Why Insurance Rates Have Been Surging in California and Florida

In recent years, we've seen home insurance premiums soar by historic amounts. Not only have prices gone up, but in some instances, we've seen national carriers simply announce that they're abandoning certain states. So, what's behind the mess? Why isn't competition causing markets to come into balance? What is the role of state insurance regulators? On this episode we speak with two guests who help us understand the problem. Amias Gerety is a partner at QED Investors, and a board member for the insurance company Kin. RJ Lehmann is the editor-in-chief for the International Center for Law & Economics. The two of them discuss insurance from both the financial side and the regulatory side. They explain where things have gone wrong and the prospects for market stabilization. This transcript has been lightly edited for clarity.

Key insights from the pod:
Kin and direct-to-consumer insurance — 6:27
Why are insurance rates going up? — 8:08
Wildfire as a tipping point — 11:22
Forward models and pricing — 12:54
Why insurers are pulling out of Florida and California — 15:09
Florida roof insurance frauds — 17:35
Capital, interest rates and insurance premiums — 22:56
Hardening houses — 27:45
How do people know they’ll get insurance payouts? — 33:54
The boom and bust cycle in insurance — 36:50
Insurance systems in California and Florida — 41:05
What makes an insurance system ‘good’ or ‘bad’? — 45:47
How regulators decide if premium increases are reasonable — 47:52
California barring catastrophe models — 50:08
California and Prop 103 — 51:18
Balancing affordability and incentives — 54:18
Improvements in Flroida’s insurance system — 57:18
Possible insurance reforms — 1:03:50