Los Angeles fire survivor is told State Farm’s $900K check on hold due to insufficient funds
Los Angeles fire survivor is told State Farm’s $900K check on hold due to insufficient funds
That's pretty alarming when a major insurance company is out of cash...
Insurance distorts housing markets, allows builders to take unreasonable risks, etc.
I strongly suspect that this is some kind of internal fuckup, not State Farm being insolvent.
Conservatives love talking about pensions funds needing to be solvent for decades...
But there's never a push that insurance companies need to have cash on hand.
They keep their money in investment accounts to make a profit on it, so how much they have varies at any given moment.
When large scale disasters strike and the market is down they're fucked. If they liquidate at the low price not only does it cost them money. At a large enough volume it excarbates the market being down.
Enough insurance claims at once and it could crash the whole economy.
People don't realize how many different ways we're fucked...
Yes, but they use reinsurance companies to spread the risk around the globe. The whole world economy might be down, but there is unlikely to be major insurance events in all countries at once. Covid claims could have broken that but most insurance decided not to cover it.
They aren't out of cash they simply gave their execs too many bonuses. I guarantee their deficit could be offset by reducing leadership pay to something more realistic.
it’s almost certainly a subsidiary of a subsidiary, created solely to hold a minimally funded bank account
♫ like a bad neighbor... our check has bounced. ♫
Not a good neighbor
This disturbing because I just started working at a State Farm agency. I was told State Farm only makes money off the interest that funds in the bucket that customers pay into. So there should be plenty of money to pay claims. Boss told me thinks it something like 200 billion dollars.
State Farm doesn't want me to be in business in California.
Ask me how I know.
This is what happens when housing is grossly overpriced. The entire system collapses
It's more than that. This was once a fine enough place to live but improper stewardship of the earth has made it a place unreasonable to build a major city, meanwhile we're in a period where people build cities in places utterly unreasonable like phoenix. New York will occasionally get fucked by natural disasters, but what happened in LA where huge portions of the city need complete rebuilds, doesn't happen there. Wildfires have become the norm in California and it's one of the regions rapidly becoming uninsurable, alongside Florida.
The price of the houses is bad, but it's the cost to replace what was lost that insurance cares about alongside the scale of the disaster and the expected mean and variance of time to recurrence. The housing is oversized and otherwise too high value in non-market ways, lacks fire resistance, and is likely to be hit by another wildfire before insurance can recoup what they paid out.
Except it really never was a "fine enough place". Wildfires didn't "become the norm". They are literally a part of the very ecosystem of California. Various trees have even evolved to need them.
Sure we fucked the planet, but don't blame "improper stewardship of the planet" on this one. This was hubris, like building on floodplains is also just plain hubris.
This was done earlier this year, The Institute & Faculty of Actuaries published a paper on the true risk climate has on the world economy. Insurance companies are most likely only starting to get this information and large payouts from the wildfire's, the hurricanes and the flooding is most likely already pushing the companies to insolvency. You can of course move risk around with re-insurance and spun out independent insurance companies but the risk to overwhelming the entire system is becoming higher and higher each year. I wouldn't be surprised if the specific account used for the CA wildfire payouts was empty and overdrawn and State Farm was caught off guard by that and had to do some serious amount of moving money around to fill it back up. Enough where it took a couple of days to come up with the cash, that in itself is really scary.
The problem is not risk. It is cost. Climate change means that the cost maintaining human infrastructure where we built it has become higher than we want to pay. And regulators and politicians have prevented insurance companies to raise rates to match the increased cost.
Ultimately, there are 3 ways out of this:
check
Bone apple tea, Noah Webster !
Of all of America's stupid shit simplified English is one that just makes sense. Cheque is an unnecessarily French spelling for a word that you wouldn't think of as French if not spelled that way.