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You don't even need regulation. You just need a private market of flood insurance that will be naturally prohibitive where the risk is high. The problem with le

• Dowwie 9y ago
  Does this story lead to evidence that Lenders were unaware of the Houston flood zone due to out of date flood maps?
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• loeg 9y ago
  You know, I had a similar idea. I have two concerns with that approach. One, the combined cost may not be reflected in the "sticker" price, and people may have some difficulty estimating a combined cost. I think this happens with cars, but may be mistaken. People look at the sticker price and maybe ignore the cost of insurance until they take it home? Maybe that's just a figment of my imagination, though. My other concern is that insurers may not appropriately price in the cost of insuring a flood area. Of course, people will flock to the lowest price insurer. Then a 100- or 1000-year flood rolls around, like Harvey, and the insurer goes bankrupt and people still lose their homes and money. This can be mitigated by insuring the flood zone insurers, or something like that, but doesn't that still amount to flood zone regulation regulation? Re: marking areas as "high risk" and not — obviously a binary distinction is a poor fit and some sort of gradient scale would be more appropriate.
  • zanny 9y ago
    Insurance isn't a single layer affair. Insurance companies have macro-insurance that covers the entire business in case they misjudged risk. It is legally required in (almost?) all insurance contracts to insure the company offering the insurance. Sometimes those meta-insurers are state agencies, sometimes they are private.
• zanny 9y ago
  The problem with leaving it out of regulation is that you get the exact scenario that is playing out in Texas - people buying homes and not getting flood insurance and then when the homes are destroyed the "consequences of the market" came through but now you have millions of homeless people whose chief asset just got literally washed away. If flooding were something localized to single homes every now and then society as a whole could endure the "expense" of having a few homeless destitute people on occasion when their homes just disappeared and it would not be a major problem. But this isn't just microeconomic consequences. When entire neighborhoods are demolished and nobody had flood insurance it causes major problems for the rest of us. Just because it is hard does not mean it is not worth doing. The alternative is to keep sticking fingers in ears while billions of taxpayer dollars go to rebuilding in areas that are at extreme risk to be destroyed again.
• saalweachter 9y ago
  The problem is that flood insurance doesn't work, as an insurance product. Insurance amortizes across populations to create the illusion of amortizing over time. It doesn't actually amortize over time. The variance on floods even on a national scale is too high to make it work.
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