So CA is a bit different. The state rules require the premium be priced basically looking back at the last 20 years of actual sustained losses in the area. That seems like a good consumer rule to prevent price gouging but State Farm are (probably quite reasonably) saying that with the increased risk due to climate change and the increased rebuild cost, they can’t square those numbers.
I do wonder about Farmer’s decision though, because as I understand it, in FL, they aren’t similarly restricted and could price their policy however they need to balance the numbers. Perhaps PR-wise it’s easier to leave the market than double everyone’s prices. It’s definitely a vicious cycle though, as more insurers leave the market, this risk will get concentrated on fewer and fewer players and their catastrophe models will show their increased risk and so on…
So CA is a bit different. The state rules require the premium be priced basically looking back at the last 20 years of actual sustained losses in the area. That seems like a good consumer rule to prevent price gouging but State Farm are (probably quite reasonably) saying that with the increased risk due to climate change and the increased rebuild cost, they can’t square those numbers.
I do wonder about Farmer’s decision though, because as I understand it, in FL, they aren’t similarly restricted and could price their policy however they need to balance the numbers. Perhaps PR-wise it’s easier to leave the market than double everyone’s prices. It’s definitely a vicious cycle though, as more insurers leave the market, this risk will get concentrated on fewer and fewer players and their catastrophe models will show their increased risk and so on…