What is an actuarial? Because I have an idea of what I think it is, but you tell me, what is an actuarial?
Yeah. To keep it very simple, for every dollar that an insurance company takes in, right? They want to make sure that they’re not paying out more than that dollar.
So, an insurance company is going to look at the risk. They’re going to look at historical data and the amount of property that they’re insuring. It’s oftentimes referred to as like, the total insured value. So in the event of a catastrophic loss, we’re going to pay out X number of dollars.
So they take that total risk that they have on their portfolio and need to make sure they’re taking in enough premium should a catastrophic fire or a catastrophic event happen.
And so what has happened is ten years ago, when we weren’t having these large historical fires happen so often or so big, insurance companies were raiding homes, that in an event where you had a house fire and it maybe spread to the neighborhood, and the insurance company would be paying out on a large event, maybe five or six homes got lost. Right? In a neighborhood as opposed to recently with these large historical fires, they’re paying out for hundreds or if not thousands of homes that are being destroyed.
So that number is way different today than it was before. And that’s really changed the risk and the exposure in kind of driving the rate.
Okay? And that’s an interesting issue because I’ll play devil’s advocate here, okay? The way it’s perceived with a lot of property owners in Tuolumne County that have been denied insurance or their insurance rates are increasing, or they are, I’ll say, forced to use the Fair plan because it’s very expensive.
What it feels like is that there’s this perception that Tuolumne County is a higher risk and that fires are more likely to happen here than somewhere else. And there have been other fires throughout the state.
And so if I own an insurance company, this is my opportunity to jack those rates up and kind of squeeze these communities and get more money out of them because there’s this perception that there’s more risk and understanding whether or not that risk is truly at the level that the insurance industry seems to think it is. I think that’s where a lot of the conflict is.
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