Care to guess which states have the highest homeowners insurance premiums?
I'll give you a hint. They have long coastlines, and high profile hurricanes have hit them a lot in recent years.
If you guessed Florida, Texas, and Louisiana, you would be correct. You win self respect as I don't have any real prizes to give out...
Hurricanes are expensive for governments, expensive for insurance companies, and expensive for regular peeps. Vast majorities of peeps in Florida, Texas, and Louisiana live where hurricanes hit just about every year or so... as well as tropical storms, tornadoes, and other damaging wind weather...
Other states with expensive premiums are mostly just states with expensive homes... Connecticut, Massachusetts, Rhode Island, D.C., and New York... Oklahoma and Mississippi where they have a lot of tornadoes and hurricanes as well...
Want to examine the numbers? Look here (link).
Now guess where homeowners insurance rates are lowest... this one is tougher, but it is where there aren't a lot of tornadoes, hurricanes, earthquakes, or other disasters. Land is plentiful and cheap... there isn't a lot of density so risk of fire spreading house to house is also less...
I said it was tough. The answer is Idaho, Wisconsin, Oregon, and Utah... homes in those states typically don't face hurricanes... weather is pretty predictable... the density is low and the risk of theft is accordingly low... yes they get a lot of snow in a couple of those states but the homes are built for winter with steep roofs and heavily insulated pipes... and storms just don't destroy a lot of houses or even roofs in those states, and land is fairly cheap so premiums are relatively cheap...
See how that works? Insurance is all about risk... if you choose to live where there is more risk of having to get a new roof every few years because of hail or gale force winds then your risk is higher... and your insurance rates should reflect that risk. If you choose to live where the biggest concern is maybe getting a couple feet of snow once or twice over the winter time then your risk is obviously lower... so rates can be lower also...
Profits for insurance companies are important because insurance companies need to be able to bank for when the big one hits and they have to pay out catastrophic type claims to hundreds, thousands, or even millions of premium holders...
Bill White though has decided to propose a truly moronic plan which will do nothing but give government more control over the private sector (link). Excerpt follows...
Insurance experts said White's plan wouldn't do much to lower homeowners' premiums.
Scott Harrington, a professor of insurance and risk management at the Wharton School of Business at the University of Pennsylvania, studied prior approval for years, and he's skeptical that it would make much of a difference. His analysis considered effects of prior approval regulation on prices, loss ratios, availability and volatility.
"Can you save money over time by having prior approval? The answer is no," Harrington said. "What's safe to say is, over time there's little evidence that it makes any difference."
Even if companies are forced to cut rates in the short term, they will make up the money eventually, he said.
Plus, he said, insurance companies might be less likely to cut rates in a state with a system of prior approval because it could be difficult to raise them later, if need be.
To distort the insurance market by requiring government to effectively set rates from here on out is to make insurance rates subject to the whims of pandering politicians... to make rates rigid and capped is to subsidize risk to the point that more people build and buy homes in flood plains and hurricane alley without regard to the actual cost of living there...
What Bill White's plan would likely do is essentially cause all insurance companies to eventually charge all customers right at the high end of the government mandated limit... risk would be spread out across people away from the coast and more homes would be built and bought right on the coast which would mean more unnecessary home destruction and property loss in the future... and bigger losses for the state... bigger losses for insurance companies... and lots of companies would just choose to leave the state as they did several years ago when people like Steve Mostyn were suing their asses off during the trial lawyer trumped up "mold crisis"...
Bill White's plan is moronic for many reasons. It is moronic politically despite what his internal polls are probably telling him because he is basically proposing that big government should regulate a vast portion of the private sector... and it reminds people of Obama Care and other government expansions and take overs that are making everyone so angry right now. It makes him seem more and more like a typical liberal rather than a pro business moderate...
It is moronic on the policy as well... it is moronic because it won't lower rates and in fact may cause higher rates for many... and it will cause a market distortion that will create even more risk in the future...
nice game. i got the expensive ones right but not the cheap ones. i was going to say arizona for the cheapest.
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