Sandy should make us re-think things

[mdl]

I agree in the limited case of barrier islands.  If you expand this out to all disaster prone areas, then like has been noted above that includes way too high a percentage of the population to just tell 40% of people to move or whatever.   I'm fine with FEMA going to save people and whatnot, but I agree it's ridiculous that tax dollars are used to make it possible for wealthy folks to be able to get insurance for vacation homes on, say, the barrier islands off the Carolinas.  If you love it out there enough and are rich enough to just build a brand new home from your own pocket every 5-20 years, then go ahead.  But I agree it's ridiculous for the government to fund insurance so people can get insurance companies to pay for it every time.

I don't think Erik's argument works here.  Rich people want vacation homes (well most people want them, the rich can afford them), and if it's impossible to get insurance and doesn't make sense to build them on the outer banks then I'd bet that for the most part they'd just build them somewhere else, so it's not like you'd be sacrificing all those construction jobs, just shifting them elsewhere.

[GaijinGolfer]

Originally Posted by dak4n6

Yes, but there are places that are more prone to disaster, and our coastline arguably has the highest probability of all. It just doesn't make good sense to have small numbers of people build on ephemeral shifting bits of sand and have the rest of the population pay for them.

Regarding your example of New Orleans, when I first visited there and saw all the dikes and levies, my first thought was 'Why did they put this city here???'

Let's face it, the human race has a long history of establishing dwellings where they don't belong, and I think that over the next 10 - 100 years we will find many of those choices becoming critical.

What area isnt prone to natural disasters?  The coast has hurricanes, the upper midwest has ice storms and flooding, the lower midwest has tornadoes.  How would you like it if your town got wiped out by a disaster and the government told you, "sorry but people dont want to pay to help you rebuild your town.  Youre on your own."

I love it when people make the assumption that their tax money is, "my money".  Its not your money.  Its money that you pay for government services.  Be it trash removal, road building, police, fire or disaster relief.  You dont get to pick and choose what services you get and as a nation, we dont sit by and act we dont care when our friends and neibors get wiped out by a natural disaster.

[boogielicious]

Quote:

But look, class warfare aside, my main point was that it is unfair for those of us who don't take on the liability of living on unstable land to subsidize those do.

I don't see where the subsidy comes from?  Do you have a link that shows that taxpayer dollars are rebuilding their houses?  It is certainly not the case in Massachusetts.  None of the homes in my home town that have been damaged due to the ocean have ever been rebuilt with taxpayer dollars.  the owners rebuilt themselves and pay for it.  They don't even get flood insurance anymore.  My parents's house was raised in '79 and paid for by my parents.  She routinely gets water in the yard and sand, and cleans it up herself.  The only thing the town does is clean the sand off the streets.

[dak4n6]

NFIP.

[MEfree]

Originally Posted by dak4n6

NFIP.

I`d be curious to know how much the National Flood Insurance Program has cost the government over the years?  One problem that I see is that the exact cost/risk is uncertain...leaving it to private enterprise would at least have it turn into a market determined price.

I checked the FEMA website and it seems as if there are about 5.5 M policies, with over 2 M of those being in Florida.  It looks like Floridians pay over $1 B in premiums (I assume annually) and have had less than $4 B in total claims since 1978.  So for Florida, they may have actually made $.  OTOH, Louisiana has had 16+ B in claims and pays about $343 M with under 500 K of policies.

http://www.fema.gov/policy-claim-statistics-flood-insurance/policy-claim-statistics-flood-insurance/policy-claim-13

[dereckbc]

Like everything else in life: You Play Your Money, and You Take Your Chances. Some win, most lose. It is the Law of Nature and old as Earth.

[newtogolf]

I agree.  And let's not forget about the earthquakes in California.  There is no "safe" place to live that doesn't endure some type of natural disaster.  Sandy was the perfect storm, NY hasn't seen flooding or damage to this level for over 100 years.  20/20 hindsight is an easy position to manage from.

Originally Posted by GaijinGolfer

What area isnt prone to natural disasters?  The coast has hurricanes, the upper midwest has ice storms and flooding, the lower midwest has tornadoes.  How would you like it if your town got wiped out by a disaster and the government told you, "sorry but people dont want to pay to help you rebuild your town.  Youre on your own."

I love it when people make the assumption that their tax money is, "my money".  Its not your money.  Its money that you pay for government services.  Be it trash removal, road building, police, fire or disaster relief.  You dont get to pick and choose what services you get and as a nation, we dont sit by and act we dont care when our friends and neibors get wiped out by a natural disaster.

