Los Angeles’ Destruction Was Fueled by Bad Policy—and Bad Incentives
Research from Brian Albrecht, chief economist at ICLE, is cited in this piece in The Dispatch on the Los Angeles wildfires and public policy. Read the full article here.
The place to start is California’s onerous regulation of homeowners insurance, which has probably encouraged many Angelenos to live in more fire-prone areas and has kept many of them underinsured or without insurance entirely. As economist Brian Albrecht detailed last week, citing a deep dive paper from his colleagues at the International Center for Law and Economics (ICLE), California’s Proposition 103 forces private insurers to price their products not just below hypothetical market rates but well below their cost—creating “the biggest gap between rates and risk in the nation.” Albrecht adds that the system is also highly inflexible and insanely slow: California’s speed of rate approvals ranked second-to-last among the 50 states (and D.C.) over the last five years, with an average of 236 days for homeowners insurance. And it’s been getting worse: