Katrina, part 2
I don't want this to turn into a rant, so I'll try to keep it short and sweet...
To help prevent/reduce future disasters like Katrina, and the costs associated with the aftermath, the government must forfeit its current role as the nation's flood insurer. Today's system socializes the risk[1] of living in dangerous areas, while privatizing the benefits[2]. IMHO, anybody should be able to see that is not the correct way to run an insurance program. There is no way to prevent natural disasters, but we should not be giving incentives to put lives and wealth in a position where devastation is relatively likely.
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[1] The government requires that any property which exceeds a certain likelihood for flooding buy federal flood insurance. The rates are set such that, in an average year, insurance premiums equal payouts. In years such as this, where payouts will clearly be far higher than premiums, the flood insurance program is authorized to borrow from the U.S. Treasury. In many areas, homes are rebuilt/repaired with insurance money, flooded again, rebuilt...ad infinitum.
[2] The same flood-prone areas, being close to water, tend to be attractive places to live and work (typical benefits include shipping, fishing, and tourism). By paying below-market rates for flood insurance, residents and enterprises do not see the full cost of existing in flood-prone areas. Large benefits + government-sponsored reduction in insurance cost = excessive development in risky locations.
1 comment:
holy shit... that actually makes quite a lot of sense. This is like the first time I've seen anyone on the internet actually have more of an in depth analysis than 'fema sux'
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