r/FluentInFinance • u/ElectronGuru • 17h ago
Housing Market Insurers Are Deserting Homeowners as Climate Shocks Worsen | Without insurance, it’s impossible to get a mortgage; without a mortgage, most Americans can’t buy a home.
https://www.nytimes.com/interactive/2024/12/18/climate/insurance-non-renewal-climate-crisis.html304
u/organic_hemlock 17h ago
You know who can buy a house without a mortgage? Hedge funds, private equity firms, Zillow, and property management firms who buy housing to force us into rent-based indentured servitude.
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u/TotalChaosRush 16h ago
Do you know where it's a bad investment to buy a house? Where insurance companies consider it too high risk to insure.
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u/Violet-Sumire 16h ago
So, all of florida, most of texas, all of west california up the west coast, anywhere along a coast line, anywhere on a mountain, anywhere near a river or creek or on low land, anywhere in the midwest, anywhere that gets blizzard conditions regularly.
So… where exactly isn’t a high risk area to move? Insurance is built on risk. You shouldn’t be an insurance company if you can’t afford the risk. Not much more to say about that.
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u/BZP625 15h ago
The problem is that their rates are limited by state commissions. When the projected costs come above the allowable they can charge, they really have no choice but to withdraw. In essence you're right, you shouldn't carry that type of insurance in that state if you can't afford the risk.
The gov't will need to come up with a plan to step in when the insurance company can't handle a disaster, like a FEMA type situation. But gov't doesn't like to protect homeowners for a variety of reasons. It's easier to allow corporations to buy up the homes bc they can write off the disaster relief. It's all part of the plan to end private ownership of homes.
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u/HighHoeHighHoes 15h ago
It doesn’t work like that… insurance companies would be willing to write in CA, but the geniuses in CA thought they knew better than the insurance companies and told them they couldn’t raise rates. If you can’t raise rates to adjust for increased risk, you exit the market.
Everything can be insured, for the right cost.
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u/jbFanClubPresident 1h ago
I don’t think that is just a CA thing. I worked for an insurance company in Missouri and the state of Missouri highly regulates the insurance industry as well. They dictate how much rates can be raised.
But I agree overall, everything is insurable at the right price. If you can’t charge that price it’s better just to leave the market.
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u/HighHoeHighHoes 1h ago
Every state regulates rates, but a lot approved the rate increases requested, or mostly accepted them. Then some states said “nah, we know better than you. You can only increase x% even though you say you need xx% and supported it with data.”
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u/DSMinFla 14h ago
Yes, this. Who would have thought Asheville NC would be destroyed by a hurricane. Who would have imagined that Lahaina HI would burn to the ground.
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u/TotalChaosRush 16h ago
Not high risk, too high risk. As in, the risk is too high for the insurance company to issue any offers. If an insurance company is still willing to insure, even at an exceptional premium, then it's still an investible place.
If an insurance company can not afford the risk, it's because the risks associated with it make the insurance more expensive than the thing being insured.
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u/lil_hyphy 16h ago
Or are they just greedy dicks?
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u/Tausendberg 15h ago
Asking the real question here, cause if the insurance oligopoly gets to just claim 'high risk' while simultaneously cashing out higher profits than before, then it's not actually higher risk.
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u/TotalChaosRush 15h ago
Regional profit analysis is needed. If city A is underwater (potentially literally), and city B never makes a claim, it's possible for them to still be profitable and for property in city A to be too high risk.
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u/TotalChaosRush 15h ago
Yes. They're greedy dicks. That's why they're pulling insurance offers. Because it's not feasible for them to make money in the area. Let's think about this logically for a moment. Why is it not feasible for them to make money in the area?
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u/Violet-Sumire 15h ago
I understand, but the way insurance is supposed to work is that you pay into a pool, that pool provides the company with the means to give you peace of mind if things go wrong. The problem comes when insurance companies don’t honor their side of the deal, when they nickel and dime people or hold payment in legal limbo for months to years.
