Kingsview CIO Scott Martin On Fox Weather First – 2.4.25
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BRITTA MERWIN: Well, on the topic of California State Farm, California’s largest home insurance provider is requesting an emergency 22% rate increase. You heard me right. Craig’s face just dropped when he heard of the 22% rate increase in response to the devastating Los Angeles County fires.
CRAIG HERRERA: They’re citing massive financial losses and escalating wildfire risks, and the company warns that without the increase, it may face serious financial instability. Yesterday on Fox Weather, now Ian Oliver and Fox Business contributor Scott Martin dove deeper into this, looking at the market meteorology involved.
SCOTT MARTIN: Scary state of affairs, lack of preparation, Ian, and the sad part about this is that it comes from so many facets. It comes from the state—really, from the regulations on the insurance companies, which, by the way, have capped rates. So they couldn’t have increased them if they wanted to. The fact that some of the state and the counties did not assess the properties…
IAN OLIVER: Correctly.
SCOTT MARTIN: …as far as values. So, guess what? The insurance companies didn’t insure the right amounts because they didn’t have the correct assessments of what the homes were actually worth. So that coverage was not there. And secondly, the folks out there probably were not pushing those buttons enough to say, “Hey, we need to get some additional insurance.” And certainly, the state insurers—as opposed to the private insurers, which are for-profit businesses, Ian—are going to go out there and try to raise rates and try to get the least amount of coverage for the most cost, because they want to make a profit too. And you have a major disaster like this, which nobody’s prepared…
IAN OLIVER: For, and they’ve not been in a profitable state to put it, not quite. It’s been several years now. This was truly a nightmare. We’ve talked here on Fox Weather about the loss of life, the loss of properties—homes, businesses, tens of thousands of them. And now it has left a lot of people in Southern California with some hard questions about their future. And then they hear something like this—asking for a 22% rate increase. You mentioned that with some of the assessments, some of these generational properties—a lot of people aren’t necessarily in a place to start the same life they had before this. Is this going to factor in moving forward?
SCOTT MARTIN: Just a bit. And for some of these folks, Ian, their home was their biggest asset—their retirement was the home. And now, our biggest asset, our homes, is washed away. And the insurance company will give you a few hundred grand to rebuild the house that you thought was worth $1.5 million. That’s not quite going to happen. So things do migrate elsewhere. I mean, we’ve seen this in Florida myself; I know you’re from the Tampa area. Businesses will move on. People move on, and they will go somewhere else. North Carolina is experiencing the same thing. So economic activity does not get destroyed; it gets created somewhere else, but that puts additional pressure on, say, the tax base in the area that’s trying to recover, for example.
IAN OLIVER: So what does this tell us about the overall industry, then? Because you just brought it up, and it’s a great point. We had you with us here on Fox Weather. It was kind of the same song, different verse to what played out down in Florida with Helene and with Milton. Are people going to be priced out of some of these areas solely related to insurance? Will they be able to get insurance?
SCOTT MARTIN: Insurance is going to be questionable—would an insurer actually insure them? And it sounds like the same song, Digital Underground, one of my favorite songs from “Nothing but Trouble.” That movie, if you remember, “Get Some Fame, People Change.” It’s like the same thing about the insurance companies that want to go in there, Ian, and take on this risk and this inability, as per the state’s directive to increase rates to the amount that they should have been to cover this stuff. And the fact that the state has not committed to making further changes going forward to prevent these fires next…
IAN OLIVER: Time, right. And you mentioned things related to Florida, like the flood insurance program—
SCOTT MARTIN: Wind insurance—
IAN OLIVER: Wind insurance—
SCOTT MARTIN: Salt water versus freshwater.
IAN OLIVER: Right. And all of these nitty-gritty details matter when you’re going through that, and they all cost money. Yes. I mean, you’ve lived through that.
