Yes, insurance companies should sometimes lose money on business that they expected to be profitable. But they shouldn’t be writing business that they expect to be unprofitable a priori. Many states and lines of business are firmly in the second category right now due to overzealous insurance regulators.

In CA, a recent batch of wild fires wiped out 20 years of profits.

Then maybe they should have worked with customers proactively to prune trees and set up fire exclusion zones or fire resistant exteriors instead of sitting on their laurels raking it in.

Seconded. Also let’s require PG&E (the company that set the fires) to actually follow the maintenance and safety schedules they repeatedly promise to follow and repeatedly fail to follow.

Seems like a lot of work when leaving the state is possible.

Thanks for the insightful and thought-provoking comment.

They are not wrong. Insurance with perfect info ceases to ne any form of a recognizable social good. In fact, it just becomes indistinguishable from a sanctioned form of populational segregation, instead of the pull-a-long stick-with-carrot through which risk is mitigated against long tail events through active propagation of best practices as a condition of coverage.

Insurance companies should be exposed to the same level of risk as anyone else, which includes having things boow up in your face if you mismanage your float.

Their comment didn’t add anything to the conversation, contrasted with yours I’m sure you can see the difference.

I agree with your commentary, my point was that they’re (insurance companies) unable to use the information they learn or newer predictive elements to help avoid the mismanagement.

Arbitrary decisions by these elected or appointed officials, as I have seen first-hand, ignoring the reality that if they aren’t able to off-set that risk it comes at great cost to the company first and their constituents later as a knock-on effect results in the only way to not have it “blow up in their face” by removing services.

So to your point, the lack of ability of control rates in a more reasonable fashion (I’m not pro no regulations btw) actually results in the same thing you’ve pointed out above - the ones who need the insurance the most can no longer get it or cannot get adequate coverage.

Insurance with perfect info would be an amazing social good. If they could say "you can build a house there, but it will burn down in a forest fire 15 years from now", we could make an informed decision on if we want to build that house.

That's not insurance then. The whole point of insurance is shared risk in circumstances where perfect information is not available but a reasonable calculation of risk for the cohort is.

And yet, people build and rebuild in flood plains...

Yeah but that’s compounded by access to the information & who do you trust.

Also human nature is to look at the odds and not believe you’re going to be that 1 in 125,000 :)

Lindsay: Well, did it work for those people?

Tobias: No, it never does. I mean, these people somehow delude themselves into thinking it might, but ... But it might work for us.

No one said they were wrong, they just lobbed a grenade to end the conversation.

If losses reach the point where it's irrational to invest in insurance businesses versus other competing business propositions, insurers exit the market, and the boo-hoo is on you. You can moralize your way out of cuts in profits, but you can't moralize your way out of sustained losses.

The idea of business leadership is to minimize losses, not provide a public service.