I read an interesting article today from a newspaper in Pennsylvania. The Times-Tribune editorial suggests that the Federal Government should require catastrophe insurance for all homeowners in “harms way.” The argument is that this will help reduce costs when the next disaster strikes. Further, they argue that this might deter some from building in harms way.
First, deterrence is a non-issue. Lets see, we have earthquakes and fires in California, hurricanes along the gulf coast and eastern seaboard, tornadoes in the middle of the country, a flood up in New England, rains in the northwest. Where would we live? Lets face it: most of the country is in a danger zone from one type of disaster or another.
Second, as to reducing costs, it would reduce costs to the Federal Government – assuming they dont screw it up. Ask anyone who has handled a flood claim about it. Flood claims are a nightmare to handle. You have to make all types of determinations and then the homeowner might get paid.
The solution: private insurance that is optional, but those who do not take it will not be given government subsidies to repair after a natural disaster. It keeps the costs to those who take the risk, and it keeps the government out of a private industry.