[GaijinGolfer]

Originally Posted by newtogolf

I agree.  And let's not forget about the earthquakes in California.  There is no "safe" place to live that doesn't endure some type of natural disaster.  Sandy was the perfect storm, NY hasn't seen flooding or damage to this level for over 100 years.  20/20 hindsight is an easy position to manage from.

When I lived in Wisconsin every year we had tornadoes, ice storms, wind storms and in years where we had a lot of snow, we had flooding every spring.  I seem to remember just about every year parts of Iowa would flood because they would get all of the water from the snow melt in Minnesota and Wisconsin.

You cant tell people that they simply cant live somewhere just because a disaster may happen.  If people want to live in a place where they are constantly told what they can and cant do, perhaps they should move to China.

[boogielicious]

Well maybe NFIP works differently in other states, but it certainly is not that way in New England.  But I would like to see the financials that show NFIP is operating at a loss to the taxpayer and not cost neutral.  Banks are guaranteed by FDIC, but only in extreme circumstances is it cost negative to the taxpayer.

[MEfree]

Originally Posted by GaijinGolfer

You cant tell people that they simply cant live somewhere just because a disaster may happen.  If people want to live in a place where they are constantly told what they can and cant do, perhaps they should move to China.

I think there is a difference between telling people they can`t live someplace and actually offering a government sponsored insurance program that makes it more financially feasible to live in a place.  I don`t think the OP was saying that we should restrict where people live, rather, I think he was saying that we should re-think offering government sponsored insurance (at least in some areas).

Obviously, some people have come to rely on this so it would be only fair to have a transition period.  i.e. if a property has collected flood insurance twice, then the 3rd time they collect their policy will not be renewed.

Originally Posted by boogielicious

Well maybe NFIP works differently in other states, but it certainly is not that way in New England.  But I would like to see the financials that show NFIP is operating at a loss to the taxpayer and not cost neutral.  Banks are guaranteed by FDIC, but only in extreme circumstances is it cost negative to the taxpayer.

I haven`t seen detailed financials either, so I don`t know if it is a drain or not.  However, non-Government insurance companies offer car, health, fire, wind and many other types of insurance, so why not flood?

One answer may be that it is not economically profitable for them to do so.  Another answer might be that the government has more of an influence on floods than they do with car/health/wind/etc.  By this I mean that sometimes there are choices that are made that can effect who gets flooded and who doesn`t- i.e. open up a dam or not, divert water in one direction or another, strengthen a levy or not, etc.  This may not have been much of an issue with Sandy, but is more of an issue in places like the Netherlands and New Orleans.

[boogielicious]

Quote:

However, non-Government insurance companies offer car, health, fire, wind and many other types of insurance, so why not flood?

I think the risk is metered by location.  If you are very close to water, then no company will take the risk.  Insurance companies base everything on risk.  National Flood is similar but will assume a bit more risk, but only to a point.  Most coastal houses in New England that are not above the 100 or 500 year flood plain will not get coverage.

Sad thing about my parents situation was that just three weeks before the Blizzard, National Flood came in a said that the risk was minimal and cancelled most of the coverage.  They could do that and it hurt a lot of people who had paid in for years.  It was a once in 100 year storm, supposedly.  Funny thing was just 13 years later, the Perfect Storm caused just as much damage to my town.  Luckily for my parents, they planned ahead and made their house virtually storm proof (with their own money).

I have a cottage near the ocean, but it is above the 500 year flood plain.  I am not going to make that mistake.

[MEfree]

Originally Posted by boogielicious

I think the risk is metered by location.  If you are very close to water, then no company will take the risk.  Insurance companies base everything on risk.  National Flood is similar but will assume a bit more risk, but only to a point.  Most coastal houses in New England that are not above the 100 or 500 year flood plain will not get coverage.

Sad thing about my parents situation was that just three weeks before the Blizzard, National Flood came in a said that the risk was minimal and cancelled most of the coverage.  They could do that and it hurt a lot of people who had paid in for years.  It was a once in 100 year storm, supposedly.  Funny thing was just 13 years later, the Perfect Storm caused just as much damage to my town.  Luckily for my parents, they planned ahead and made their house virtually storm proof (with their own money).

I have a cottage near the ocean, but it is above the 500 year flood plain.  I am not going to make that mistake.

You make a lot of good points-

Private insurance is based on risk- availability will encourage people to live in less risky places while lack of availability will discourage people from living in more risky places.

Motivated people can take steps to reduce their risk in some situations

Gov enterprises are not necessarily as rational as private enterprises: I don`t get cancelling coverage because of minimal risk- a private enterprise would be happy to continue collecting premiums if the risk was minimal.

