The Overhead Wire Daily | April 16th, 2024 | Insurance-aggedon

Piggybacking on yesterday’s item in the Premium newsletter on car insurance driving inflation, I stumbled across this piece on Twitter from November of last year discussing Prop 103 in California which regulates insurance rates. It’s interesting and long but perhaps worth the read if you’ve been itching to dive in on the topic and how it might be reformed.

But what it gets me thinking about how a lot of our problems aren’t getting solved perhaps because we are stuck in a negative feedback cycle that’s just pulling us in deeper. We’ve been hearing a lot about insurance rates going up on buildings and cars. Those increasing rates are in part causing inflation and some real estate market instability. And the land use patterns that we build focused on a transportation system that is car oriented also feed into this negative loop as we choose bigger more expensive vehicles which are of course more expensive to replace and build roads and make rules that enable more collisions than other countries.

We can talk about the same thing with housing. We’ve decided to build a lot of housing in 100 year flood zones or fire prone areas that are getting exposed by climate change. The high cost of housing overall brought on by regulations and a shortage of workers also in part due to high housing costs also makes insurance replacement if your house does get wiped out even harder.

And states and the federal government are sucked into this moral hazard as they back stop insurance that mainstream companies see the risks on and won’t take.

The spiral and seeming connections go on and I’ve been trying to think about how they all go together, but it’s probably a longer piece than the intro to a newsletter. At the moment I’m not sure how it gets fixed but maybe it starts with how we build cities and move around in them.

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