Do we know why the insurance companies can't simply raise the insurance price to match the risks in those areas that are prone to natural disasters? I mean in general, not as in California where the government imposes strange policies. Speaking of the policy, why wouldn't California allow the insurance company raise the premium by region? Doesn't such policy benefit the rich at the cost of the poor as the rich love to live by the hills, lakes, or beaches, which is very much against the ideology of California?
California's ideology is to protect at all costs the people who already live among its hills, lakes, and beaches. Insurance and property tax hikes are threats insofar as they could drain your wealth. The (other, new) rich are a threat insofar as they could become your neighbors and ruin the view. The state protects you in both directions.
This sounds evil. Why protect the rich when the states always spend huge to help the the poor?
If your house burning down was a near certainty within a few decades, the real cost of insurance would be buying a new house + profit margin.
Insurance only really works when most people don’t suffer a catastrophic event and can cover the few who do.
It's more complicated than that, as always. Here's some (incomplete) background on Florida:
https://www.civilbeat.org/2024/03/how-floridas-home-insuranc...
Re: California, I don't understand the context for your question, or why you would think the California government is more strange than any other US state government. There's no universally-accepted "ideology of California." It's a big state with a huge, diverse population.
tl;dr, though: California does allow insurers to do that, but is using currently an antiquated set of rules that don't allow for modern risk management approaches. It's been rewriting those rules recently to fix this; I think the new rules are supposed to be in effect starting this year.
It was based on some reports (or podcast? I can't remember) that the California government didn't allow the insurers to sufficiently increase their premiums in the burnt areas. The government (or the insurers) cited two reasons: there was a rule that the annual increase should be no more than 7%, and that if they want to make an exception then the insurers must increase the premiums for all the insured areas instead of setting the price by risk. As a result, the insurers stopped insurance renewal for about 60% of the burnt properties. I assume the intention is to protect the insured or to ensure certain equity, hence the use of the term "ideology". FWIW, it thought it was a neutral term, implying that it's a strongly held fundamental belief.
California's insurance policies are more strange, due to proposition 103, passed in 1988.
It creates a condition where the state can prohibit insurers from selling to residents, if it doesn't like their prices, which has recently lead to a lot of insurers no longer selling in the state, as construction prices in the state have risen significantly faster than inflation, leading to insurance premiums that the state doesn't like.
Residents who no longer have any insurers available can buy insurance from the state, but its far more expensive than the plans it rejected from private insurers.
> Residents who no longer have any insurers available can buy insurance from the state, but its far more expensive than the plans it rejected from private insurers
Sounds like a state-run racketeering business
> There's no universally-accepted "ideology of California." It's a big state with a huge, diverse population.
Population is diverse and large, yes, but the state government (including the insurance commissioner) is radically biased left/progressive and has been for decades.