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Idea re: Emergency Insurance

Submitted by TX Politico on Fri, 12/12/2008 - 11:06
in

Let's change FEMA’s (and similar disaster response agencies’) regulations as follows:

1.   People can receive help from them no more than three times in their lifetime and
2.   No one may receive assistance more than once per type of disaster within a ten year period.

For example: if a person lives in a hurricane prone area and their house is destroyed by a hurricane (or related disaster such as a tornado or flooding caused by a hurricane), they can receive help to restore their lives to some semblance of order. However, they may not receive any more hurricane-related bailouts for the next 10 years.

Why is this a good idea?

Because right now we are subsidizing people who think it is a good idea to build their house in areas which are prone to natural disasters on a regular basis and everyone who does not live in such areas is paying for them to do so.

We help them, year after year after year, to rebuild in the exact same damn spot they did before. This is insanity.

By removing the incentive which allows them to spread their risk among everyone else, we will begin the process of forcing people make truer assessments of the amount of risk they are willing to take on than they are currently doing.

The positive results? 

  1. People will move away from areas prone to certain natural disasters or
  2. Have to buy proper insurance to ameliorate the risk they are voluntarily taking.
  3. Also cost to everyone else will go down as the government stops forcing them to pay for someone else’s willful disregard of reality.
  4. "Worst-disaster ever" will be used less frequently as fewer people are at risk to harm.
The trade-off? 
  1. Areas like South Florida would see a drop in population or
  2. Their inhabitants would see a rise in the cost of living commensurate with the true risk they are taking to indulge their preference to live in the area.
This new policy would also apply to places like Tornado Alley in the Great Plains, flood-prone areas like New Orleans, California and its earthquakes, etc.
 
Thoughts?

 

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Comments

Insurance will not cover them.

Submitted by RisingTide on Fri, 12/12/2008 - 12:14.

you have noticed the current credit crisis? well even before that, they were denying coverage to people in hurricane prone areas. That means most of coastal texas, florida (entirely).

I think you ignore the actual reasons why people live in these places -- geographical and strategic GOOD THINGS often come with RISK. Unless you'd like to suddenly have to pay more on all your overseas purchases, I think this bears a lot of thought.

Also: Where the fuck would you put Manhattan?

Clarifying my position

Submitted by TX Politico on Fri, 12/12/2008 - 12:43.

First - there's no need to be rude.  You can certainly make your point without cursing.

Second - what does the current credit crisis have to do with relieving the rest of the country from the burden of paying for someone else to take risks they would not otherwise take if they had to pay for it themselves?  If the residents there want it badly enough, and thus are willing to pay for it, insurance will take that bet given the right premium.

Third - of COURSE there are good things that come from living in places like South Florida.  That's why people live there.  (Personally, I visit Florida every chance I get.) The question is, without relying on everyone else to bail them out after a disaster, would they still consider the risks worth the benefits?

Some people would continue to think the benefits are worth it.  Those people could opt to remain and to purchase insurance, knowing that they would no longer be able to rely on you and me to pay for their voluntary decision to incur the risk of disaster.  Others would decide that maybe the benefits aren't worth the extra money and they would move.

As for Manhatten . . . I guess they get to buy insurance then, don't they?

if sea levels rise, Manhattan will be gone for good.

Submitted by RisingTide on Fri, 12/12/2008 - 12:48.

ditto with Florida. And they WILL rise. Five degrees for the world is a conservative estimate of the temperature change. And five degrees colder than it is now was an Ice Age. What will happen when it's five degrees warmer? Nobody knows, but they've got a lot of models....

To your first point: I wasn't cursing at you. Manhattan would be a big problem.

To your second point: What do you want to do if we lose New Orleans? How about Los Angeles? Many of these places are ports, instrumental to the rest of our economy. Without them, we would be forced to import much more from Mexico. And even with decreased shipping through them, due to people leaving the places, it's likely that we'd ALL see higher prices. I'm sorry that probably wasn't clear. I think there is a compelling public interest to having efficient transportation networks (however, there might be better transportation networks. not my specialty) -- and if the price of them is some amount of money whenever disasters hit, well it is at least possible that might be a worthwhile price, isn't it?

Removing our ports, or dramatically slowing them, would drive many stores out of business. It would dramatically damage our economy.

I'm at least partly playing devil's advocate here... but it's important to note that most of the "We don't get flooded anymore" in teh Midwest was by public decisions on removing levees and letting the Mississippi flood. Maybe this could be a model used in other preventable areas, incentivizing lower risk housing (for tornados, a mudbrick house without windows is likely to be much less dangerous, for instance).

Your basic premise is off:

Submitted by TX Politico on Fri, 12/12/2008 - 13:09.

Your basic premise is off: how does suggesting that people pay insurance for the risk they choose to take equal "losing New Orleans" or "removing our ports" or that these places would cease to exist?

Debating the reality of "climate change" is one thing.  Suggesting that people not rely on you and me to cover their bets is a wholly different matter.

in many of these places, insurance is no longer being issued.

Submitted by RisingTide on Fri, 12/12/2008 - 13:32.

many insurance companies won't touch insurance in a flood plain:

http://consumerist.com/5044232/help-chase-suddenly-wants-me-to-buy-tons-...

and those who do often deny claims for little or no reason:

http://www.legalradar.com/2008/11/hurricane-victims-denied-insurance.html

 

One of the basic problems with insurance is the opaqueness of the marketplace.  Most people cannot fairly gauge their insurance company's policies -- say if an insurance company has a policy to deny any claim above a certain dollar amount, then it would be a good idea to get a different insurance company, as you would be liable for the lost money until you can get it resolved in court (which, with stonewalling can take a while). HOWEVER, most people don't make large claims on an insurance company. So, you often don't know about such policies until AFTER they hit you. And even one such brush with a bad company can leave you bankrupt and homeless.

Insurance companies are not our friends. They act in their own self-interest, and it always looks bad to put a lot of negatives down on your balance sheet. It's in their best interest to simply collect payments, and deny as much as they can when they need to reimburse. it is ALSO in their best interest to pressure the government to step in, repeatedly, to take their debt away.

 

With Friends Like These

Submitted by TX Politico on Fri, 12/12/2008 - 13:45.

Your links do not prove what they would seem to be intended to prove. Rather, they offer anecdotal evidence of problems that have occurred.

If a company is doing something illegal (e.g. denying claims they are liable to pay or changing the terms of a contract after it has been signed), then they should be punished and their customers made whole.

Also, if insurance is not being offered in an area, then perhaps more people would need to move then.  I would bet there is a reason it is not offered.

If the insurance company is going to lose money or go out of business because of claims in certain areas, do you think they should be forced to provide coverage in that area?

If not, then would you suggest the government pick up the tab?  That's exactly what I am arguing against.

Sometimes things like the inability to get insurance in an area is a signal that people should pay attention to. 

If they chose to ignore that signal, then, well . . . you plays the game, you pays the consequences.  Don't like the odds?  Live somewhere else.

If it a big enough business (e.g. the Port of Las Angeles) they WILL be able to get insurance.

Anecdotal evidence is still evidence. They're what came to mind

Submitted by RisingTide on Fri, 12/12/2008 - 13:55.

as a quick googling.

Of course there is a reason that insurance isn't being offered: corporations have forgotten what their job is. If your job is to offer insurance, you offer it at a good rate. you do not refuse to offer it simply because it would be unaffordable. That's bad business, and it just might happen that people have enough money to pay for their beachfront properties.

Do you believe that we should require insurance in this country? It would seem like that might solve more problems than simply saying that the taxpayer won't cover anything, and with less hassle.

