Council Resolution on LZ1 & LZ2 High Cost of Home Insurance

[leilanidude]

Whether it's unreasonable or not depends on what it covers.

True - if you $50k on the house and it is worth $500k - you are way under water if the house is destroyed as the mortgage company will be insuring for the value of their interest, not your equity.

[Punatang]

Here is a fascinating WSJ article, preserved in archive.today.  It's about "a new breed of insurer".  Could this be our light at the end of the tunnel?

https://archive.ph/0JN1Z

Here is a snippet:

Climate Change Is Breaking Insurance. Here’s How Tech Could Save It.
A new breed of insurer is finding opportunity as larger companies exit some markets


By 
Christopher Mims


Dec. 8, 2023 9:00 pm ET

If floodwaters outside a warehouse in Freeport, Texas, owned by private investment firm Postlane Partners rise to 8 inches, an internet-connected sensor will trigger an automatic $3 million payment from an insurance company, a startup called FloodFlash. If the waters rise to 16 inches, the payment will also rise—to $5 million.  
This type of policy, called parametric insurance, works like a bet. It has a defined payout, which limits the liability of the insurer. And it comes from a new breed of insurance company, stepping in to shoulder risks that traditional insurers can’t—or won’t—take on, because climate change has made more typical kinds of coverage unprofitable.

[kalianna]

I donʻt really understand this. If thereʻs 8" of flood water that causes the property to be flooded and become a total loss, why would 16" pay out twice as much? And if there is less damage from the water, would it still pay the same amount? And if the property is worth twice the payout, does that really help? It will be interesting to see how this develops.

[HiloJulie]

The link Punatang provided answers each of your questions in the full article.

Also of interesting note are these statements:

• In the 1980s, the U.S. suffered an extreme weather event that cost $1 billion every four months. Now, one is happening every three weeks, according to the U.S. National Climate Assessment, released in November.
  
• “If you had to pick a canary-in-the-coal-mine industry to measure the extent to which climate change is real, I think insurance is probably the best one I can think of,” says Max Clarke, chief executive of Plover Parametrics
  

[terracore]

I think the gist of the coverage is that traditional insurance policies are sold with the intent to make the insured "whole" after the incident. The new polices don't pretend to do that, they instead pay out a flat fee so the insured have something to "start over" with. Frankly I think it's a better deal for all involved because there is no bickering and lawsuits with either side trying to nickel and dime over something that was lost is actually worth, so long as this is reflected in lower premiums in the real world.

In a way I recently bought insurance very similar to this for a MacBook. The insurance/extended warranty that Apple offered was really expensive, and it covered a lot of things that were unlikely to happen. So I bought an after-market warranty from Upsie that covered most of the same things but their maximum coverage is limited to the cost of what we paid for the MacBook. Sure enough, the dog snagged the cord, pulled it off a desk and it fell and broke the screen. It was over $600 to fix it at Pahoa Tech and Upsie sent us a check for the full amount. Pahoa Tech offered to fix it for half that amount if we agreed to have a non-Apple screen put in, but we passed and had the OG equipment replaced but here's the rub.... If the screen breaks again the policy won't pay another $600+ to fix it because that would exceed what we paid for the unit... but there IS enough left on the coverage to have an aftermarket screen put in. Frankly, I feel "whole" either way, and saved a fortune on the policy.

While I'm on the topic let's discuss the coverage offered by places like eBay and Amazon. I bought a lightweight flexible solar panel back when I was pretty sure the technology wasn't "there" yet, so I paid an extra couple of bucks for the insurance. Sure enough, about 2 years later the panel failed. The panel was about $100 but I had a 50% off coupon. The Asurion or Allstate or whatever policy covers the list price, not the price after coupons. So they paid me $100 for a panel I paid $50 for. They also wanted me to send the panel to them at their expense, which I was happy to do, but the only box I had that was big enough was this gigantic box full of styrofoam etc from a window air conditioner I had just bought. So not only did I get the $100 for a $50 item, UPS came and hauled my garbage away with it. Another one you ask? Okay, buying an SLA battery on eBay and they offer me a 3 year warranty on it for $3.00. What are the chances the battery is going to last 3 years the way I'm cycling it? Practically zero. Sure enough, the battery failed just in time for the policy to cover it. Okay, one more. I bought a smoker and paid for the extended warranty. The "stainless steel" racks that came with it weren't really stainless steel and they disintegrated. I checked with the warranty and they sent me a check to cover replacing the entire unit. Because of the size/weight they didn't want it back and asked me to dispose of it. There was another seller on Amazon that was selling replacement stainless steel racks for that model, so I was able to just buy the racks and continue using the smoker. All of these examples made me feel "whole" even though the coverage was limited to the original listing price. And the last one for real this time... I bought an electronic item that failed and got the reimbursement. But the price had dropped significantly since I bought it. They could have sent me a new unit per the policy but for whatever reason it was cheaper for them to reimburse me the full amount and have me replace it myself and "keep the change".

One last observation on extended warranties. Lets say you're buying multiple of something at the same time. Like 3 solar chargers... One policy will cover any one of those chargers.

[randomq]

terracore single handedly bankrupting the insurance industry. Wait, actually they must be making insane profits to sustain this level of expense!

[Punatang]

While predomiately about California, this article does reference "other state regulators wrestling with their own insurance no-go areas." With parallels to our situation in Hawaii, it seemed germane enough to post here. Apologies if you disagree.  

It's another WSJ article preserved in archive.ph        https://archive.ph/cxCcB#selection-5097.99-5097.169

and a snip:







[*]
The Man at the Center of America’s Biggest Insurance Crisis
Ricardo Lara said climate change was a threat in California, then insurers fled the state

By 
Jean Eaglesham


Dec. 15, 2023 9:00 am ET

California Insurance Commissioner Ricardo Lara faces a make-or-break year as he races to woo back insurers. PHOTO: ASSOCIATED PRESS
When he campaigned to be California’s insurance commissioner, Ricardo Lara warned about the risk of climate change. Insurers agreed, so they tried to jack up rates and cut back on coverage.
When Lara blocked their rate increases, insurers, including 
Allstate ALL 0.47%increase; green up pointing triangle
, State Farm and Farmers Insurance, stopped or restricted new home-insurance business. That put Lara in the middle of the biggest insurance crisis in the country.

[terracore]

The article in a nutshell:

Insurance companies lost billions in the state, tried to raise rates to stay in business, he told them they couldn't raise rates, so they exercised their only option: they left.

Now he's doing whatever he can to woo them back, which will probably entail giving them more than what they originally asked for before they pulled out.

[AaronS]

My brother lives in Hawaiian Ocean View Estates. His current homeowners insurance provider UP&C is pulling out and won't renew his insurance coverage. He was paying 1,000 to UP&C for both hurricane and lava coverage. Aloha quoted him a $2,000 rate rate for lava coverage only. I called up Atlas Insurance and was able to get a a quote of $1,845 for both hurricane and lava coverage.

[terracore]

What is the term for those rates?