No. of Recommendations: 22
What people living on the Pacific Palisades, on east coast barrier island or in midwest flood zones forget (doublethink?) is that insurance companies are businesses which have to make profitable decisions, not public charities. In a similar vein, neither should the federal government be. If people insist on living in vulnerable areas (especially those wealthy enough to live "anywhere"), they should either take the risk of "self-insuring" or pay a fair price based on the actuarial probability that their house will have to be replaced in a relatively short period of time. This is not the insurance companys' fault nor the government's.
I think you're very right about the first point - for society to run and people to be safe, there have to be disincentives to living in places that are not (or are no longer) safely habitable. Or at the very least, a lack of subsidies for that behaviour! As you note, the simplest start is for the person taking the risk to bear the fair market cost of that risk. It's not as if really high insurance premiums are the result of insurance companies making excess profits, they're not. It's because they're trying to price high risks sensibly. Their attempts may be off here and there, but it's not because they are profiteering as a group.
But I think you're wrong on the second point - the very specific news item raised, the disappearance of available insurance, is definitely government action. The quickest way for any government to make *any* good or service disappear from the marketplace is to cap its selling price below its cost of production. Nothing will clear the shelves faster. It's always a chuckle watching yet another government try to stem inflation with price caps, then being surprised at the outcome. Economists must feel like the guy who works the "perpetual motion machine" desk at the patent office.
Jim
