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There already is a federal program for uninsurable properties (for flooding only, I believe). They take whatever insurers reject. By my understanding, people ju

by elteto 3y ago

There already is a federal program for uninsurable properties (for flooding only, I believe). They take whatever insurers reject. By my understanding, people just keep building on the same spot, even if it floods constantly, therefore they are a huge drain on the program. I don’t see a solution honestly. With global warming large parts of the world will become uninsurable. And we shouldn’t expect insurance companies/the government to carry that burden just because someone decided to live there.

selectodude 3y ago
That federal program is broke as a joke, and it generally comes with extremely high deductibles and poor payouts. It’s easy for states to regulate insurance companies for political points, which you’re seeing in California and Florida. However, insurance markets collapse slowly and then very very quickly when the math stops working out.
- elteto 3y ago
  IIRC, it’s broke because only a small handful of properties account for a disproportionate amount of the claims.
  - sokoloff 3y ago
    Isn't the essence of pooled-risk insurance that a vast minority of policies will represent a disproportionate number of the claims in any given time period?
    - harshitaneja 3y ago
      Yes. But not from the same group of people over and over again. At least not in the laissez faire style systems where the market would stop assuming uniform risk and increase insurance rates to the expected values based on the probabilities of the specific circumstance. In a dirigiste economy, state would choose certain social factors to protect and keep the distribution of costs uniform for the betterment of the whole society. But even in those systems, I am not sure we should have beachfront properties or similar as factors. (Sorry about my lack of proper vocabulary and jargon in this comment, I seem to have forgotten all of my vocabulary relating to sociology and economics.)
      - selectodude 3y ago
        Which ends up being the issue with any insurance programs for the uninsurable. 100 percent of the time, it will end up being a subsidy to the policy holder. If it weren’t, they’d be insurable.
        harshitaneja 3y ago
        Exactly. And a market in general wouldn't ever create those programs themselves if they don't provide any direct or indirect profits. So these would be state directed. I am not sure we have any disagreement anywhere. :)
      - sokoloff 3y ago
        > even in those systems, I am not sure we should have beachfront properties or similar as factors If beachfront properties have substantial risks that inland properties don't (such as flooding from storm surge*), then not using is_beachfront? as a factor will end up being a subsidy to the owners of beachfront properties. * - https://www.nhc.noaa.gov/surge/ https://www.nhc.noaa.gov/surge/
- seanharper 3y ago
  The national flood insurance program shows one of the downsides with government participating in the private market (there are some plusses as well) - their rates were set too low, and that created a group of people who were politically motivated to agitate to keep them low. It's very hard to find the political will to raise insurance prices on those people, even though the majority of people/voters understand that it's a subsidy that doesn't make sense - first because its not fair, second because it encourages outsizes risk taking.
- zzleeper 3y ago
  That federal program, even with high deductibles, completely subsidizes their customers at the cost of taxpayers. They massively underprice the hazards, at the taxpayers ends up being on the hook at the cost of people who decided to built (and rebuilt) "their house on the sand"
kdmccormick 3y ago
I'm no free-market zealot, but in this case it seems like the market has spoken. They shouldn't live there! Of course, there are ways to be humane about this, given that tearing people apart from their communities is bad for society. The government could taper off the program slowly, giving communities time to relocate. Or they could provide damage payouts with the stipulation that they are used to relocate somewhere else with lower risk, not rebuild in the same spot. But to indefinitely subsidize building in doomed places? Doesn't seem right. I'm sure there's nuance I'm missing, happy to be enlightened.
- elteto 3y ago
  I don’t think you are missing any nuance at this point. If the amount of uninsurable properties is (comparatively) small, it’s way easier to throw some money at them and keep everyone happy. I think that’s the basic premise of the program. Everything changes when, for example, a large chunk of South Florida becomes uninsurable or inhabitable, potentially displacing hundreds of thousands. I don’t think we have anything in place for that scenario.
  - jen20 3y ago
    Can’t we pay to put them on busses or something? That seems to be the approach to the displaced which is favoured by Florida politicians after all.
- rs999gti 3y ago
  I would think that the market would also adjust towards building more hurricane resistant housing like earthquake proof buildings in San Francisco and Tokyo
- pnutjam 3y ago
  Read the act 1 section, or listen to the podcast. This has been tried and it's basically impossible in a capitalist system with local democracy. https://www.thisamericanlife.org/762/transcript https://www.thisamericanlife.org/762/transcript
- seanharper 3y ago
huthuthike 3y ago
A lot of these people are stuck in the situation. While they can get flood insurance to rebuild the property, they can't afford to abandon the property, and they can't find anyone to sell it to. So they are in a cycle of rebuilding the property, waiting for a flood, then rebuilding it again. There is a pretty obvious solution in my mind: The federal government offers homeowners a buyout for them to move out of that property. If they choose not to take the buyout, they are removed from the flood insurance program. This would save the government a lot of money over time, even if they made the buyout significantly higher than the property value.
- kube-system 3y ago
  How would you handle sales of the property? Some of these are desirable beachfront properties.
  - alistairSH 3y ago
    Any property bought by the government under these conditions would be condemned. Doesn't matter if it's beachfront - there shouldn't be a home on a beach that sees significant hurricane damage every year.
    - kube-system 3y ago
      Yes, I am saying that it could be desirable for the owner to refuse a buyout and sell it to someone other than the government.
      - alistairSH 3y ago
        Yeah, we'd have to condemn the home as part of the process to avoid that. Or at least flag it as uninsurable, so any buyer would have to bring cash and be willing to eat a total loss.
        kube-system 3y ago

by elteto 3y ago

selectodude 3y ago

That federal program is broke as a joke, and it generally comes with extremely high deductibles and poor payouts. It’s easy for states to regulate insurance companies for political points, which you’re seeing in California and Florida. However, insurance markets collapse slowly and then very very quickly when the math stops working out.