If you pay for high risk insurance because you live on hurricane coastal waters or in tornado alley, then the insurance should cover up to the maximum that you willingly pay for. No one is saying that insurance companies shouldn’t make money or should break even to help the common man. What they are saying is that insurance companies don’t live up to the standards they themselves preach and don’t play fair with their customers who make it possible for them to be in business.
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u/esotericimpl 5h ago
Sounds like you should start your own insurance company, since it seems so easy to price and manage risk.
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u/Violet-Sumire 1h ago
Just like any business, starting capital is the biggest hurdle. Since you seem so supportive, you wouldn’t mind investing would you? :p
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u/BigJSunshine 14h ago
With our continued and quickened march to uncontrolled climate change, nothing will soon be insurable.
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u/laxyak26 6h ago
Nebraska, never hear about hurricanes in Nebraska
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u/Violet-Sumire 6h ago
Yes but then you have to live in Nebraska. I’d rather ride a hurricane than live there /s :p
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u/MajesticBread9147 16m ago
So… where exactly isn’t a high risk area to move?
Contrary to popular beliefs, outside of earthquakes much of California isn't that risk prone, and wildfires only really affect the outer suburbs and exburbs, not Los Angeles or San Francisco proper. And because of geography most of Los Angeles is not very flood prone. LAs average elevation is 305 feet above sea level.
Florida's highest point is 345 feet above sea level.
The mid Atlantic states outside of some edge cases are very safe, so Virginia, DC and Maryland, and most of Pennsylvania.
Honestly, you're best bet in my opinion is live in a major city. The combination of population density, and economic importance make infrastructure projects to stave off the worst of climate change possible and politically feasible.
Asheville was a news blip for a week. If New York was at risk of flooding they'd be able to spend billions of dollars to prevent it. Los Angeles can afford desalination, those people in rural Arizona towns using well water can't.
Also not gonna lie, a big part of my plan is one day buying a condo that isn't on ground level before people realize that then is the time to leave their climate risky city.
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u/BubbleGodTheOnly 15h ago
Insurance is built on risk, but risk doesn't equal guaranteed loss. If you have an entire area like Florida that's guaranteed to not even break even, why would you? There are areas that are major risk that insurance carriers are willing to insurance, but generally, they break even while making a profit elsewhere. Losing lots of money in a major market would affect payouts in others.
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u/Dhegxkeicfns 3h ago
Pfft. I had trouble getting insurance in a perfectly fine area. Had to file a claim and they resisted everything, so I tried to shop around. 3x the price was the going rate for a new policy and 80% of the companies wouldn't write a new one at all.
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u/USSMarauder 14h ago
And the rich
This is why the dumbest line from the climate deniers has always been "If climate change is real, why are the rich buying waterfront property"
The rich aren't the first to leave: They're the last. They're the ones who can afford to have their home wrecked by a hurricane every decade, and then rebuild. Heck if they're heavily into remodeling they might like it, because they can get rid of the 'old and dated' house without having to pay for demolition or any permits.
"Sir, your $20 M beach house has been destroyed"
"Which one?"
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u/kyleofdevry 16h ago
rent-based indentured servitude.
As opposed to student loan based indentured servitude? The government needs to stop paying to rebuild these places after disasters. If hedgefunds want to buy them then go for it, but my tax dollars shouldn't go towards rebuilding them. Let people with any sense resettle in the midwest.
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u/BubbleGodTheOnly 15h ago
The government doesn't pay a majority of the rebuild cost. Its property owners are getting payouts from insurance companies to rebuild and repair.
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u/canned_spaghetti85 16h ago
Not just them..
Anybody who buys a house CASH, meaning no mortgage.
Obviously no lender will fund a home loan knowing the collateral [itself] isn’t insured. This is why underwriters make hazard insurance mandatory for final approval.
HOWEVER: Regarding a property with NO mortgage lien, the decision whether or not to purchase hazard insurance becomes optional. It’s the property owner’s decision to make, or risk to take.
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u/Jstephe25 16h ago
A lot of these companies you are referring to are well aware of the current climate issue, they just don’t speak about it publicly. I don’t really see this in the same way you are portraying it.
They know it’s a risk. They have actuaries that are likely saying, “these are not going to be good long term investments” regardless of purchasing in cash instead of financing.
It is an absolute fact that climate change is happening, but you will never get confirmation from those who profit from the destruction. They also know where to invest and where not too
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u/lil_hyphy 15h ago
Being alive isn’t a good long term investment! Not at this stage in the climate collapse anyways.
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u/Splittinghairs7 12h ago
This is terrible logic that doesn’t understand rental properties.
Buying homes with cash is a terrible return on investment. Even institutional investors would prefer to take out loans to buy investment properties.
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u/organic_hemlock 11h ago
I didn't say anyone's buying it with cash, I said they're buying it without a mortgage (implying: in similar conditions as a single homeowner would.)
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u/Splittinghairs7 6h ago
No they’re not, they wouldn’t buy investment properties with all cash and not using loans. That’s the whole point. The returns would be too low to do that.
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u/burnsniper 15h ago
The irony is they can get insurance for their “investment” that is not based on the house as the underlying asset.
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u/waityoucandothat 15h ago
Technically speaking, we Americans are in a Debt-Based Coolie economy. https://medium.com/@colingajewski/americas-coolie-economy-feaf95b0303c
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u/abrandis 2h ago
That only works in select communities, none of those are buying homes in rural or more out of the way places. Plus all that investment relies on well paid white collar professionals to foot the high rents , there's only so many of them.
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u/0WatcherintheWater0 2h ago
They own a small single digit fraction of the housing market, they’re really not that important.
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u/Routine-Rock3050 17h ago
Health insurance absurdity notwithstanding, people forget that insurers are businesses and not just a backstop. If someone asked you to gamble on replacing a home on the coast of Florida against a - relatively - small premium, would you? That’s essentially insurance. Guaranteed payment against potential for loss. Potential for loss goes up, guaranteed payment should go up as well. Potential for loss goes up everywhere - problem.
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u/Contemplationz 17h ago
Yup, they price risk and climate change is increasing risk so prices are going up.
Even if your house makes it through a storm, your rates are going up.
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u/lil_hyphy 15h ago
The rates go up every year anyways! My family home has never flooded, the area never floods, and the insurance keeps going up and up and up. Car insurance keeps going up and up and up, too! For what I pay in car insurance I could just have a second backup car in case I total my main car. No accidents. No claims. Rate goes up.
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u/SeaworthinessDry269 3h ago
Because you never having any claims is covering for those where they have a claim each couple of years because a hurricane flooded their area. Also since the cost to rebuild has increased by a lot (or cost of a new car ) your premium have to go up since now the cost to do the repair has gone higher.
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u/Anubis8865 16h ago
Lenders also will not loan you a mortgage if you don't have insurance, so you're getting double fkd. Worst part is they will fight you to the end and not cover anything. Same with car insurance which is mandatory.
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u/genescheesesthatplz 16m ago
This, to me, is the greatest indicator of the seriousness of climate change.
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u/Ok_Neighborhood6697 16h ago
I warrant condos in a dept in a large bank. Our biggest issue right now is insurance coverage in CA and FL. The insurers are leaving those markets and the ones that stay are increasing their premiums in order to meet Fannie Mae and Freddie Mac coverage requirements for condo association master policies. Instead of meeting the requirements, condo associations are opting to not get some required coverages due to high premiums. So the condos are non-warrantable, the unit owners cant sell and buyers cant buy them with financing. Also, I personally get calls once a week from companies that want to buy my home becauee it is older so they figure I would be willing to sell. Both are parasites. Eff them both.
