Climate Change? Nahhh ...

You could could offer insurance in California. ... It's not "uninsurable." Anything is insurable for a price commensurate with the acturial risk. Some people would be able to pay premiums and choose to, others wouldn't.

They (along with a lot of other insurers) have chosen to leave California entirely. State Farm recently tried to raise fire insurance rates. California's regulators forced them to CUT the rates. Things like this are why they can't operate in California. The state made it impossible for them.

State Farm cited a number of reasons for why it left, including the increase in construction costs in the state way outpacing inflation (which is true and has zero to do with climate change). The reason construction costs are a nightmare there, though, relative to other places is that the state has put so much red tape and costly rules and regulations into place that it has driven up the costs of homes. For example, new homes need to include things like solar panels, which drive up the costs of those homes.

The insurance companies can't operate in that kind of environment, so they left entirely. If it was just a climate change story, they could certainly operate there and charge insurance premiums that mitigate the risks and allow them to operate profitably. That's not possible because California has driven them out of there.

 

I didn't say anything lumber costs. ... which btw, are down to prepandemic levels right now. But lumber costs have nothing to do with this, and they certainly have nothing to do with the out of control construction costs in California, which way outpace inflation, so even if lumber was still as expensive as it had gotten, it wouldn't explain it. Construction costs are so out of control in California because of red tape and the barriers that state government has thrown in the way of businesses, and all of the additional costs they have mandated in order to complete construction. The state is reaping what it sowed.

 

Increases in insurance premiums in California are approved or denied by the state’s elected insurance commissioner, Ricardo Lara. Industry groups have long argued that Lara’s office has not allowed providers to set prices commensurate with the cost of doing business in fire-prone California.

“We have very inexpensive home insurance in California,” compared to other states, said Michael Wara, director of the climate and energy police program at the Stanford Woods Institute for the Environment. “But the thing is, five years ago, we realized ‘oh yeah, actually in California you can burn down 50,000 houses overnight.’”

Five years ago, we realized ‘oh yeah, actually in California you can burn down 50,000 houses overnight.’

The consequences of a continued drip-drip decline of insurers from California could be far more costly in the long run, warns Dan Dunmoyer, president of the California Building Industry.

It's the same old story. ... politicians / regulators try to price fix something. ... And the basic laws of supply and demand demonstrate the cost of that, namely that when you force / coerce prices for something lower than the market cost, the increased demand that spurs, reduces supply. In the case of California, you have wildfires which should be making insurance more expensive. ... but you have a state government of fuckwits that has an insurance commisioner trying a Soviet model, and so many rules and regulations and added costs being heaped on new construction that it makes it even more expensive for insurers on top of that.

So they are taking their ball and going home.

 

It is not a supply chain problem. ... New Construction is marketedly more expensive in California than it is anywhere else (where they would be dealing with the same supply chain issues if they existed) due to the business environment the state government has created.

Those insurance companies left because they had a state insurance commission that has the authority to tell them how much they are allowed to charge in premiums, and it set up an unprofitable framework for them.

On top of it, if they need to make good on a claim. ... it's way costlier for them in California (due to how much more construction costs are there) than it is anywhere else.