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Comment by smodo | Hacker News Reader

Lol that’s precisely what it is. It redistributes the cost of accidents. Across all its members, paid forward.

Just don’t get insurance and nothing of yours will pay for anything belonging to anybody else.

No, it's not. The idea of a risk pool is that everyone's catastrophic risks cancel out, not that people who replace their roofs also chip in to cover hail and water damage for people who don't.

In fact, you are wrong; insurance in California is redistributive by regulatory design. Farmers (when operating in CA) must offer insurance X% of homeowners in a range of $Y-$Z, subsidizing those customers who are more expensive to Farmers. It's relevant to the story: Farmers is disallowed (for political reasons) from canceling accounts in Auburn due to actuarial climate updates; Farmers has new incentives to closely scrutinize home conditions and utilize any new datasets.

This quirk of California law (that insurers cannot factor in climate risk or anything other than trailing 20 year average costs) is why insurers are pulling out of the state; it isn't generally true of insurance.

It also doesn't have anything explicitly to do with "actuarial climate updates" -- there have been a bunch of correlated losses recently (i.e. fires in 2017-2018) that mean that the insurers are losing money on people who live in certain high-risk places in California. Calling it "climate" just window dressing for local politics.

California won't let them underwrite to accurately reflect the location risk, so they're pulling out instead. It's basically exactly what Tptacek said, only demonstrating it via the stupidity of California's law.

If anyone is interested in learning more, this odd lots episode covers the changes to the home insurance market if a fair bit of depth:

https://m.youtube.com/watch?v=BYbSz1MXdFA

Yeah, I just listened to that episode. :-)

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