Is the world becoming uninsurable?

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.

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.

"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.

If the regulators have defined 'price gouging' as a price substantially below the break even mark, literally any profitable insurance product is implicitly believed by them to be price gouging. The US does a weird thing where "insurance" no longer means pooling risk but some sort of transfer payment welfare system. If they're going to define "price gouging" as profitable activity it is hard to see how the economy is going to function.

Allowing insurers to make a profit and run a business without interference is going to be cheaper - and in most instances better - than whatever the politicians are trying to build here. If you get rid of all the mandatory-this and price-gouging-thats then to stay in business insurers have sell products that people want to buy at a competitive yet sustainable price. It works for food, it'd work here too.

The math of insurance suggests that, if it needs to be widely carried (either due to things like mortgage requirements, or the simple realization most people don't have enough resources to absorb a major catastrophe themselves), the most economical way to go is to have a single risk pool that's as broad and diverse as possible, so it can swallow a large clustered crisis more easily. Yes, this is a bit of robbing Peter to pay Paul.

I always found it funny when insurance marketing talks about "personalized rates", when the goal is to DE-PERSONALIZE the risk. If you have 10,000 customers in Los Angeles, and 5 million elsewhere, you can either isolate the LA customers and charge them the "real" price of the risk, which will be unviable as a business and probably politically touchy too, or you can include them in the broad pool, and the people with a full-cinderblock home in a non-flammable state pay $20 more a year so the entire endeavour can work.

The concept probably works better if you have some concept of social cohesion to lean on-- you might not get the best possible outcome personally, but the system itself is more robust for everyone.

> If you have 10,000 customers in Los Angeles, and 5 million elsewhere, you can either isolate the LA customers and charge them the "real" price

That's the only way.

> which will be unviable as a business and probably politically touchy too

Why would it be? If you live in Los Angeles - doesn't mean you don't need insurance (even if it several times the cost of insurance in the safer areas).

> or you can include them in the broad pool

No, you can't. Your competitor who doesn't do this will offer cheaper insurance - because they doesn't distribute high risk of small group to everybody else.

> the people with a full-cinderblock home in a non-flammable state pay $20 more a year so the entire endeavour can work.

Why would they do that? 20 bucks is 20 bucks.

> The concept probably works better if you have some concept of social cohesion to lean on

You mean if you with totalitarian governance deprive people of the ability to choose? Yeah, that could work. I mean, that's how the gulags were justified.

I'm trying to understand how what you're suggesting is different from mandating everyone just get a personal savings account, where they must pay some specified minimum calculated to cover them in the event of a loss of their personal property?

Are you saying that we should only pool risk between people in the same risk bucket?

How do you aim to determine the resolution of that risk? Not to mention calculating it accurately?

> Are you saying that we should only pool risk between people in the same risk bucket?

People should be free to make that choice even though it increases net costs for higher-risk or less-affluent individuals.

> How do you aim to determine the resolution of that risk? Not to mention calculating it accurately?

By allowing private actuaries to make these pricing decisions: skilled organizations will succeed, others will fail.

I'm trying to work out how what you're describing works, first I have to understand you before I can form an opinion on it :)...

Ok, I get how you want to value risk, independent actuaries. I suppose, there's some bias there as insurers might lean on them to adjust the risk to be more favourable to them and as they'll be repeat business, they're likely to comply, but let's assume we find some really honest ones.

So given say a pool of people with similar risk profiles, say young professionals in high earning careers, and you calculate that they're effective risk is the same so you pool them together.

Now, what do you believe an insurer would insure them against? And of the things, what would not take them out of the pool they've been placed in and put them into a different, perhaps smaller pool?