Insurance Market Under Scrutiny

This chapter examines the effects of stringent government regulations on the insurance market, focusing on how these rules have led to an increase in state-run residual market plans. It also addresses the financial challenges faced by the industry and the implications of climate change on future insurance premiums.

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Natural disasters are becoming more severe and costly—who should bear the financial burden? We explore the tension between socialized risk and market-based insurance.

Topics covered include:

The surprisingly large percentage of natural disaster losses that are uninsured
Why natural disaster severity is increasing
A deep dive into the complexity of the home insurance market, including state-run home insurance plans
How California has tried to update its home insurance regulations, leading to potentially greater coverage but higher premiums
How socialized insurance relieves the cost burden to consumers but can also lead to riskier behavior and adverse risk selection

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Show Notes

California wildfires: What we know about L.A.-area fires, what caused them, who is affected and more by Tim Stelloh, Marlene Lenthang, Rebecca Cohen and Phil Helsel—NBC News

Climate change is showing its claws: The world is getting hotter, resulting in severe hurricanes, thunderstorms and floods—Munich RE

Shaping the Future of Wildfire Insurance in California: New Insights from the Most Comprehensive Wildfire Risk Model in the Market by Firas Saleh—Moody's