In 2023, State Farm announced that the company would no longer sell new home insurance policies in California. They cited “historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.” Simply enough, the risk involved in new policies in California was higher than the company chose to accept.
Insurance, at its simplest, is basically paying someone to assume all, or part, of your risk. If the place becomes riskier, the payment becomes higher. If the company really can’t calculate the risks, it may choose not to renew your policy.
I don’t mind being able to cite State Farm – we had insured cars through State Farm for years, but when Sam was rear-ended by a careless semi driver, I learned that a long and profitable past relationship didn’t make up for one expensive crash – even if the guy responsible for the wreck was a refugee immigrant truck driver. Might have been different today – the news tells more about bad truck drivers from other nations now than it did ten years ago. But State Farm’s risk calculations changed. No big thing – there are lots of companies offering car insurance. State Farm hadn’t cancelled us, or non-renewed. They just became a pain to deal with, so we chose to change companies. Thirty plus years of having the same company didn’t mean anything for the next year. I still like the agent who took the time to explain it to me and suggest I find another company when the risk calculations changed.
There are different types of home owner insurance. One friend of mine had problems because of nearby standing water – a visit to the house would have shown that flooding wasn’t possible, but lines on the map convinced some desk denizen that it was a clear and present danger. My house is close to a pond – but setting up the level and taking a couple shots at a survey rod shows that the water will top the road and flow away before it can get to the house. Elevation and gravity make flood insurance unnecessary to me – though the lack of risk would probably keep an insurance company renewing the policy into the next millennium.
Here, the risk is fire. Not so much from aspects of the house as from the fact we live in a forested area. One of the reasons State Farm was cutting back on California – 2big fires aren’t unusual. For me, cleaning up blow down timber is an annual effort in reducing risk – and it is personal. Sweat reduces my risk. That doesn’t mean that an insurance company is going to value my sweat and labor as highly as I do.
Here, we’re part of the 4.4 million homes considered at risk from wildfires. I can’t argue – I just try to keep the woods cleaned up and the old roads in shape to use as fire breaks. It’s going to be a busy summer for an old man.
I studied risk at college – nickel ante dormitory poker games generally paid better than work-study jobs. I failed to research risk adequately, when I wound up in a lowball game – for those who haven’t played lowball, the lowest hand wins the game. I held a 6,4,3,2,1 – and still remember it nearly sixty years later. I was playing with a bunch that didn’t recognize a straight as high, and lost to a 5,4,3,2,1. Wound up spending 2 days on a jackhammer to replenish my stake. I can understand why insurance companies are choosing not to renew policies in areas where wildfire or flooding is a risk. In South Dakota, we had a place that hadn’t been hit by a tornado since homestead days. Five miles away was a spot that had been hit twice in fifteen years. Even with insurance, I wouldn’t have built there. Nice place – but too much risk of it blowing to hell and gone.
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