Talk:Flood insurance
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[edit] Controversial
Why is the US Federal Flood Insurance program here said to be "controversial" ?
What is the controversy ?
- As the insurer of last resort, this program effectively sanctifies risk prone areas that other insurers won't touch. It basically leaves the US taxpayer on the hook to cover risks that no one else will. See moral hazard for more on this.--Hooperbloob 06:31, 13 February 2007 (UTC)
- An interesting view. Three things --
1. Moral Hazards - Considering its behavior towards its insureds generally, when was the insurance industry concerned with moral behavior at all ? It appears that for-profit insurers cannot, virtually by definition, indulge in moral behavior toward both its insureds and its stockholders as those insurers and their relationships to those parties are presently constituted.
2. Political Hazards - When their is no insurance at all, those who are in effect insured by the taxpayers are those who can wield sufficient political muscle to open the gates of the treasury. How is that superior to the situation in which the insureds at least contribute something to the kitty.
3. Structure - Federal Flood Insurance could be structured to present the true costs to the insured. Assuming that it does not (I do not know one way or the other, for a fact), then is this not just an example of another form of political hazard ?
I use the term "moral" in the economic sense -- but I think that we need a different term for "morale" -- since both insured and insurers do engage in immoral conduct. —The preceding unsigned comment was added by 68.220.21.92 (talk) 08:47, 13 February 2007 (UTC).
That is all better discussed at the main article specifically on the US govermment flood insurance program. To directly answer one of your questions, one of the concerns with that program is that today, homeowners are encouraged to build in floodplains (because they know that the gov. will cover the cost, which results in injuries and deaths that would not occur otherwise), and secondly, these homeowners also get both disaster funds and insurance funds, rather than just disaster funds, which exacerbates the first problem. Some good sources discussing this are needed for this article.--Gloriamarie 01:52, 9 October 2007 (UTC)