I do not believe that they should be forced to provide coverage. But neither do I believe that it makes any fiscal sense for us to reward companies who refuse to provide coverage to areas. In your scheme, the government would have a compelling reason to ensure that there are insurance companies that would cover critical national defense areas, among others. Would you be okay with modifying the corporate taxation structure for that?

If enough people decided to live someplace else, you WOULD lose the ports. If your plan did anything at all, we WOULD lose jobs and corporations in the Interior, due to increased need for shelving and storage (Just In Time is a fickle bitch to maintain, very prone to structural problems). You would see higher costs to live in places, which would drive out the lowest income people... no, it wouldn't. because they would simply lose their homes, and then we could pay them welfare instead.

Your idea seems simplistic and effective, but under the surface it would destroy the American Economy.

Perhaps a more targeted approach would work better... beachfront properties with Values above X are only given up to Y by the government, and this is disclosed beforehand so that they will know that they are liable for the rest. This way we at least limit the damage, without causing massive economic dislocation.

People move where the jobs are. There are many jobs where there is no viable location that is not riskprone to live. These jobs would have to pay more, giving other places a competitive advantage. Places like Vancouver or Mexico.

The Plural of Anecdote is not Evidence

Submitted by TX Politico on Fri, 12/12/2008 - 15:48.

While they are interesting stories, they do not prove anything.  Confirmed studies and statistics are one thing. Anecdotes are another.

Of course there is a reason that insurance isn't being offered: corporations have forgotten what their job is. If your job is to offer insurance, you offer it at a good rate. you do not refuse to offer it simply because it would be unaffordable. That's bad business, and it just might happen that people have enough money to pay for their beachfront properties.

Um, what?  If a company offers insurance, it weighs the risks of offering a particular product in a particular area and decide if it makes sense.  If it chooses to do so, then it charges a rate which would cover expected costs and offer a profit.  If the risk is too much, it doesn't offer it.  It would be bad business to offer something that would potentially drive you out of business.  If it were potentially feasible, they would offer it.

Do you believe that we should require insurance in this country? It would seem like that might solve more problems than simply saying that the taxpayer won't cover anything, and with less hassle.

No, I never said anything like that.  I said we would help people who had misfortune . . . to a degree.  After that, if you continue to take the same risks that we helped you out for before, then you are on your own.  Carry insurance or not, your choice.  If not, don't come back with a sob story later and ask for more money. 

But neither do I believe that it makes any fiscal sense for us to reward companies who refuse to provide coverage to areas. In your scheme, the government would have a compelling reason to ensure that there are insurance companies that would cover critical national defense areas, among others. Would you be okay with modifying the corporate taxation structure for that?

How are we "rewarding companies who refuse to provide coverage to areas"?  By allowing them to make decisions based on whether or not is makes sense to provide a service?

As for "national defense areas", like I told LnGrrr, that's already under government purview.  The government would pick up the tab to make whole government areas.  Where's the mystery in that?

I am talking about individuals who choose to take certain risks and then expect you and me to pay for their costs if those risks bite them in the ass.

If enough people decided to live someplace else, you WOULD lose the ports.

People adapt.  If a port was having trouble getting workers, it would offer more money and some people would decide it was worth the risk to continue living there.  Plus, with the extra money, they would be able to afford the insurance necessary to cover their assets.

you are making my point for me.

Submitted by RisingTide on Fri, 12/12/2008 - 15:59.

this is effectively a minimum wage increase, targeted to the particular areas most prone to trouble... Therefore, many minimum wage earners would be forced to be jobless -- this is simple econ 101, stay with me. But if you need to pay people more, the prices of goods goes up. While this might mean that we have more american manufacturing, in the short term the dislocation would be very very bad for our economy. And any importers would suffer badly. Unless they imported through Mexico or Canada, which they would because those countries do not impose such heavy tariffs on their ports.

Just admit that in the name of fiscal discipline you would like to move our shipping industry to Mexico and Canada. And that you think this would be a good thing to taxpayers.

