Hacker News Reader

Comment by ben509 | Hacker News Reader

Part of the problem here is exacerbated by all the flood insurance that effectively subsidizes building in flood plains. In addition to long term measures to mitigate climate change, we should have a tax on areas that are threatened by flooding and water levels rising so that we can reduce the immediate issues by incentivizing people to move away from them.

View on HN

A proper flood insurance would be a tax for flood-prone areas. Rates are calculated so that for any given house the expected insurance payouts are slightly lower that the insurance premiums over the next few decades. The insurance has a high incentive to get those numbers right (or overestimate payouts) because that's their profit margin.

Government subsizided flood insurance is a really weird subsidy that just shouldn't exist.

This planet money episode seems relevant : https://www.npr.org/sections/money/2017/09/29/554603161/epis... Yeah, no private insurance company will knowingly insure houses in those flood prone areas that are pretty much guaranteed to flood. With the subsidized government insurance, people keep on rebuilding and collecting that free money.

I'm not sure how insurance is a subsidy. Doesn't the cost get spread between insurees and the insurance company takes the foam off the top for itself?

National Flood Insurance is run by the government, it's not the same as most property insurance.

Not for flood insurance. There's no profit in it. The National Flood Insurance Program is a federally-subsidized program that loses about a billion dollars a year.

https://www.cbo.gov/publication/53028

Flood insurance is a different program.

No actual company is stupid enough to put money that a floodplain won't flood. Instead the federal government uses tax money to basically back insurance so that when, surprise, your floodplain floods, the insurance companies aren't actually losing money.

FWIW, I can’t speak for Miami but I do know that the costs for flood insurance are high enough in coastal areas that some people skip it entirely.

The other side of this is to adopt coastal retreat policies as well though. Its not enough to drive insurance up, you need to prevent people moving in anyway because it's cheap land because of that.

Interesting - you had your fun at the ocean front. Now if you want money for the lost property, you have to buy three streets back?

That's not a bad idea.

SciAm recently had a good article about these policies and the challenges they face:

https://www.scientificamerican.com/article/surrendering-to-r...

Should we also tax people living in earthquake-prone and tornado-prone areas? How about blizzard-prone areas? Keep going with this and we will run out of places (in the USA) where it’s ok to live.

Also, as someone who lived in south Florida, flood insurance is a joke and unavailable near the coast anyway. Nobody expects it to pay out enough in a major catastrophe, including hurricanes and flooding.

Blizzards don’t typically level buildings, and a tornado’s path of destruction is narrow enough that the lucky homeowners can sufficiently subsidize the unlucky ones through insurance.

Neither of those risks are comparable to earthquakes and hurricanes/flooding, which can be relied upon to thoroughly destroy huge swaths of cities, regularly.

You mean like blizzards like this: https://www.csmonitor.com/USA/Sports/2010/1212/Vikings-Metro... ?

California regularly survives 6.0 earthquakes with minimal damage, because our building codes require earthquake-safe construction. For example, the 2008 Chino Hills quake, at 5.5 intensity, caused almost no damage other than the unsecured contents of store shelves falling onto the floor.

In contrast, a slightly stronger quake in DC (5.8) caused hundreds of millions of dollars in damage to structures, including to the Washington Monument, because the local building codes did not contemplate earthquakes.

Some risks are not insurable since they're guaranteed to happen. That's why no private insurance company will offer flood insurance, but since these owners of capital have enough political clout, they are able to secure a taxpayer funded bailout fund (nation flood insurance program).

I am guaranteed to die at some point. Yet (at least in Germany) I can go to a private insurance company, agree to pay a few euros each month and in return they pay out 10000€ when I die to cover my funeral, no questions about cause of death asked. It's an insurance that is guaranteed to pay out, but it still insures against uncertainty because I don't know when I will die.

Flood insurance is fundamentally the same, the payouts are just not well spread, requiring a large geographically diverse insurance company.

In order for the insurance company to pay you 10,000 euros when you die, they have to collect that much from you plus their operating expenses minus the investment gains expected over your expected lifetime. This is whole life insurance, and it's usually a better idea to stick the money into index funds and avoid paying the insurance company for their operating expenses.