elteto 3y ago
IIRC, it’s broke because only a small handful of properties account for a disproportionate amount of the claims.
- sokoloff 3y ago
  Isn't the essence of pooled-risk insurance that a vast minority of policies will represent a disproportionate number of the claims in any given time period?
  - harshitaneja 3y ago
    Yes. But not from the same group of people over and over again. At least not in the laissez faire style systems where the market would stop assuming uniform risk and increase insurance rates to the expected values based on the probabilities of the specific circumstance. In a dirigiste economy, state would choose certain social factors to protect and keep the distribution of costs uniform for the betterment of the whole society. But even in those systems, I am not sure we should have beachfront properties or similar as factors. (Sorry about my lack of proper vocabulary and jargon in this comment, I seem to have forgotten all of my vocabulary relating to sociology and economics.)
    - selectodude 3y ago
      Which ends up being the issue with any insurance programs for the uninsurable. 100 percent of the time, it will end up being a subsidy to the policy holder. If it weren’t, they’d be insurable.
      - harshitaneja 3y ago
        Exactly. And a market in general wouldn't ever create those programs themselves if they don't provide any direct or indirect profits. So these would be state directed. I am not sure we have any disagreement anywhere. :)
    - sokoloff 3y ago
      > even in those systems, I am not sure we should have beachfront properties or similar as factors If beachfront properties have substantial risks that inland properties don't (such as flooding from storm surge*), then not using is_beachfront? as a factor will end up being a subsidy to the owners of beachfront properties. * - https://www.nhc.noaa.gov/surge/ https://www.nhc.noaa.gov/surge/
seanharper 3y ago
The national flood insurance program shows one of the downsides with government participating in the private market (there are some plusses as well) - their rates were set too low, and that created a group of people who were politically motivated to agitate to keep them low. It's very hard to find the political will to raise insurance prices on those people, even though the majority of people/voters understand that it's a subsidy that doesn't make sense - first because its not fair, second because it encourages outsizes risk taking.
zzleeper 3y ago
That federal program, even with high deductibles, completely subsidizes their customers at the cost of taxpayers. They massively underprice the hazards, at the taxpayers ends up being on the hook at the cost of people who decided to built (and rebuilt) "their house on the sand"

kdmccormick 3y ago

I'm no free-market zealot, but in this case it seems like the market has spoken. They shouldn't live there! Of course, there are ways to be humane about this, given that tearing people apart from their communities is bad for society. The government could taper off the program slowly, giving communities time to relocate. Or they could provide damage payouts with the stipulation that they are used to relocate somewhere else with lower risk, not rebuild in the same spot. But to indefinitely subsidize building in doomed places? Doesn't seem right. I'm sure there's nuance I'm missing, happy to be enlightened.

elteto 3y ago
I don’t think you are missing any nuance at this point. If the amount of uninsurable properties is (comparatively) small, it’s way easier to throw some money at them and keep everyone happy. I think that’s the basic premise of the program. Everything changes when, for example, a large chunk of South Florida becomes uninsurable or inhabitable, potentially displacing hundreds of thousands. I don’t think we have anything in place for that scenario.
- jen20 3y ago
  Can’t we pay to put them on busses or something? That seems to be the approach to the displaced which is favoured by Florida politicians after all.
rs999gti 3y ago
I would think that the market would also adjust towards building more hurricane resistant housing like earthquake proof buildings in San Francisco and Tokyo
pnutjam 3y ago
Read the act 1 section, or listen to the podcast. This has been tried and it's basically impossible in a capitalist system with local democracy. https://www.thisamericanlife.org/762/transcript https://www.thisamericanlife.org/762/transcript
seanharper 3y ago

huthuthike 3y ago

A lot of these people are stuck in the situation. While they can get flood insurance to rebuild the property, they can't afford to abandon the property, and they can't find anyone to sell it to. So they are in a cycle of rebuilding the property, waiting for a flood, then rebuilding it again. There is a pretty obvious solution in my mind: The federal government offers homeowners a buyout for them to move out of that property. If they choose not to take the buyout, they are removed from the flood insurance program. This would save the government a lot of money over time, even if they made the buyout significantly higher than the property value.

kube-system 3y ago
How would you handle sales of the property? Some of these are desirable beachfront properties.
- alistairSH 3y ago
  Any property bought by the government under these conditions would be condemned. Doesn't matter if it's beachfront - there shouldn't be a home on a beach that sees significant hurricane damage every year.
  - kube-system 3y ago
    Yes, I am saying that it could be desirable for the owner to refuse a buyout and sell it to someone other than the government.
    - alistairSH 3y ago
      Yeah, we'd have to condemn the home as part of the process to avoid that. Or at least flag it as uninsurable, so any buyer would have to bring cash and be willing to eat a total loss.
      - kube-system 3y ago