Allstate becomes next major insurer to halt new policy sales in California

[usonian]

https://www.cbsnews.com/losangeles/news/allstate-becomes-next-major-insurer-to-halt-new-policy-sales-in-california/

Allstate, one of the nation's largest insurance companies, has joined State Farm in deciding to halt sales of property and casualty coverage to new customers in California, saying it's too pricey to underwrite policies in the state which has seen thousands of natural disasters in recent years.

Allstate quietly stopped issuing new policies in California months ago, but didn't announce the move until Friday. Allstate was the fourth-largest insurer in California, according to the most recent 2021 state data. It earned $4.3 billion in premiums that year and incurred $2.6 billion in losses.

"We paused new homeowners, condo and commercial insurance policies in California last year so we can continue to protect current customers," Allstate told CBS News in a statement Friday. "The cost to insure new home customers in California is far higher than the price they would pay for policies due to wildfires, higher costs for repairing homes, and higher reinsurance premiums."

...

State insurance officials said State Farm's decision doesn't mean residents will be uncovered, noting that about 115 other companies will still write policies in California.

[Tetrachloride]

1. San Andreas Fault for one. Weather. Insurance regulations.

[Xolodno]

6. Not quite....

No company covers earthquake insurance in California. It's all routed to the California Earthquake Authority.

[Tetrachloride]

11. It affects business in general. Construction costs, supply lines.

Stock market will definitely pay attention.

[Xolodno]

12. Are you kidding me?

I wasn't too far from the Ridgecrest earthquake and think only one old house caught fire due to a gas break (and that quake left a visible scar). In California, the ground is always moving, there is probably a 2 pointer somewhere in the state everyday. How is it managed? Simple, building codes. The last company I worked at in a high rise was designed to withstand a 7+ pointer and I was in it during a four pointer. Most large quakes now are just, "yeah, a bunch of stuff fell off the shelves and broke" and that's about it.

The most expensive earthquake, the Northridge quake (and I was around for that one as well) was the most expensive and wasn't even the San Adreas, it was the Pico. And it resulted in a boom of construction activity in the form of building, bridge, housing, etc. upgrades.

https://www.statista.com/statistics/276732/the-most-expensive-earthquakes-for-the-insurance-industry-in-the-united-states-since-1980/

If there is a place to worried about, its Washington with their fault lines and the New Madrid fault line in the Mid-West...they are not equipped or coded to withstand.

And my premise still stands, State Farm, All State, Travellers, Farmers, etc. won't have to shell out a penny during an earthquake loss.

[Tetrachloride]

14. I use the Kobe Earthquake of 1995 as my

example to study regarding California.


https://en.m.wikipedia.org/wiki/Great_Hanshin_earthquake



The New Madrid one is less than comforting.

[Xolodno]

23. I've been in the insurance industry for 23 years....

....five of those was in the Actuarial department. At my current company, I'm in the analytics area, but this company subcontracts the main actuarial functions, with that said, I do/oversee a lot of the in-house actuarial functions. I also have a few extra letters behind my name, but what do I know. I'll stop responding.

[NowISeetheLight]

16. CEA

CEA has enough assets to cover something like $19b of insured claims last time I looked at their website. They could cover the 94 Northridge or 89 San Francisco quakes fully. Since they don’t cover everyone, only the insured, and there are steep deductibles it’s different.

My CEA policy covers $550k for the house (structure) and cost me about $1800 last year. It is increasing yearly. The deductible is 20% so I’m still stuck with a huge bill. I figure at least it would pay off the mortgage so I wouldn’t have to file bankruptcy. I’d move and start over somewhere else.

[Xolodno]

22. True.

Its basically catastrophe coverage, but its better than no coverage. The likelihood you sustain a total loss is extremely rare. But in that case, I would think the Federal Gov would intervene and offer low interest loans/grants to cover that deductible. We have far less severe earthquakes than Florida has hurricanes.

[Marius25]

18. The San Andreas has nothing to do with insurance companies not issuing new policies

There hasn't been major Earthquake activity in awhile there that would trigger this reaction.

It's more likely due to wildfires and the recent wave of atmospheric rivers that caused widespread flooding.

[Tetrachloride]

20. I appreciate the relative risk of recent weather vs other events

Actuaries, either in-house or outside consultants, give advice. insurance executives then make decisions.

Businesses do not have unlimited capital and are beholden to stockholders.

If the businesses choose to invest outside of California, they probably have reasons and opportunities.

Actuaries are both historical (backwards) looking and futurists. Casualty insurance is the most difficult to calculate compared to life, health or pensions.

There’s a mountain of math. I only use text.

As mentioned above, building codes are the key regarding earthquakes. Far fewer codes have taken care of the environment. And plenty of people don’t care about environment.

Im surprised anyone replied.

[Zeitghost]

21. IIRC

Flood insurance is a separate policy and only a small % of homes in CA are susceptible to wildfire. I know in some areas the state has stepped in to supplement coverage in heavy fire areas.

This has more to do with regulation and construction costs in the state.

[Takket]

2. California but not Florida?

hasn't the hurricane losses in Florida been every bit as destructive in the last few years?

[senseandsensibility]

3. Good question

I'd like to know too.

[JI7]

8. I think some refuse to cover Florida also

[sinkingfeeling]

9. Homeowners have to pay a separate deductible for hurricane damage. And one must have

separate flood insurance.

https://www.cnn.com/2023/06/01/business/florida-homeowner-insurance-rates/index.html

Florida’s homeowner insurance rates are four times the national average. That’s not getting better anytime soon

[Marius25]

19. Most insurance companies have already left Florida

It's the worst state in the country for insurance.

[MOMFUDSKI]

4. Years ago here in Florida

Allstate and State Farm stopped writing property insurance. But stayed to write auto. State allowed this crap. Should've said "write it all or write nothing". But no. Money talks.

[jimfields33]

13. We'll see how California handles it before knocking Florida.

[roamer65]

5. Those 115 will start to pull out faster.

It piles the risk all onto them.

[Xolodno]

10. True, however.....

State Farm and Allstate don't insure much in the wildfire areas (I should know). However, the CDI has refused to allow rate hikes for over two years. And actuarial indications show that hikes are needed.

Other companies, Farmers, Travellers, USAA, etc. could look at this as an opportunity to gain market share....assuming their combined ratio's show profitability. I'm sure they will segment the best areas out.

The question will be, what happens when the states insurer of last resort files for a rate increase.....everyone will be watching as its a non-profit.

[Xolodno]

7. It's a lot more political.

State Farm made a claim about wildfires, I can tell you that's bullshit because they don't insure in most of the wildfire areas and what they do is very little...a joke if you will.

The issue is this, the CDI has not allowed a single rate hike in over two years, despite actuarial indications they are needed. So, State Farm and All State are playing a game of chicken with the CDI.

[ripcord]

15. Outrageous housing prices have many downsides

This is one.

[usonian]

17. I considered rent vs. buy.

Being 74, and divorced, I don't need a lot of space.

I rarely use the woodworking tools.

So, when you add up all the "little" costs of home ownership, they are a "rent", or "fixed cost" in the words of economics that sound the reverse of what they mean (i.e. as opposed to sunk cost, they are recurring) that are considerable.

I'll review the matter as I make my plans.