Homeowners insurance is pricing people out in disaster-prone cities

Home owners in low-risk regions like upstate NY actually have to subsidize the solvency of insurers offering coverage in extreme-risk regions like Florida and the south.

Everyone's home insurance premiums should be lower than they actually are. Except they're not, because we have to pay to offset the cost of all the people rebuilding their houses on the Florida coast every few years.

I cant say I understand this, to me it seems like if you know the averages of claims across time will be $X, then you just sell the premium for >$X . Like it could be seemingly absurd, like if you expect to replace a house every 10 years, then you do annual premium >= ($REPLACEMENT/10) . (all averaged across the pool)

My previous job was at an insurance company in part of the country that is not disaster prone. Even then, once in a decade hailstorms would essentially wipe out reserves and necessitate reinsurance. It would take probably 5 years to recover from the effects. You always had your fingers crossed during hail season that you'd finish the year in a position to get some bonuses. And this was a mutual insurance company, so no quarterly shareholder pressure, just long-term sustainability goals. That company would never dare expand into Florida.

Here's a white paper talking about the history of FL specifically: https://floridapolicyproject.com/wp-content/uploads/2024/05/...

You can pull the annual reports for any publicly traded insurance company if you are curious about the numbers.

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Alternatively maybe this could be a good case for insurance funding part of the physical infrastructure to protect the houses e.g. sea walls.

I would argue it should happen after the first disaster. The government has subsidized houses being built in known flood paths for too long imo. If you are in a known zone and had a major loss. You don’t get money to rebuild but instead money to build elsewhere.

They have been doing a version of this for a while in some areas. The homeowner gets a bailout, but the money comes with rebuild requirements (often lifting/lofting the building above a 100 year flood level). If they are met, your property remains insurable and eligible for future help. Conversely, the owner can take the money and keep or sell the land.

The problem with this method is that it tends to gentrify the region. Wealthier people can afford to live elsewhere during the repairs, but people living paycheck to paycheck are often forced to take the money and sell the land.

What is a "three strikes" for if the cost of periodic rebuilding is financed by unsubsidized insurance?

"Rezoning" is a needless control that then prevents future development that might be impervious to whatever disasters caused the periodic rebuilding before.

If they don't have insurance, hopefully they will leave and less new people will build houses on uninsurable land. At least some of those people will then avoid injury and death in the storms?

I read it as less insurance coverage, less people buying and building. There is always some % of folks that stick around. Over the medium and long term that probably equates to some number of lives.

... anyone got stats on what happens to mortality rates during such an evacuation?

How exactly is it working? Florida's population keeps growing no matter what. Highest point in the whole state is a tiny hill.

Those families are suffering the effects of their choices. It could be that they rationally prefer the risk of devastation or the higher insurance rate, than living somewhere else. We should allow them the freedom to choose, without also subsidizing the choice.

You need to spend public money in this. Not just to save the banks.

People had decades of warning of this happening.

Any assistance on moving out is a very bad idea. There are rising insurance costs, slowly, people have time to respond.

People in Florida did not even advocate for mitigations that would have prevented the rising costs, when they were given decades of warning.

Protecting home values above all else is very bad for society. Unless renters are given the same protection and massive handouts, it's a very unfair system

> you support the people who get left behind.

Yes, you support the people left behind with the profits of the people who are ahead.

The US voters just hate that type of equality. And as a result the vindication is merited - that is an inherent feature of non-merit based inequal societies, just the the US is.

How is that a thorny issue? What got us into this housing crisis is exactly the mindset you're displaying here: once you get yours, it's yours for the rest of time and anyone who tries to change that should be voted out.

Why do these home owners deserve more support? because what? They own some property? (Or at least the bank does)

I don’t feel sorry for these people. They made choice and the evidence this was inevitable was in front of them for 10 years at least. They don’t deserve special consideration.

Considering how we treat things like job loss, which is a good allegory here as it has all the same features of circumstance, why do they deserve special considerations that aren’t extended to other groups?

Maybe that's a thing the first few times this happens. But it won't be happening just once or twice.

Using public funding to keep on bailing people out is going to get expensive for everyone and won't be that popular the more often it happens. Expensive bailouts make them a natural cutting target.

The way this works out financially is that insurance prices go first. Then banks do the obvious thing which is to be reluctant to provide mortgages on property likely to suffer damage within the mortgage period. That probably is already a thing. That in turn makes existing property a harder sell and affects property prices negatively. And as a result, some property mortgages might be under water before the property is under water. A natural disaster would wipe out the uninsured property and then the mortgage. Any banks with lots of exposure to that might be facing issues if that happens.

Any public funding used mitigate that is more likely to go to these banks than the people affected. Which won't be popular.

Easy to spell this out, because minus the root cause (natural disasters), this is more or less what happened around 2009 when banks had to be bailed out because of the subprime loans. Loads of foreclosures and misery. But it was the banks that got the bailout.

The predictable end result is that after a few disasters, certain areas just won't be rebuilt again because nobody is willing to fund that. Some people might move out before the worst happens. Banks and insurers will be the first to move out. Probably sooner rather than later. That probably won't be great for people that remain since investments in public infrastructure and maintenance of things like roads will also drop off for the same reason.

Unfortunately, unless we install some kind of back-stop to facilitate people moving without ruining themselves (since the median American has a little under half their net worth tied up in their home), this will be a messy transition. You can't sell those houses to afford to move elsewhere since the whole problem is they can't safely be houses anymore (as the sage said, "Sell them to who, Ben? F**ing Aquaman?").

We will all pay the tab to restructure society to avoid this climate change effect, or we won't and we can expect the people who get screwed to not be particularly invested in being part of this society.

> moving those families inland.

Inland from the coast of Florida is a swamp. Is that really any better? I know the orange man is a fan of draining swamps, but I'm pretty sure that's not what was meant. People don't live in deserts. People just need to accept that the opposite of no water can be just as in hospitable

I would agree, but there is one issue.

Where will people move, without a huge amount of homes being built, where will they move to ?

If the move, even with their current insurance rate, their payments/rent will probably cost much more then they are paying now. Especially if their home is paid off.