[dsc123]

Originally Posted by MEfree

I don`t get cancelling coverage because of minimal risk- a private enterprise would be happy to continue collecting premiums if the risk was minimal.

I would guess that this is the point exactly.  If National Flood is there to insure the otherwise uninsurable, then it might cancel the policy and require the homeowner to seek private insurance.

[boogielicious]

It was very odd at the time.  They were probably looking for ways to cut expenses.  Just really bad timing.

[MEfree]

Originally Posted by dsc123

I would guess that this is the point exactly.  If National Flood is there to insure the otherwise uninsurable, then it might cancel the policy and require the homeowner to seek private insurance.

I`ll admit that I don`t know as much about this as I would like, but I find it hard to believe that NFIP would cancel a paying customer because their risk was too low without giving them a chance to get a private policy.

Based on the below, it seems as if NFIP refuses to insure some very high risk areas while also not covering low risk areas (based on posts above).  So what then is the point of NFIP?  If they don`t want really low or really high risk customers?  Why not just let the private market take on everyone?

http://privateflood.com/

For those properties located in a Coastal Barrier Resource area, we have worked with companies to be able to write flood insurance on the private market.  We can obtain private flood insurance for you when it is not available from NFIP.  Coastal Barrier Resource or CBRA zones are not eligible for federal flood insurance.  Additionally, there are some areas which are designated as "Otherwise Protected Areas" or OPA's where federal flood insurance is not available.  Finally, there are some communities which do not participate in the NFIP.

At SFI Group, Inc, we can write private flood insurance for you in many cases when your property is not eligible for federal flood insurance.

[phan52]

Originally Posted by boogielicious

Be careful in your assumptions.  There is no place in the US that is safe from disaster.  Floods hit rivers too.  Tornadoes don't care where you live.  Forest fires, earthquakes, mudslides and volcanoes.  You think there are million dollar homes in Hoboken?  The whole city is underwater.  How about Joplin Missouri in 2010?  How about the drought this year in Texas?  How about the 9th Ward in New Orleans after Katrina?

My neighborhood was destroyed in the Blizzard of '78 by the ocean and my parents were definitely not rich.  Some of the water front properties were owned by wealthy folks, but most of us who lost homes were blue collar.  There was no tax payer funded bailout for my parents as you suggest.  My parents had to take out loans to rebuild and they paid far more into the flood insurance than they ever got back.  It set them back years.

The same will apply to almost all the people who have lost homes in this storm.  State and Federal dollars will rebuild infrastructure, but that is about it.  The insurance companies will nickle and dime their customers to nervous breakdowns.  I have lived it.

You have found isolated examples that do not apply to most all of the people affected.

But he has a very good point. Some of the areas on the NJ barrier islands should not have expensive real estate on them. When I was a kid there was a devastating storm in South Jersey that just lopped off part of the north end of Avalon and many homes were destroyed and/or condemned. They didn't build homes in that area for a while but people forget and, of course, it is all about money, so there are homes there again in the same spots, and more of them. Places like Avalon were very lucky that the eye of the storm passed north of them or the north end of that island would have suffered the same devastation as 1962, as anybody north of Atlantic City found out last week.

[boogielicious]

People do forget or don't believe.  This guy moved into my parents neighborhood about 10 years after the Blizzard in '78.  He did not believe that the water was ever that bad and said that it was insurance fraud.  So he went and did a bunch of work on his house including landscaping with big railroad ties.  In '91, the Perfect Storm rearranged all his renovations including the railroad ties that ended up in my parents yard 300 yards away.  He didn't want them back, so my Mom build a raised garden!  He later moved.

Quote:

but I find it hard to believe that NFIP would cancel a paying customer because their risk was too low without giving them a chance to get a private policy.

Hard to believe but sadly true.  What they did do afterward was allow families that got removed from Flood insurance access to SBA loans at a low percentage (8% at the time, which as low compared to home equity and mortgage rates).  We ended up taking out a loan to improve and protect the house from further storm damage.  Still, we lost out on a lot of insurance coverage that we paid into for 16 years.

[Datsyuk]

Originally Posted by GaijinGolfer

When I lived in Wisconsin every year we had tornadoes, ice storms, wind storms and in years where we had a lot of snow, we had flooding every spring.  I seem to remember just about every year parts of Iowa would flood because they would get all of the water from the snow melt in Minnesota and Wisconsin.

You cant tell people that they simply cant live somewhere just because a disaster may happen.  If people want to live in a place where they are constantly told what they can and cant do, perhaps they should move to China.

Good call - no floods or other natural disasters ever happen over there!!