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Comment by mgh95 | Hacker News Reader

Perhaps the more pertinent question is what if the US gov doesn't recognize the risk and allow insurers to raise rates. A now significant portion of the problem is the fact that California's FAIR plan will potentially be insolvent. In this case, the market was correct, not the gov.

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>what if the US gov doesn't recognize the risk and allow insurers to raise rates.

I'm not sure I follow: Isn't the entire point of raising rates (I assume you mean raising insurance premiums) to compensate for higher risk?

The point of raising rates is to compensate for higher risk. However that is politically very unpopular, so voters put pressure on politicians to prevent insurers from adequately pricing risk through premiums.

Also, I don't think the government is predominantly to blame. I'd wager plenty of people in local, state, federal governments know that these locations need to be expensive to insure or are basically uninsurable. However, voters refuse to accept the reality of increasing risks due climate change, urban sprawl, and other factors. Politicians lack the incentive (or spine) to be honest about these risks. And anyone else in government, especially scientists, that do state the risks plainly are either ignored, censored, or fired.

And its only going to get worse. As more companies pull out, governments will step in (pressured by voters) to be the insurers of last resort. This is already true in Florida (see: https://en.wikipedia.org/wiki/Citizens_Property_Insurance_Co...) and (I believe) California. At some point, natural disasters will probably cause these government insurers to go (basically) bankrupt since they're insuring rich people's million dollar houses on Florida's coast and in California forests.

Edit: I'd also wager companies are more than happy to price-gouge in situations like this too. I expect this is both premiums being insufficiently high and companies seeing profit opportunities.

Insurers in California were forbidden from raising rates to compensate for the fire risk, so they instead chose to pull out.

Read the question again: "what if the US gov doesn't recognize the risk and allow insurers to raise rates".

Breaking it down: "What if the US gov ... allow insurers to raise rates".

Now color me confused.

California advocates frequently accused home insurers of price gouging (see: https://consumerwatchdog.org/insurance/study-public-scrutiny...) arguing that price increases need expensive and time consuming hearings processes to the point of calling these practices "illegal".

If the government doesn't recognize that there is a very real, very significant risk of wildfire and prohibits pricing it in (whether based upon location or mitigation factors) insurers will leave the market, effectively rendering the houses ineligible for subsidized mortgages.

So you're saying that everything would be fine(ish) if insurers are allowed to raise premiums. I agree.

The question you posed as a future potential problem is: "What if the US gov ... allow insurers to raise rates".

So again, color me confused. What is the problem with the government allowing insurance companies to raise premiums?

I think you've misread the question. I understood it as "what if the US gov doesn't (recognize the risk and allow insurers to raise rates)" rather than "what if the US gov (doesn't recognize the risk) and (allow insurers to raise rates)."

It makes sense that way, plus if "allow insurers to raise rates" was a separate clause the verb should be "allows".

The statement in question reads:

> Perhaps the more pertinent question is what if the US gov doesn't recognize the risk and allow insurers to raise rates.

Breaking it down: if the US gov (or its subdivisions) believes the risk is "gouging" or "egregious" or "too expensive" and prohibits rate increases, an insurer thinks they'll lose money, and leave the market. When this happens either the gov steps in as an insurer of last resort (and loses tons of money, because underwriting isn't a political problem), or insurance products cease to be sold in that area.

If insurance is no longer available, the house is no longer eligible for a fannie/freddie conforming loan, and is for all practical purposes ineligible for a mortgage. The local property market dies overnight.

>Breaking it down: if the US gov (or its subdivisions) believes the risk is "gouging" or "egregious" or "too expensive" and prohibits rate increases,

You worded the original query badly then.

I read it like follows:

What if the US gov:

* doesn't recognize the risk and

* allow insurers to raise rates

Hence my confusion: Why is it bad for the US government to let insurers raise rates?

EDIT: Copypasta fail. :V

> Hence my confusion: Why is it bad for the US government to let insurers raise rates?

Because of a very, very, bad decision to make the California (and I really should have written California gov, not US gov) an elected position. And people like voting for the guy who prevents prices from going up.

Look: You're arguing that the US goverment preventing insurers from raising rates is a bad thing. I completely agree.

You however worded the original query in such a way that I read it as the US government allowing insurers to raise rates is a bad thing.

That's why I was confused. All I advise is you choose your wording a bit more carefully in the future.

The correct breakdown is:

"What if the US gov doesn't (recognize the risk and allow insurers to raise rates)".

The only grammatical way for your interpretation to be correct is if "allow" was "allows". (However, I will grant that many posters, here and elsewhere, are sufficiently careless with their typing that one could easily assume that was the intent.)

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