And we're not talking about a 10,000 euro loss here, when a home gets flooded, the loss is likely six figures or more since houses aren't cheap. Most people can't afford insurance for a likely loss of $100,000.

There are many large geographically diverse insurance companies, and there is a reason all of them stay away from flood insurance. There's no buyer for the amount of premium they would have to charge.

> Should we also tax people living in [...] blizzard-prone areas?

We already do; municipalities in blizzard-prone areas factor snow removal costs into their annual expenditures, which show up in residents' taxes.

One theory I've heard is that the prevalence of natural hazards in the US explain the comparatively lower level of development prior to arrival of Europeans - basically any time the locals were getting somewhere some kind of catastrophe would befall them, and destroy their progress. Does make one think about the long term, especially with a more extreme climate expected to be on the way.

Private insurance works for earthquakes and tornadoes.

Until a massive quake wipes out an entire region, at which point, the insurance carriers declare bankruptcy because they won't be able to pay off all the policies. And that is already factoring in the exorbitant premiums being paid and high deductibles on the policies.

With tens of thousands of claims, home owners will get pennies on the dollar if they get anything at all.

Do you have insider knowledge or are you just expressing cynicism?

Typically insurance companies buy insurance against this, it's called reinsurance.

https://en.wikipedia.org/wiki/Reinsurance

Yes homeowners should bear the full cost of their choices. It's entirely possible to build a modern house strong enough to survive earthquakes, tornadoes, and hurricanes with only minor damage. Flooding is more difficult to design around.

> Keep going with this and we will run out of places (in the USA) where it’s ok to live.

plenty of places that don't see earthquakes, tornados, floods, hurricanes, or much of anything else.

blizzards might sound apocalyptic to a floridian, but generally just damage above-ground electrical, and maybe knock a few trees into a few roofs.

Strict building codes increase the cost of buildings but make them safe in case of earthquakes. You can see that as a form of tax for living in an earthquake-prone area.

I wonder if people living in coastal flood-prone areas are expecting a bail-out when it becomes impossible or impractical to live there.

As much as it'd be great to just point a finger and say "You should of known better!", houses are the bulk of most folks assets and the last thing we need is to turn a few small cities worth of people into homeless refugees.

So realistically they'll get a bail out so they can at least recover somewhat. It will still be a loss for them, it'll be a loss to everyone who pays taxes, but it's still better then the alternatives.

Why? With this attitude, we'll keep building more vulnerable cities at the coast, effectively subsidizing doomed construction.

We shouldn't have unemployment, since people should just be saving enough money to make it through the hard times!

People as ends, not means. It's not ok to leave people starving in the streets as an example to others. Fight for laws to restrict building in flood plains, but don't abandon the forlorn.

They absolutely are. 99 Percent Invisible recently did an episode about the Outer Banks islands in North Carolina, which would be eroding naturally anyway even without sea level rise because they are barrier islands, which are always impermanent. Interviews with the residents there made it clear that they feel that a) there is no problem and b) if there is a problem, they are entitled to unlimited government funds for beach reconstruction to preserve the value of their property. Florida isn't going to be any different

Same in LA:

http://www.latimes.com/local/lanow/la-me-ln-del-mar-sea-leve...

Herb Montgomery and his wife, Janet, have lived in Del Mar's low-lying Beach Colony just east of Camino Del Mar for 20 years.

He knows the ocean is creeping closer to his property and he says the city has an obligation to protect his home, valued at $3.2 million, from the rising waters

Things are going to get ugly down the road.

Haha, this is pretty clever. They’re going to make every other taxpayer subsidize projects for the rich. I only regret I’m not brazen enough to eat my fellow man like that.

soooo... tax? The current tax system can't handle that, if anything once the water starts creeping, the tax system would do the opposite. Property values drop, taxes drop.

I think what you might have wanted to recommend was for insurance companies to have higher premiums / rates whatever. Not everything needs to be solved at the government level.

Reply on news.ycombinator.com