This week’s print edition of The Economist includes an article entitled Uninsurable America. The subtitle reads, succinctly: Insurance is supposed to signal risk. Policymakers should let it. The article merits study in its entirety, but here are a few key excerpts:
For decades Americans have been moving to beautiful places that are vulnerable to extreme weather. Florida, once a swampy frontier, is now America’s third-most populous state. It is also the state most often hit by hurricanes. By 2015, the Atlantic and Gulf coasts boasted more than $13trn of real estate. Look West and the story is similar. Homes are proliferating in the wildland-urban interface, where nature and development anxiously coexist and wildfire season seems never to end…
…Those who enjoy the benefits of living in high-risk areas (such as a majestic ocean view) should shoulder the costs. However, both federal and state governments ensure that they do not, by subsidising or suppressing property insurance rates in such places. This has encouraged reckless building…
…Private insurers burned by huge payouts after disasters are abandoning risky markets such as Florida and California. Homeowners are turning to state-backed insurers of last resort, which offer less coverage for a higher price. When these plans cannot cover claims, taxpayers are often left with the bill.
The article concludes with this ominous forecast:
Eventually, … some Americans will need to move to keep safe from rising seas, roaring floods and fast-encroaching flames. … make no mistake: the longer politicians subsidise building in dangerous places, the worse the pain will be, and the bigger the final bill.
The underlying reality here? Insurance per se merely redistributes risk; it doesn’t reduce it. Private insurers aren’t asking high premiums because of greed; they’re asking high premiums because they’ve calculated the true risk. State and federal governments can’t insure at lower rates because they’re more efficient. Instead, they’re merely gambling that their bad bets won’t be exposed any time soon. They’re encouraging their state residents, and others contemplating a move in, to live in a state of denial.
As individuals and as a nation, we can and should face this challenge more dutifully. And the United States can do better. We’ve proved it. Commercial aviation provides a singular success story. In the 1960’s, commercial aviation was already the safest way to travel; only one or two thousand people were dying in accidents each year. But those in the sector realized that aviation was about to take off; that in a few decades, air travel would quadruple, and if airline safety didn’t improve, that growth would imply a fatal commercial accident about once a week. Statistical safety or no, the optics would not look good to the traveling public. Government and the private sector joined forces to establish a National Transportation Safety Board to investigate accidents, discover causes, identify and implement fixes – basically instilling a culture of “this must never happen again.” Half a century later, even in the face of that fourfold travel increase, in most years U.S. carriers experience zero fatalities.
In the same way, if property insurers can characterize wind, flood, fire, and other risks to individual homes, to communities, and to business sectors, that same information can and should be used to drive the search for prevention strategies – more intelligent land-use, more effective building codes, and more realistic public-policy governance and regulation. Surely, driving down risk, no matter how slowly, offers a much healthier, happier way to spend the next half-century than merely watching in dismay as suffering and losses mount.
When it comes to natural hazards, the emphasis should expand from a focus on saving lives per se. More accurate, timely hazards warnings are already increasingly effective in triggering evacuation and sheltering. But not enough is being done to ensure that those saved lives are worth living. The homelessness and joblessness resulting from many hazards devastates communities and ruins individual and family lives for decades, not just months or years. More than ten years after Katrina (2005), some survivors still experience post-traumatic stress. The 2020 Census shows the New Orleans population still down 100,000 from the 484,000 people who lived there in 2000. One 2023 report found many New Orleans homeowners still trying to put their finances back together following the disaster. Chronic health impacts can persist for decades. Hurricanes Hilary (west coast) and Idalia (east coast) took the headline attention off the Lahaina (Hawaii) fires, but survivors of all three of these events will still be picking up the pieces years from now, even as yet other disasters pile on, whittling away at the available relief funding and attention. More and more Americans will experience nightmarish loss. News- and social media will pour salt on those wounds, providing daily reminders of the contrast between the diminished circumstances and prospects for disaster survivors, versus those of the larger, thus-far unaffected American public.
Politicians get blamed for downplaying and subsidizing risk, and (for the associated inequities that favor the already well-to-do, at the expense of the poorest). Shame on them – maybe. But they’re operating in a democracy, and delivering only what the voting public demands and rewards. Politicians see that we don’t like to face facts and not just those associated with hazard risk. So, some politicians allow campaign rhetoric to degenerate to some form of looking us in the eye and saying “You’re living in a fantasy world… and I can keep the fantasy going four years longer than my opponent.” Any shame is therefore on us. We need to seek something more responsible from ourselves. Only then will our would-be leaders take notice and follow suit.
Living on the real world demands nothing less.
A closing thought. Meteorologists have a special opportunity to foster the needed social change. During the extended periods of calm that separate intermittent hazards and our life-saving warnings, we can be a voice for building societal resilience through land-use, building codes, and critical infrastructure protection – much as our dentists encourage us to floss and brush our teeth between visits.