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this post was submitted on 12 Jul 2023
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United States | News & Politics
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Insurance is a suckers game if you are trying to get insurance on a piece of land that will be underwater in the next few decades. Who wants to take on a risk that is guaranteed to happen?
Generally, insurance companies aren't taking that risk. They can decline to renew your policy if they give you 120 days notice, so, for the most part, they are only insuring the next year.
This is all about the immediate risk of major hurricanes and the rapidly climbing costs of rebuilds. I know people in Colorado are really struggling to rebuild because costs have risen so much recently and insurance didn't keep up. I recently moved insurers (to Farmers, ha) and increased my rebuild amount by nearly 30%. That certainly came with a policy hike, but gives me enough that I have reasonable confidence I could indeed rebuild a comparable house.
I suspect there's also a risk concentration problem with some insurers. I've got to imagine they are looking at massive computer models of possible hurricane tracks and seeing scenarios where there's an outsized exposure. Still, what is curious to me is that they can't price it in as that's essentially the business that they are in. Would the required rate increase really be that unpalatable?
People were saying Florida would be underwater “in a few decades” in 2005, almost a few decades ago…. And it’s not. Florida has a barrier island (it’s man made, I think) and mangroves, both of which slow land erosion along its coast.
Meanwhile there are people living there who need insurance
The thing about insurance companies is they are out to make money. They don't care about philosophy or the blowing of the political winds. So for them to pull out of Florida they must have analyses that show that pulling out will make them more money than staying in the market. It doesn't matter if there are people there who need insurance, Farmers is out to make money not give it away in a bad investment.
The problem is we allow them to subdivide the nation in their policies. The risk in Florida isn't shared across the nation, which would mitigate this issue.
So we should instead punish everyone else for not living in a documented flood plane?
You're not being punished in that scenario. You're in a larger pool which lowers risk. Lower risk means lower premiums. It's one of the principles that makes socialized medicine in countries all over the world cheaper than the US healthcare system.
Lower premiums for Florida. Higher premiums for everyone else.
Risk pooling doesn’t work the way you think.
My rates would go up because of someone else's choices. Not interested, sorry.
I'm living in Wyoming at over a mile of elevation. What is my incentive to "share the risk" by paying higher insurance rates so that some asshole in Florida can keep their beach condo??? Same with the red nose and clown shoe wearing bozos that keep building homes in the fire prone areas of California.
If you can't afford insurance and you can't afford to rebuild then you can't afford to live there. It's that simple.
Like I said in other responses, being in the larger pool reduces your risk. They can still charge FLA residences for being in a higher risk zone. But pulling from a nationwide pool makes sure they can cover when a storm the size of the whole state swoops in and creates damage over such a large area. Isolating Florida just makes it impossible to cover. You would actually benefit by being in the larger pool. The more they isolate you, the higher the risk of the pool, which means premiums increase. This exact thing happened at my workplace when the insurance company created "healthy" and "unhealthy" pool. Premiums for both pools shot up. Everyone was better off all being in the larger pool, yes even with the "unhealthy" people in the pool. Same thing applies here.
It doesn't reduce the risk, it merely shares the cost across more people. You also don't seem to be aware that the Federal Government is already subsidizing Flood Insurance in Florida through the NFIP which is administered by FEMA. The people living there are already benefiting from distributed cost via direct contributions from Federal Tax money.
But that's the way insurance tends to work - actuaries look at the risk involved in ensuring person X or group X against threat Y and charge accordingly.
Larger pool, lower risk. That's one of the basics in actuary tables.
That's now how it works. Adding a high-risk pool to a low-risk pool doesn't lower the overall risk. It averages it. Meaning the lower-risk pool has their costs increased, and the higher-risk pool has their costs decreased. Since the high-risk pool is much smaller than the low-risk pool, merging them is a negative for a larger population.
So like you’re just ignoring the “significant increase in flooding in south Florida over the last decade”? (Link)[https://piahs.copernicus.org/articles/382/207/2020/]
Florida is sinking, while sea levels are rising. It’s causing more frequent flooding, but it’s also claiming land every day. If Florida isn’t experiencing any of the issues that climate change brought about then I guess all of the insurance companies leaving, and marking “increased environmental disasters” as their biggest reason is more to do with… people eating too much McDonald’s? Or could it be that they’re leaving for the exact same reason that scientists have been saying for decades. Florida, much like the rest of the south, is sinking and hurricanes are increasing in both frequency and power. Which leads to more environmental disasters.
When the seas rise on a porous state like Florida, they're going to flood from the ground up as much as from water rushing in from the coasts. The Florida water table is rising.
But it's not just land erosion along the coast that you need to worry about.
Miami is already getting salt-water intrusion in the storm sewer system, which makes them run backwards. This will eventually intrude into the aquifer there as well making the water undrinkable without expensive filtration.
The limestone that all of south Florida sits on is literally being eaten away by ocean acidification.
That same limestone prevents any kind of dyke or seawall system from working.
Sinkholes are opening up in the middle of the state due to so much water being pumped out of the aquifer & it not being able to replenish fast enough.
It doesn't matter if people need insurance. Insurance companies aren't in the business of giving away money.
It's getting worse every year, as seen by insurance companies jacking up rates or pulling out entirely.
So you're telling me you'll believe a big company with actuarial tables and a financial stake over some rando on the Internet? Typical... /s
It would be useful to see the exact quote in context. Do you have it?
No, there is not a barrier island that will stop flooding. And the mangroves can slow erosion where they are but will not prevent flooding.