This is why you can’t get insurance.
As many of you know, insurance prices have gone through the roof in almost every capacity. Premiums have gone up over 300% in the last decade, with entire zipcodes being dropped and neighborhoods left vulnerable. But why? Why is this happening and is there anything we can do about it?
Let’s start by figuring out how insurance companies price their premiums. While a lot of that data isn’t necessarily public, we do know that they pull from a wide range of datasets, both private and public, that provide them with details about the homes location and their risk to certain natural disasters. In combination with that, they take into account your credit score, history, history of the area, and a few other factors to determine your coverage.
Insurance companies make their decisions based on a multitude of factors and a lot of those factors have been changing, most notably, the weather. Wildfires have become increasingly more problematic in the last few years and have damaged tens of thousands of properties as well as endangering many more.
Insurance companies that cover a large majority of California have been threatened by these changes, losing millions every year to these feats of nature, and they’ve had enough. And so finally, the biggest company, State Farm, pulled out of California altogether.
“State Farm General Insurance Company made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.” SOURCE
With wildfires playing a key role in being able to ensure large parts of the state, many others have followed, leaving hundreds of thousands of residents extremely vulnerable. Now, residents have to be temporarily moved onto their State Plan, which doesn’t cover large neighborhoods, or pay an enormous amount of money to keep their property insured.
But this isn’t the end. There is still a way to get insurance back and start to lower prices and it all starts with proper prevention. Neighborhoods are in danger of wildfire and many don’t know where to start.
Many don’t know what kind of prevention protocols to follow and if they do, don’t have the money or the time to educate and hire people to do the work. Many people rely on volunteer work around their community but for those with older populations, that work is harder to come by.
But this is the solution. We need to start more work on the prevention side and do it at a large scale. Why work on prevention? Well, if you think about it, that’s really what insurance companies are looking for. They want to be able to insure areas that are more on the high-risk side, but they only feel comfortable about doing it if they know people are making an effort to protect themselves.
By pushing for prevention and showcasing how preventative measures actually do make a difference, companies are more inclined to support neighborhoods that continue with this kind of work. And the more that people move into prevention, the more companies will use that information to their advantage to price better premiums and come back to high-risk areas.
Take Kettle Insurance for example. Kettle uses data modeling and risk assessments to price insurance premiums based on how high-risk the area is. They can more accurately predict the dangers of living in certain areas and based on that, decide who to insure far better than the average insurance company.
They’ve shown that they’re willing to cooperate with those who take preventative measures and it’s a step in the right direction. And with California beginning to enforce more inclusive data structures into insurance policies, we’re going to see a shift in how we manage these kinds of packages.