The risk should never be too much to offer insurance -- at a minimum you could ask for half the value of the goods upfront, with the rest due the next year. Maybe no one could pay this, but... And I sincerely doubt that any place gets hurricanes more than once every five years or so.

I think the real problem with your plan is that you would create legions of destitute people. Most people will think "lighting won't strike twice" and will remain in the same area. Or, a smarter strategic decision would be to cycle people in and out of homes, so that they were only there for one disaster. Then you move the next people from CornLand Usa in.

I also think that you're going after white whales. Where are these places that routinely ask for money? last I checked after the flood of 1994 (go look it up, the study is online), they fixed most of the midwest so that flood damage would be much less severe...

 

I should have known better

Submitted by TX Politico on Fri, 12/12/2008 - 16:17.

RisingTide, I should have known better than to get into a conversation with you based on your previous posts in this forum. 

As with so many of the posts I have read from you on this site, you make assertion after assertion with nothing to back them up.  No stats.  No studies.  No anything.  Just bald statement of supposed fact.

You also change the subject (global warming, national defense areas, minimum wages, a desire to move jobs out of the country,  and forced insurance), indulge in ad hominem attacks (veiled charges of racism), and offer up straw man versions of arguments in attempts to get further reaction out your interlocutor.

If you want to continue such antics, have at.

I refuse to feed the troll anymore.

Have a good one.

you don't really read my posts, do you?

Submitted by RisingTide on Fri, 12/12/2008 - 16:35.

When I make charges of racism, I do it boldly, and with research to back it up.  I truly hope that you have not found any hidden allegations of racism in this conversation, because there weren't any!

You may be right, a lot of what I've posted here has no citations. My commentary on racism generally has citations (I'll point you to the work of Dr. Bonilla-Silva, as he's a great place to start. marvelous wit too). My work on the economy also is generally cited (you can see what I posted today, for example). Perhaps it's not well cited, peer-reviewed journals. But I don't think we need strict citation criteria.

I did not provide further evidence for the revocation of insurance in various regions, because I did not consider it terribly germane to the argument that I wanted to advance. I go off on tangents frequently, and I apologize if this is somewhat discombobulating.

Global Warming is a proximate cause of many disasters, so it was germane to bring up -- particularly when I wanted to make the point that relocation of all of our coastal cities (barring San Francisco which has actual hills) would come at an enormous cost (which might actually help revive construction. I may have to think about this some more.. It may be that massive dislocation could actually help the economy -- tangent end).

If you say that people will pay more for workers, then that is an effective wage increase. It isn't government mandated, but it is something that companies are obligated to do because of government. I don't know if this raises your hackles. A priori, it doesn't raise mine.

When you raise the idea of a differential wage structure based on how dangerous the place is, it is my natural inclination to look at port activity, as that is the easiest job category to be able to say "This will be effected." Because the natural competitors for ports are in other countries, it is natural to talk about American Job Loss. I will note that if I was talking about finance (aka Manhattan), the case for jobloss would be nonexistent. However, we have a very large workforce that is tied directly to globalization, and therefore the port question takes on more saliency than even finance, if you can believe it.

But, despite me attempting to stay on the topic of the ramifications of your idea, you have decided to label me troll.

I hope us military folks get an exemption

Submitted by LnGrrrR on Fri, 12/12/2008 - 14:33.

I certainly didn't choose to be stationed here in Biloxi.

Military is Government so it's not a free choice

Submitted by TX Politico on Fri, 12/12/2008 - 15:26.

LnGrrrR - the military is part of the government.  They would be responsible for you since they force you to be located in a high-risk area.

True but...

Submitted by LnGrrrR on Fri, 12/12/2008 - 16:34.

You'd have to get the insurance agencies to buy off on that!  :D

To be fair, Congress has done alot for us lately, such as providing relief for housing rental for soldiers. And if they have to close down Keesler, I won't feel too bad. I've been here nearly five years; I'm ready to move on.