Who pays for risk?

https://www.pilotonline.com/opinion/letters/vp-ed-lets-1020-20191020-diinurkgezhdnbyjsaohnml4u4-story.html

So, homeowners in Okracoke are upset that they aren’t getting a taxpayer bailout on flood damage from Hurricane Dorian. It appears that many, if not most, chose not to purchase flood insurance.

So, whose fault is that? Why should taxpayers who live in Kansas, or here in Tidewater, who cannot afford a beach house themselves be required to bail out those who chose to built in a flood prone area and not carry appropriate insurance?

What line in the Constitution allows for such charity with other people’s money?

17 thoughts on “Who pays for risk?

  1. I don’t think the Ocracoke folks were looking for “coverage”. I think they were hoping for some temporary assistance while they rebuild. Which is what FEMA does.

    Liked by 2 people

  2. RE: “Why should taxpayers who live in Kansas, or here in Tidewater, who cannot afford a beach house themselves be required to bail out those who chose to built in a flood prone area and not carry appropriate insurance?”

    They shouldn’t, plain and simple. Government-based disaster recovery — to the extent it exists at all — should be limited to the restoration of true public goods (things like roads and water systems). There should be no such thing as individual disaster relief, because it can never be done fairly.

    Liked by 1 person

  3. Why should we cover Kansas homes destroyed by tornadoes or California homes destroyed by wildfire?

    Yes, obvious problems like Ocracoke are easy to pick on. And certainly expensive homes on beaches shouldn’t be subsidized.

    But there are parts of the country now where flooding hasn’t been a problem before, but is now. Not just waterfront either. One and two feet of unprecedented rain have raised havoc in areas not even thought of as flood prone. And some of these areas had been family homes for generations.

    Liked by 1 person

    1. “WE” shouldn’t cover any of those things. People should buy their own insurance.

      If you choose to live on the beach, or in Tornado Ally, or the Ring of Fire those are choices you make and you should cover your own risks. The cost of the insurance should figure in to your choice to live there.

      But no one has the right to force others to assume their risks.

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      1. If your homeowners insurance is a large national company your premiums reflect losses wherever it underwrites.

        Unless certain specific exclusions are listed such as rising water which requires separate flood coverage.

        Liked by 1 person

      2. RE: “If your homeowners insurance is a large national company your premiums reflect losses wherever it underwrites.”

        Are you really sure that’s true? The probability of occurence of a hazard is a major variable in the math used to calculate the premium amount, and that probability would necessarily be based on local conditions, not national ones. That leaves admin/overhead as the only part of the premium amount an insurance company might “pad” or inflate.

        Do you really believe that insurance companies pad their premiums in such a way, with the full approval of state regulators, or are you just guessing?

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  4. “Rates are also affected by factors that are completely out of your control, like the financial health and solvency of your insurer and the reinsurance companies (your insurance company’s insurer who helps them pay for claims). When carriers suffer a record-setting number of losses in a given year, like they did in 2017, that affects the industry’s bottom line, and there’s a good chance the following year’s rates will reflect that — often at the behest of reinsurance companies.”

    “If your rates went up in the last month or year and you’re wondering how that happened, the horrifically active tropical storm season may be part of the reason.”

    https://www.policygenius.com/homeowners-insurance/why-did-my-homeowners-insurance-rates-go-up/

    I am no expert, but insurance companies have to make money. And if they, or their reinsurers, pay out big losses, they have to recoup somewhere.

    My point was simply that if USAA insures me and a house in Kansas both of those premiums are income. Then a loss in Kansas come from that pool. If enough comes out, rates may go up across the board.

    Some companies have stopped writing insurance completely in coastal areas.

    I might be wrong. And would demur to further info.

    Liked by 1 person

    1. Your rates are indeed affected by local factors, from as obvious as the prevalence of wildfires in your area to less straightforward such as the distance to the nearest fire hydrant.

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      1. True. But major national catastrophes do also. Which essentially means that rate payers with Aetna in Tidewater are contributing to the coverage for Kansas homeowners in tornado alley.

        Liked by 1 person

      2. RE: “Which essentially means that rate payers with Aetna in Tidewater are contributing to the coverage for Kansas homeowners in tornado alley.”

        That happens to a far less extent than you might imagine. The bulk of your premium is simply the result of the actuarial calculation for the thing you are insuring. Your link puts it this way: “The amount you pay in premiums is largely dependent on your home’s location, the age of your home, and your insurance score.”

        This is another example of how insurance does not work by spreading risk.

        Like

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