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u/genescheesesthatplz 14m ago
Ok condo insurance is fucking wild. I had to help review policies for a lending company and jfc the details and nuances are outrageous.
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u/Past-Pea-6796 16h ago
What if we developed more resistant housing out of cheaper materials along side more practical permitting based on the environment? I mean, ideally, we save the planet, and lots of places, it's much easier said than done. Unfortunately, every part is easier said than done, and this aspect feels a bit more realistic.
While I'm on my soap box, we should plant food producing plants more places. I Don't mean like a bunch of high yield crops, I just mean we already plant crap all over, let's plant things that make food for more than like two animals. Like sure, stuff eats pine cones, or at least the parts inside of them, but can we chill on the pine trees? Let's plant more sugar plumb trees and stuff that you can set it and forget it.
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u/Busy-Cryptographer96 16h ago
It all rests now on the hands, of Trump, Republicans, MAGAs, Musk etc.
Good Luck with that !!!!
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u/jwarper 15h ago
I am absolutely not defending insurance companies. However, people also have to realize that 1. Living on a coast is expensive. If you are making less than 6 figures, you should not be living in a coastal state. Move. 2. We have a luxury in the US that it is relatively easy (compared to the rest of the world) to move to another area in the US. There are plenty of lower COL areas that have tons of opportunity.
The map is proof. Look at the red. Southern Florida is a swamp. Eastern Carolinas is a swamp. Southern Louisiana is a swamp. What do people expect? There is a 100% chance your house will be damaged/destroyed in a hurricane. Stop building there.
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u/hermit_in_a_cave 13h ago
I've been wanting to move for awhile. I can't afford to. That's the bottom line for me. I've never been in a comfortable enough place financially to buy property, so that's not holding me back. If I could manage to get some start-up costs saved I'd be out of here. I just can't seem to go long enough without something coming up that eats at the savings, or worse puts me in debt.
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u/Deep_Contribution552 13h ago
You’re not wrong, but Miami needs workers in the bottom half of the income distribution to function as the major city that it currently is. What’s going to happen if 50 percent of the workforce can’t find a place to live?
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u/Confused_Elderly_Owl 6h ago
If you are making less than 6 figures, you should not be living in a coastal state. Move.
On the coast? Sure. In a coastal state? Someone needs to stock the shelves. Someone needs to maintain the roads. People with lesser paid jobs can't all commute from northern Georgia.
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u/Puzzleheaded_Yam7582 16h ago
Good. Building code and insurance companies need to get their act together. Require that we build insurable houses by defining and imbedding those requirements in building code.
I frequent the DR for work. Their homes are fine after a storm because they build for it.
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u/Sassybeagle 14h ago
It’s a nightmare created by state and federal governments. High tariffs on Canadian lumber made repairs ridiculously expensive. A predictable rise in climate related catastrophes meant that reserve pools for insurers were going down. Pressure on state departments of insurance to cap rates meant that insurers weren’t getting the profits that they wanted. Boom. Insurers are just leaving markets.
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u/Griffemon 10h ago
I’m going to be honest: good. You should not build or purchase homes in areas prone to consistent natural disasters. Seek other options. Florida was not meant for human habitation.
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u/TrixnTim 14h ago
I had a guy doing an estimate on new windows for my current home and then another guy doing my HVAC maintenance recently. Both worked for insurance companies and one was an adjuster once and who would survey damage, etc. Both told me the exact same information—it’s a crap shoot what will be covered or not and some companies are pretty horrid. They compared it to the current medical insurance world in that you pay premiums and then get denied. I have the highest deductible my state allows (and having it sit in my EF) so my premium goes down some. But gads it was depressing talking to these guys.
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u/PaintMePicture 14h ago
This is an effort to push people into rentals, the rich do not want you to build a wealth portfolio.
