Largest home insurer in the country no longer offering policies in California (house, to buy)

[Tulemutt]

Originally Posted by Mathguy

. …
1) The profit in $1000 of premium for homeowners in CA is about $50 or less. …

Well no, not exactly.

If anyone doesn’t know: insurance companies make their real money by using the cash flow from clients’ premiums to finance a variety of investments. So they put your money to work exclusively for their additional return.

Your premiums, collectively with others, cover the claims payouts - plus profits (ranging usually from 2% - 10% depending on type of insurance). And your premiums buy the insurance companies stocks and bonds and real estate and and and … exactly none of which is shared with you.

Capitalism at its finest. Fair and square.

[njbiodude]

Allstate just joined State Farm in no longer offering new insurance policies for homeowners Friday.

To all celebrating the evils of insurance—remember government insurers of last resort virtually always charge much more for policies

[bale002]

So if insurance rates are going up significantly nationwide, it means that we as a nation do not have enough to resources on our own soil to rebuild ourselves as we are today.

[Mathguy]

Originally Posted by Tulemutt

Well no, not exactly.

If anyone doesn’t know: insurance companies make their real money by using the cash flow from clients’ premiums to finance a variety of investments. So they put your money to work exclusively for their additional return.

Your premiums, collectively with others, cover the claims payouts - plus profits (ranging usually from 2% - 10% depending on type of insurance). And your premiums buy the insurance companies stocks and bonds and real estate and and and … exactly none of which is shared with you.

Capitalism at its finest. Fair and square.

I didn't want to get into that nuance because it was hard enough to get people to grasp basics so let's explore everything that you just wrote.

1. Specific to homeowners insurance they are holding those premiums for maybe a year on average.

2. They are highly regulated as to what investments and how they are accounted for, so mostly those are federal bonds with safety but low returns, a couple percent in recent years.

3. This is ALL contemplated in the rate approval process so if the state says you can make a 5% profit, that includes investment income so stating they don't share it is 100% incorrect.

Do you understand that the state sets (via approval) all of those rates?

P.S. The state even caps the amount of executive pay you can call an expense, so anything past that amount comes from the profit margin. Just heading off the "fat cats" claim I know is coming. I think you can see SF's last CA rate filing online, check it out.

[Mathguy]

Originally Posted by njbiodude

Allstate just joined State Farm in no longer offering new insurance policies for homeowners Friday.

To all celebrating the evils of insurance—remember government insurers of last resort virtually always charge much more for policies

Ouch.

The lying and finger pointing from the politicians is about to go into overdrive.

There are some REALLY good old threads on this topic in the Florida forum.

The most common tactic will be to claim they're really making tons of money....but then why are they leaving should be the next question.

[Tulemutt]

Originally Posted by Mathguy

I didn't want to get into that nuance because it was hard enough to get people to grasp basics so let's explore everything that you just wrote.

1. Specific to homeowners insurance they are holding those premiums for maybe a year on average.

2. They are highly regulated as to what investments and how they are accounted for, so mostly those are federal bonds with safety but low returns, a couple percent in recent years.

3. This is ALL contemplated in the rate approval process so if the state says you can make a 5% profit, that includes investment income so stating they don't share it is 100% incorrect.

Do you understand that the state sets (via approval) all of those rates?

P.S. The state even caps the amount of executive pay you can call an expense, so anything past that amount comes from the profit margin. Just heading off the "fat cats" claim I know is coming. I think you can see SF's last CA rate filing online, check it out.

Yes.

But yes also, they DO make “fat cat” money. Insurance is a super lucrative business at scale. (It is also a nightmare business … it has no R&D, product manufacturing, distribution / logistics etc in the hard goods sense … but it has nightmarish number-crunching actuarial pressures, deeply challenging personnel management challenges with value adjusting, fraud investigation, etc etc) It is amorphous like most purely financial product business. 100% Money manipulation through extraordinary math.

It is super-regulated for damn good reason.

[rokuremote]

Originally Posted by Tulemutt

Capitalism at its finest. Fair and square.

Originally Posted by Tulemutt

It is super-regulated for damn good reason.

So which is it?

[Tulemutt]

Originally Posted by rokuremote

So which is it?

Both.

[rokuremote]

Originally Posted by Tulemutt

Both.

Not nearly as clever as you think.

[Tulemutt]

Originally Posted by rokuremote

Not nearly as clever as you think.

The two observations I made are not in any way mutually exclusive. Nor have you presented any actual rebuttal (other than a pithy, but vacuous, snark).