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September 03, 2005

Flood Insurance

Two interesting snippets from John Tierney.

Starting in the 1960's, the federal government took over the business of insuring against floods. It offered subsidized insurance to people in flood-prone areas, encouraging seaside homes that never would have been built otherwise. Even at bargain rates, most people went without flood insurance - only about a third of the homes in New Orleans carried it.

People don't bother to protect themselves because they figure - correctly - that if disaster strikes they'll be reimbursed anyway by FEMA.
....

Here's the bargain I'd offer New Orleans: the feds will spend the billions for your new levees, but then you're on your own. You and others along the coast have to buy flood insurance the same way we all buy fire insurance - from private companies that have more at stake than do Washington bureaucrats.

Private flood insurance has come to seem quaint in America, but in Britain it's the norm. If Americans paid premiums for living in risky areas, they'd think twice about building oceanfront villas. Voters and insurance companies would put pressure on local politicians to take care of the levees, prepare for the worst - and stop waiting for that bumbling white knight from Washington.

I had thought that after the floods of 1992 the Feds had stopped subsidizing flood insurance in low lying areas. Obviously I was wrong.

September 3, 2005 in Insurance | Permalink

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Comments

In many areas in the US and especially along that coast, insurers won't underwrite those risks.

Posted by: auntymarianne | Sep 3, 2005 4:58:16 PM

Many states would embrace this idea for the flood insurance because floods are something common those years and we should protect ourselves somehow.

Posted by: Cara Fletcher | Aug 29, 2007 4:01:17 PM