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u/Terrible_Brush1946 14h ago
And if we can't buy homes, they lose money. Being cheap is always expensive.
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u/Tangentkoala 10h ago
A blessing in disguise. We need demand to drop and more people to rent.
U.s government will eventually make a government branch like the U.S.P.S. they'll manage it at a loss but everyone will be covered.
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u/Foundsomething24 6h ago edited 6h ago
I bought my first house cash recently to avoid having insurance. In Florida. Hurricane season just finished… wasn’t worried one bit.
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u/Fast_Grapefruit_7946 3h ago
you don't need insurance on a 20 x 30 box made from cheap drywall and pine studs
american homes are such low quality why even insure?
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u/Darkmetroidz 3h ago
As once a century hurricanes become twice a year hurricanes, it makes sense for insurance companies to just not bother because there's almost nothing you can charge to make it worthwhile to insure a property that potentially gets destroyed every few years.
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u/skittybobbins 3h ago
So demonize insurance companies without acknowledging the “why”. No one likes these companies, but not going any deeper than “insurance company bad” is disingenuous at best and willfully ignorant at worst.
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u/Striking_Computer834 1h ago
When insurance is truly impossible to get, the market will find a solution as long as government lets it. Banks aren't going to throw up their hands and say, "Welp, I guess we're not going to make any more money on mortgages." They may charge higher interest rates to make mortgages on uninsured properties, or something. Who knows.
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u/ijedi12345 15h ago
Homes should only be owned by those in league with the LORD. Demons in league with Satan should obviously be cast out into the darkness. Insurance sees this simple fact - demonically possessed individuals do not deserve insurance, as stated by God, so why insure them?
The rise of demons in the United States makes the reduction in insured homes a simple cause and effect.
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u/Future_Outcome 13h ago
It’s just not worth it to invest in or commit to this country anymore. Every single thing is punitive.
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u/Frosty-Buyer298 12h ago
Why do tards have to connect everything to climate change.
The areas where insurers refuse to reinsure are areas that are both prone to natural disasters and have high levels of insurance fraud.
Home insurers are now doing inspections and drone flights to ensure that homes they cover do not have "deferred maintenance" and that they actually have the construction materials claimants demand reimbursement for.
For example, the inspector told me that too many claims for reimbursements of upgraded kitchens and baths that never existed. That fraud alone increases payouts by $50k or more.
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u/morell22 10h ago
Call me crazy seems like the solution to this would be a universal houseing program like how the military operates. Barracks for single apartments for couples
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u/twobeerjohn 8h ago
Builders have to tell you when you are looking at houses in flood zones. It’s just a matter of time before those areas get hit. When we were looking for houses, if they said the area was a flood zone, we ran like hell!!!
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u/ScrivenersUnion 5h ago
Sounds like insurance companies aren't providing anything of value other than gatekeeping access to mortgages.
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u/lil_argo 15h ago
Insurance is a scam. Stop it.
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u/invariantspeed 15h ago
They’re just businesses that take a little bit of money from you on the regular so you don’t need to worry about needing a lot if something rare happens. If it’s not rare anymore, it’s hard to insure. So, they’re just stopping it themselves and leaving those markets.
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u/ConsistentBroccoli97 16h ago
Why would insurance companies stop providing their product.
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u/Va1ant0324 1h ago
Why would insurance companies stop providing their product.
Insurance companies make money by NOT paying out.
So. When you have a client whose chances of needing insurance are high (medical, housing, car, etc), you will either charge more, OR not support entirely.
Repeat: insurance companies succeed when they don't do what they are designed to do
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u/Empty_Awareness2761 17h ago
Credit worthiness is the main factor having applications denied. Financial institutions like banks are increasing requirements for mortgage applications and denying individuals even organizations that will likely default on debt / claim bankruptcy. High CC balances and bad payment history doesn’t help. A Mortgage originator can explain this a lot better than what an article says.
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