebody else to pay for their risk. It's their choice to live in that area, they should bear the consequences. It's not like it is or has ever been a secret. Climate change is known for decades now. Many people just chose not to "believe" in it. Well, their choice, but now that sh* hits the fan, they shouldn't come whine that everything gets sprayed with poo.

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pestaa ◴[17 Jan 25 11:28 UTC] No.42736431[source]▶
But this cuts both ways. The insurers chose to provide their services in the area for the amount of money agreed upon. If anyone was more aware of the risks and probabilities, it's them.

Why do they get to pull out now when it's time to hold their end of the contract?

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fishstock25 ◴[17 Jan 25 11:40 UTC] No.42736511[source]▶
That depends on what you mean with "pull out". Typically you pay a premium and that means you are insured for a certain period. A year or so.

Everybody who is insured at the moment of course needs to be paid by the insurance under the terms they had agreed to. The insurances should not be allowed to "pull out" of this responsibility.

But what about the next year? If no insurance wants to offer you another term, especially not for those same conditions, then it's their choice to "pull out" in that sense.

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1. andrewaylett ◴[17 Jan 25 12:43 UTC] No.42736947[source]▶
On the other hand, suddenly not offering cover at all is a problem for people who have established interests in a property.

I can see an argument for not writing new policies in an area. But I can also make an argument for allowing existing policyholders to renew -- maybe not at the previous rate, but at an appropriate rate for the risk.

As a matter of public policy, we ought to match the risk put on a homeowner with a mortgage by the bank with the risk assumed by the insurer when the homeowner pays their policies. Not let the insurance company lay the risk on the homeowner if they notice the risk has gone up before the loss is realised.

Alternatively, we need to start treating buildings insurance more like (UK) life cover: I took out decreasing life insurance when I took out my mortgage, it'll pay off the mortgage if I die. The amount of cover goes down every year to roughly match me paying off my mortgage. No matter what happens to my health in the meantime, if I keep paying the premiums then I keep the cover -- even if I wouldn't qualify for new cover.

Or maybe we need to say that if an insurance company declines to renew because they think the risk has risen too much, the customer should be allowed to claim on the expiring policy even if the house is still standing, because it's obviously worthless, and it's obviously due to a risk that was covered by the policy.

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2. Panzer04 ◴[17 Jan 25 14:30 UTC] No.42737857[source]▶
If you want a longer reinsurance term, it needed to be agreed to upfront. I'd guess insurance companies are well aware of the risks of writing long-term policies and so don't usually offer them. That being said, your comparison to term life insurance is quite apt - I wonder if such insurance policies actually exist. I would guess they'd cost more than a yearly renewing policy, but who knows.

Your other proposals as extensions to yearly terms certainly go too far. Annual renewal policies are commonplace, and it should be well understood that there's no obligation on any party to continue it.

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3. andrewaylett ◴[17 Jan 25 17:33 UTC] No.42740886[source]▶
Oh, definitely. At least not without a lot of discussion around how much the extra insurance would have cost. I'm not in a position to implement it either :).

If we're going to have state intervention though (and it seems at least under suggestion, I've no idea how seriously, in CA) then rather than an insurer of last resort, we (or rather they) should consider what they actually want from their insurance.

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4. MichaelZuo ◴[17 Jan 25 18:52 UTC] No.42741903{3}[source]▶
There are specialty insurance companies that will underwrite almost anything, for any duration, for a high enough fee.

But if the state regulator sets a maximum cap they wouldn’t be allowed to…