The Insurance Scam: How Government Meddling Destroys Markets and Rewards Risk

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Chris breaks down how government interference and real estate lobbying have completely distorted the insurance market, turning it into welfare for the wealthy. From California’s wildfire chaos to Florida’s coastal real estate bubble, Chris explains why pricing risk properly matters — and why taxpayers should never be forced to subsidize million-dollar homes in disaster-prone areas. If you can’t afford the real cost of living somewhere, maybe you shouldn’t live there. www.watchdogonwallstreet.com

Episode Transcript

Speaker 1 (00:00):
The Watchdog on Wall Street podcast explaining the news coming
out of the complex worlds of finance, economics, and politics
and the impact it will have on everyday Americans. Author,
investment banker, consumer advocate, analyst, and trader Chris Markowski.

Speaker 2 (00:16):
Here's a riddle for you. What is something that you
buy that you purchase but you hope you never have
to use. I guess it could be a myriad of things.
One of them would be insurance. You don't want to
use insurance. You don't want to use your car insurance.
You don't want to use your home insurance. We want
to use your health insurance. You want to be healthy,

(00:37):
and most certainly, you don't want to die your life insurance.
Chris Rock did an entire bit on insurance. You know,
it's something you buy in case bad it happens. It's
true and unfortunately, unfortunately politicians and the government have tinkered
around with insurance, subsidizing insurance, insures of last resort, all

(01:02):
of this, YadA YadA, YadA YadA, bs and have completely distorted,
distorted the values of homes, caused all sorts of problems.
They've allowed for areas of the country to be overpopulated
in certain areas where they shouldn't be. Let me get

(01:24):
into this, for there was actually we're going to start
off this. There was a story several days ago I
had sticken around. I wanted to talk about this again,
talking about California. Californians these days dread receiving a letter
from their home insure as much as from the taxman.
Insurance rates of skyrocketing, and many have to increase much
more to correct for years of government price controls. Again,

(01:52):
Risk and the Great Book. I've talked about it before here,
the history of risk and throughout his risk was priced
in when the ancient Greeks were sailing the season, the traders,
the Venetians, the risk of ships going down and cargo
being lost, that was priced in, priced in to the

(02:17):
goods that were being sold. They had insurance too, Anyway.
The American Enterprise Institute put out a report comparing risk
insurance rates in states. Insurance premiums across the country have
climbed in recent years, but nowhere more than in California.

(02:40):
Take a look around the country, not including median insurance premiums,
not including flood, earthquake, personal injury and property coverage, ever,
is in ninety percent in California over the last six years.
That's fifty nine percent nationwide, forty seven percent in Texas,
fifty four percent in Florida. I live in Florida, and

(03:04):
I get this all the time. Man, Your insurance premiums
must be really high. No, no, they're not. Not why
I don't want to live on the water. I want
to live close, real close to the water. But I

(03:24):
want to make sure that I am a certain level
above sea level, so if the storm surge comes, I'm
going to be Okay. I built my home so the
new building codes here, I mean for crying out loud
our windows one hundred and sixty mile an hour wind.
I mean I got a break, you know, the house.

(03:45):
The yard was graded properly. You know, got twenty inches
of rain last year. The storm yard was dry, thing
drained out. My insurance premiums here in Florida, right near
the water, cheaper than they were in Long Island. Just
to leave it at that. Again, risk is priced properly anyway. Again,

(04:14):
even in California, these premiums have gone through the roof.
But still the insurers are underwater. The insurers are underwater.
Nine of California's top twelve home insures of pause or
restricted new business. Since twenty twenty two, seven of disclosed

(04:34):
plans drop policies. An increasing number of homeowners, especially in
areas with high fire risk, have been forced to obtain
coverage from the state's insure of last resort, the fair Plan. Now, again,
people might not like this, but here is a little
bit of reality. Okay, if you want to live in

(04:57):
an area, you want to live in an area where
there is a high fire risk, high fire risk. Okay, okay,
you should have you and you want to ensure your home,
you should pay and you should pay a lot. It's

(05:22):
not something that we the people taxpayers should have to
chip in. That, my friends, is bull excrement. Okay. I've
described this before. This is welfare for rich people. And
what happens is is you get over development in areas

(05:43):
that quite frankly shouldn't be overdeveloped, wouldn't have been over
developed unless the insurance premiums are subsidized. You want to
pay for your home. You got the money, Okay, you're
a big Hollywood type, you're a big actor, you're Brad Pitt.
You want to build a house there and a fire prone.
God bless, God bless. I don't want to subsidize your insurance.

