The other day, I sat down for dinner with a couple who had an insurance agency in Hawaii. We address the issue of beach life and the threats of tsunamis and hurricanes. Of course, they offered flood insurance at their agency, and so far it hasn’t been cheap. Recently, in response to Hurricane Sandy, the federal government redrew flood maps, most of it moved inland quite a bit, miles in some cases. Let’s talk.
This solves two problems for the Federal Government, the National Flood Insurance Program and FEMA, namely, it helps pay for FEMA costs after disasters, which leaves a lot of money from premiums. It also means that there are more people paying into the system.
For an insurance agency, this gives them the opportunity to educate home and business owners about National Flood Insurance and ways to deal with such insurable risks – insurance agencies may offer free seminars to get new clients or have an excuse to call for a long time. customers readjust policies and potentially sell them more insurance, good news, right? Not so fast.
There was an interesting article on MSNBC Money on September 5, 2013 titled; “Report: Tsunami would sink California’s economy”, by Alicia Chang. I guess it goes without saying really, but the same could happen anywhere on the edge of the Pacific, plus many of the big earthquakes in Alaska have sent the tsunami to the Pacific, not down along the coast. Also, if you look at a globe, you can see why this report is misleading in many ways. The article said;
“The potential impacts, based on a hypothetical 9.1 magnitude shake on the Alaska Peninsula, were detailed by a team led by the US Geological Survey to help first responders prepare.”
What bothers me is that all these hypotheses that we see all the time really push the limits of advice to policy makers, almost to the point that no one would be allowed to build a house anywhere near the coast, imagine the cost to the economy in that case, if we had to move everything now, or drive flood insurance costs through the roof, to the point where no one could afford to live there?
One might wonder why the US government is suddenly getting into the insurance business, they are with health care and now they see dollar signs with the National Flood Insurance program and more money for FEMA, They are both completely penniless, well, so is the Federal Government which is deficit spending every year. We may need less government, but either way, you will need more flood insurance if you live in low-lying areas along the coast, because the government says so. Consider all of this and think about it.