re: Insurance rates in the Palisades was cheaper than 97% of all US zip codes.

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Measured against home values, insurance costs are cheaper in the Palisades than in 97% of U.S. postal code

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I wonder if that’s skewed because a huge portion of the home value in those areas is the land itself.

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No wonder State Farm and other insurers left. The property value and risk kept growing out of control, but the state kept mandating what price they charge to insure these multi million dollar properties with pennies.

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This can't be overlooked, Insurance is math and the math didn't make sense for the insurers. Once again, the government is the root of the issue.

That’s crazy. My home insurance is so cheap in Arkansas that I honestly forget how much it even is.

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Are unfamiliar with hurricanes?

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You suggested that lower rates in CA vs. LA were because the value was in the dirt and not the home.

So I'm simply trying to understand where the "value" lies in the 9th ward such that the premiums are so much higher.

But it's ok, I'll give you the answer. The issue, which many Californians are going to painfully learn, is not surprisingly California's government. They have meddled in the insurance market for years, trying to cap premiums and implement bureaucracy at every step, slowing approvals for premium increases which has lead to many major insurers leaving the state completely. This is, unfortunately, the perfect storm at the absolute worst time and the fallout will be significant. The post mortem will expose the lunacy of the state's interventions and policy...but it already sounds like the feds will step in with gobs of our money to make it look "less bad".

Here's a good recap of the situation and issues: LINK

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Under California law, the elected insurance commissioner must approve rate hikes greater than 7 percent annually. Given the exponential growth in property and casualty payments, rate increase proposals well exceeded this threshold. However, the commissioner’s slow, bureaucratic approval process means that “by the time a rate increase is approved, it’s already out of date” (Venton, 2024).

Nor are insurers merely raising premiums to maximize profits. The table above demonstrates the mounting catastrophic losses—particularly in 2017 and 2018, years in which California experienced especially cataclysmic wildfires. Also, net profit margins[6] in the homeowner insurance market are already known to be thin. A New York University study of profit margins across various industries in the United States found that, as of January 2024, the national net profit margin for property and casualty insurance was only 5 percent (Damodaran, 2024). With expected losses exceeding approved premiums, insurers predictably started withdrawing from the state’s market entirely by 2023. Desperate insurers searched for legal pretexts to cancel policies, with reports of drones and consulting aerial internet maps to discover how properties may not be strictly in compliance with their policies (Balevic, 2024).

More and more insurers began to reduce their presence in California’s homeowner insurance market as they incurred mounting and unsustainable losses. In May 2023, State Farm, California’s largest homeowner insurance provider, announced in a press release that they would not accept new property and casualty applications for either personal or business policies. (State Farm, 2023).

Other major insurance providers quickly followed, with Allstate announcing in June 2023 that they would not write new homeowner policies. Then, the next month, Farmers, the state’s second-largest homeowner insurer, announced they would restrict new policies.

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I wonder if that’s skewed because a huge portion of the home value in those areas is the land itself.

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So you're suggesting that the average actual structure/home in Pacific Palisades has a lower replacement cost than the 9th ward in NO?

I just posted it but it's because CA meddled and legislatively and bureaucratically limited rate increases because those big bad insurance companies make too much money. So they just left the state and/or stopped writing new policies. There is no problem govt cannot create and no existing problem they cannot make worse.

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Kind of a flawed way of analyzing it when so much of the value of the property is from the land value.

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Not flawed at all. The value of land is generally about one-four of the overall total value (land & residential improvements, etc.). In any community instances exist where the land value exceeds or is below that general ratio. By and large, when land values are high, improvement values (and likely related costs for improvements will be equally high). So to compare Los Angeles to LaRose one may see an extreme difference in land value and improvement value. However, for southern California, the Atlantic Coast of South Florida, etc., it is their standard or typical value. In short the individual land value is a function of that specific market as a whole (as are improvement values - their levels are generally connected).

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5450 is cheap?

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This is almost exactly what I pay now for a ~$230k house in south Louisiana and that does NOT include flood coverage.

California has a higher standard of living and these homes are significantly more expensive, so what part of the country is really getting fricked by insurance rates?

Add in our inflated auto insurance as well for a little lagniappe of frickery.

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Your brain is flawed and there is no value in there

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Strong start to Friday on the OT.

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And yes this likely means fewer companies will write policies… but the risk and payouts has been there many years. Why is just recently companiesafr pulling out?

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See my long-ish excerpt and link above. It explains it perfectly.

Just found this quote though which I think sums it up perfectly with far fewer words

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What are the rules for insurance companies?

Unlike most states, California heavily regulates its property insurance market.

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California seems to think they can control the market and pricing, not understanding that companies can choose to not do business there. It's kind of a perfect case study on why government pricing never works and results in fewer options.

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You suggested that lower rates in CA vs. LA were because the value was in the dirt and not the home.

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Uh no. I merely suggested that looking at their premiums vs the value of the property is a bit flawed because the land is so valuable. That does not mean I think it's cheaper to build in Cali than NO.