Insurance welfare for the rich

ProjoCoastal insurance quandary
Our coastal-insurance practices need a major review
- and fast!

More welfare for the rich? Well, it's more complicated than that, but a story from The Wall Street Journal by Liam Pleven that was republished in the June 10 Providence Journal ("Taxpayers eat cost of coastal insurance") raises fairness issues.

An effect is to provide special protection to the affluent folk who can afford to buy or build on the shoreIn states exposed to hurricanes, many insurers are bailing out of offering insurance to owners of shoreline property (who tend to be affluent). In response, the states, pressed by the powerful private citizens (including campaign contributors) who tend to have places on the coast, and by state officials who want the tax revenue from shoreline development, have created insurers of last resort for shoreline property. In some states, all property insurers are required to be members of associations backing these last-resort insurers.

These new, last-resort insurers don't have adequate reserves, which could leave other insurers (in the aforementioned associations) and sometimes taxpayers to pay for damages after a big storm.

Making for an even bigger hit on taxpayers forced to help cover the losses of people with year-round or summer places on the shore is federal flood insurance, which insanely (except for the shoreline owners) includes government-backed policies that even cover damage from water, damage not normally covered by private insurers.

An effect is to provide special protection to the affluent folk who can afford to buy or build on the shore -- including in areas where environmental and safety concerns would suggest that nothing be built! Indeed, the federal flood-insurance program is no small reason why there has been so much construction on America's coasts -- and so much rebuilding, much of it at taxpayers' expense.

Our coastal-insurance practices need a major review -- and fast!

- Robert Whitcomb in the Providence Journal

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