(06:08):
But we have the same thing in Florida. And again
this comes down to lobbying. Oh yeah, yeah, your friendly
neighborhood real estate agents in their lobby has been pushing
this for a long time. Why why do you think
that this is the case. They know, they know all

(06:29):
sorts of properties along the water would no longer be
affordable to many people, which is fine, Which is fine.
I don't care turning areas back to nature. As far
as I'm concerned, I have no problem with all habitat
real you can't afford to live there. We're building in areas, okay,

(06:52):
building in areas maybe where we shouldn't be building. And again,
it you want to build their, have at it. Why
do I have to ensure your home? California, The underlying
problem is that state regulators for years suppressed rates by
barring insurers from incorporating future wildfire risk and reinsurance costs

(07:18):
into premiums. Do you understand how fricking stupid that is.
I don't know how to put it any other way.
I really don't imagine. Imagine if imagine if the government said,
you know what for life insurance, you know what you

(07:40):
can't now No, no, you life insurance companies, you can't
take into consideration, uh, someone's health or age when pricing
a life insurance policy. That's it's no longer insurance. Do
you understand.

Speaker 1 (07:58):
That?

Speaker 2 (07:58):
That's what we have. That's what we have. As far
as health insurance is concerned, call it health insurance, not
really health insurance. You could bust your asset, the gym
two hours a day, you could put into you got
the best blood results, low cholesterol, grate everything out there.
You know what, You're paying the same amount as a

(08:20):
guy that's drinking a fifty jack and smoking a pack
of cigarettes every day when it comes to health insurance.
So don't call it insurance. I've made fun of that
before in the past. The Los Angeles wildfires in January
required other insurance policy holders to bail the Fair Plan out.
State Farm General, the state's largest homeowner insurance, says it's

(08:42):
paying out one point a dollar twenty six in claims
for every dollar it collects in premiums now. Okay, that's
not a sustainable business model. Okay. It recently requested an
emergency twenty two percent increase to avoid an insurance death spiral.

(09:10):
California hasn't approved it yet. If State Farm fails, other
insurers and their policyholders will have to pay its claims,
driving up premiums even more. The the well the insurance
commissioner in California, Ricardo Lara, rebuffed State Farm, but now

(09:30):
it's saying, oh, well, you can raise it, but only
seventeen percent. Again, it's amazing, okay to take a look
at this and the government making excuses for all of
this nonsense. Listen, people, you know again, I've talked about

(09:56):
this before, even when it comes to life insurance. It's
part of our watchdog on Wall Street, Markowski Investments Financial
Independence Top twenty. You own the right amount of insurance,
not a penny more, okay, and your insurance needs are
gonna change over the course of your life. You know,

(10:16):
as my kids go on out of the house success,
I don't need as big of a life insurance policy
because they're able to take care of themselves. But again,
the importance of being able to price risk. Whenever the
government gets involved, and you get lobbyists involved in the

(10:37):
real estate lobby, ah, yeah, we gotta subsidize this and
we got to have a government flood insurance program. No
you don't, Now you don't. Someone wants to build on
the inner coastal down here and Florida. You know it's beautiful.
It's get you beautiful. You can put a boat lift

(10:59):
in the back, put your boat there in the water,
go out into the Gulf of Mexico. Sweet sweet, I
don't want to pay for your insurance. Okay, you better
put that house on stilts. Better put that house in stillts.
You better protect that house. And again, you lower your

(11:20):
own insurance premiums. You're forcing me to do it. You
want to live in an area California that's fire prone,
not to mention the fact you've got government officials that
don't even match. You get rid of brush and what
not to make things worse, fire comes. Well, don't say
we didn't warn you. Okay. If your insurance premiums are

(11:42):
really really high, well did more? Did Likely you might
live in a dangerous area, just saying can't afford it
somewhere else. Watch dog on Wall Street dot Com