State Farm Halts Home Insurance in California - WSJ

[Al3x Lee]

So when are we going to stop treating buildings like they're special and more like a vehicle or piece of equipment?

Give new builds replacement cost for the first 5 years, then everything is ACV. Don't want to throw a new roof on your house after 30-40 years? No problem. Don't want to maintain your commercial premises? Also not a problem... So long as you're okay with receiving the ACV claim settlement.

Maybe we could even kill two birds with one stone. The people who buy up hoards of property and become slum lords will actually have to learn to deal with the risk of their real property instead of just transferring it all to insurers.

Lenders might also think twice before giving out money like candy

 

[AZDave]

But insureds demand more and policy's are providing more, and they want their rates to be lower all at the same time.!

I had a claim denied this week. It was a commercial claim, building built in the 70's, sewer line collapsed. No damage or backup, just an old 50 year old line that needs replacing. Insured emails: hey Dave, why don't I have coverage for underground utilities? My homeowners carrier offers it, why doesn't my business carrier offer it?

Ugh.

 

[Al3x Lee]

"hey Dave, why don't I have coverage for underground utilities? My homeowners carrier offers it, why doesn't my business carrier offer it?"

Exactly my point for moving everything to ACV. It would make these conversations a hell of a lot easier. Not to mention property premiums would be slashed and carriers wouldn't be fleeing California at record rates

 

[myfakename]

So when are we going to stop treating buildings like they're special and more like a vehicle or piece of equipment?

Give new builds replacement cost for the first 5 years, then everything is ACV. Don't want to throw a new roof on your house after 30-40 years? No problem. Don't want to maintain your commercial premises? Also not a problem... So long as you're okay with receiving the ACV claim settlement.

Maybe we could even kill two birds with one stone. The people who buy up hoards of property and become slum lords will actually have to learn to deal with the risk of their real property instead of just transferring it all to insurers.

Lenders might also think twice before giving out money like candy

I agree with roofs going to ACV, and i think the market is headed there eventually.

BUT saying ACV on entire structures after 5 years is a little silly. The lifespan of a structure is much greater than that of a vehicle.

 

[Al3x Lee]

I agree with roofs going to ACV, and i think the market is headed there eventually.

BUT saying ACV on entire structures after 5 years is a little silly. The lifespan of a structure is much greater than that of a vehicle.

Really? That doesn't imply that a depreciation schedule for buildings can't exceed that of vehicles. In fact, it's entirely possible to establish an agreed value or stated amount, similar to what is done for vehicles or equipment. Suppose you renovate a building after 30 years; you can present that case to the underwriter and, eventually, the claims adjuster. Let me give you an example: the Delorean in my profile picture, which is 42 years old, is insured for $55,000 based on an agreed value. Just because something is old doesn't mean you can't obtain a proper valuation for it, as long as the insurance company agrees with your assessment.

What seems 'silly' to me is paying for replacement cost on 50-year-old buildings that retain their original features. It's nonsensical that my homeowners insurance premium increased by 25% year over year for my house built in 1993, despite having new siding, an 8-year-old roof, renovated kitchen and bathrooms from 5 years ago, a brand new water heater and HVAC system, and significant plumbing and electrical upgrades. Meanwhile, my neighbor's house, built the same year, remains in its original state with peeling paint, dry rot, missing shingles, and more. Yet, they would probably receive a similar payout if both houses were to be destroyed.

Insurers shouldn't bear the risk of poor property investments and shell out billions of dollars for subpar buildings. If someone wishes to purchase a subpar building, they should assume a greater portion of the risk in partnership with the insurer. Alternatively, the entire property insurance market could face collapse. Personally, I'm not overly concerned either way since I'm not heavily leveraged. However, it's disheartening to witness entitled individuals who are oblivious to these realities.

 

[marindependent]

Any idea what their market share is in Kali?

New Stat on this one - According to the Insurance Journal article: State Farm's CA Halt Reflects Pooor UW Exp... "State Farm currently has 21% of the homeowners market,..."

and you will all like this: "The number of companies writing new homeowners insurance has stayed consistent roughly 115 since Insurance Commissioner Ricardo Lara took office, according"

 

[Markthebroker]

and you will all like this: "The number of companies writing new homeowners insurance has stayed consistent roughly 115 since Insurance Commissioner Ricardo Lara took office, according"

 

[ehall2]

In today's market if I present two homes for coverage, the one that has shingles missing, dry rot, peeling paint and more would be declined except that State Farm would insure it. I inspect every home before I give a quote and have told people they need to go to State Farm or pray for a hail storm. I'm serious. State Farm will insured anything but then they cry because they lost 13 billion last year.

 

[AZDave]

In today's market if I present two homes for coverage, the one that has shingles missing, dry rot, peeling paint and more would be declined except that State Farm would insure it. I inspect every home before I give a quote and have told people they need to go to State Farm or pray for a hail storm. I'm serious. State Farm will insured anything but then they cry because they lost 13 billion last year.

Agree and will add: To my knowledge, they are the only carrier that will write owners with certain dog breeds - pits, rots, chows, etc..... It is up to the 'agents discretion and underwriting'. Has the dog bitten anyone (yet), is the uw question.

 

[Markthebroker]

Really? That doesn't imply that a depreciation schedule for buildings can't exceed that of vehicles. In fact, it's entirely possible to establish an agreed value or stated amount, similar to what is done for vehicles or equipment. Suppose you renovate a building after 30 years; you can present that case to the underwriter and, eventually, the claims adjuster. Let me give you an example: the Delorean in my profile picture, which is 42 years old, is insured for $55,000 based on an agreed value. Just because something is old doesn't mean you can't obtain a proper valuation for it, as long as the insurance company agrees with your assessment.

What seems 'silly' to me is paying for replacement cost on 50-year-old buildings that retain their original features. It's nonsensical that my homeowners insurance premium increased by 25% year over year for my house built in 1993, despite having new siding, an 8-year-old roof, renovated kitchen and bathrooms from 5 years ago, a brand new water heater and HVAC system, and significant plumbing and electrical upgrades. Meanwhile, my neighbor's house, built the same year, remains in its original state with peeling paint, dry rot, missing shingles, and more. Yet, they would probably receive a similar payout if both houses were to be destroyed.

Insurers shouldn't bear the risk of poor property investments and shell out billions of dollars for subpar buildings. If someone wishes to purchase a subpar building, they should assume a greater portion of the risk in partnership with the insurer. Alternatively, the entire property insurance market could face collapse. Personally, I'm not overly concerned either way since I'm not heavily leveraged. However, it's disheartening to witness entitled individuals who are oblivious to these realities.

You actually do own a Delorean? Damn it, I 100% should have stopped and visited you on my Oregon trip.