Whose Risk Is It Anyway?

What I object to is the subsidized insurance rates for the luxury homes on the outer banks that get hit by stormees, rebuild, a lot on the public dole.  Seems to me if you want luxury water front property, you should be willing to cover the insurance costs or let the home wash away.  Just because it could be built doesn't mean that it should have been built.

 

Basically FEMA makes you pay flood insurance if you are in "their" 100 year flood zone. The truth is, like in my community, most parts of that flood zone have been modified by the city and the city engineers put the risk at zero. They asked FEMA to change it. FEMA did not. One reason for this, according to the reading I did, was to distribute the costs more evenly among everyone, as it costs too much for people who flood to carry the burden on their own. I do not remember the exact percentage but I know that many areas that do flood, including in this county, have floods year after year after year and it is predictable who will be hit. Yet everyone is helping pay the cost, if they have a mortgage and are in the so-called flood zone, even though it has been re-engineered. Personally, I think those who take the risk should pay the bulk of their own costs. They would if they were bad drivers.

I live in an area that is greatly affect by high insurance rates. it is killing the average guy all the way up the the well off. These are not Luxury homes. Many have never been damaged, flooded, or tend to have a high risk of diaster in at least the past 300 years. The insurance companies just will not write new policies. The entire area is red-lined and no individual is considered on a case to case basis. Its a tradegy for our country to be so money hungry as the insurance companies have become. No large company lost a dime for the year Katrina hit.

The insurance companies and their adjusters basically took millions from the Federal Treasury when doing claims in the Katrina areas. They put much too much damage on flood insurance making their wind claims much smaller than they should have been. This was your money and my money. We spend  too much time on Paris and less on doing the right thing. Having someone pay $4,000 per year on a 200k home for insurance with high deductibles is too much. Then add $400 for flood. Something is not adding up.

The feds take billions in taxes from oil and gas in Louisiana because we let companies drill so you guys can have cheaper gas. The post hits close to home and you touched a nerve.

Perry, I agree.  I have felt for a few years now the companies and corporations can do a lot for the communities along the coast.  We rely on private investors to step in and re build.  My fear is the only person who benefits, is the investor.  The people out of a home are still in the dark. 

There really needs to be a good answer to this question.  I think you are on the right track to find it.  Great post!

It would be interesting to know how much money was collected in premiums by the insurance companies over the years in comparison to $$ paid in claims...particularly in Louisiana...They seemed to always dodge the bullet until Katrina.  I'm not guaranteed a profit.  The insurance companies have insured & collected money from these people for many years.  A major disaster hits and they look for reasons to avoid paying claims, and then some refuse to provide further coverage or implement extreme rate increases.  This involves people who cannot rebuild homes they lost due to no fault of their own, who paid insurance in good faith, expecting to have coverage, who lost everything.  It is not the same thing as someone who gets traffic tickets, DUI's or has a lot of automobile accidents causing their insurance rates to go up. The insurance companies have had many profitable years...they hit some bad times and want to tuck their tales and run.  I guess they'll just limit their business to other states less likely to have a natural disaster.

Perry,

I think that those who choose to live in high-risk areas should pay the extra premium. Why would the people of a particular state, or the whole nation, subsidize an individual's housing choice. Yet, what little I know about insurance, isn't it true that the financial losses suffered by insurance companies after Katrina were spread throughout the world in higher premiums? So, in reality, the issue is rather complicated, whether it makes sense or not.

I would never want to live close to the ocean. We are closer than I'd like to be right now. But from what I've heard, there is no flooding out this way. I can't imagine what the best solution would be. It's a tough one.

I actually like this post Perry.  To bad it has to be topic.

Wow, this post hits a nerve for me also. I was an insurance agent for 7 years and have an in-depth understanding of how these companies work so it's hard for me not to get worked up when I read about how the insurance companies are ripping everyone off and should be investigated.

Those types of claims are not much different than the claims we're hit with daily about ripping off home sellers and being overpaid.

Insurance companies have a P&L margin, just like we do and they're actually regulated quite heavily, so it's hard for me to believe that they're just pocketing the premiums & not paying out on the claims.

Here in Oklahoma, we've had major homeowner's rate increases over the past several years due to the frequency of severe thunderstorms and tornadoes. Yes, it sucks for us all to have our monthly payments skyrocket, but it's an expense we have to take on because of where we live. I don't expect taxpayers or other parties to pick that up for me.

Some areas of the country are simply at higher risk than others, and justifiably, the homeowner's premiums are higher. If we don't like it, we have the option to move to another part of the country which has lower risk, and lower premiums.

Perry, that's a great question. At first glance, I'd have to say I'm probably against standardized or federal regulation of the insurance industry, simply because each state has it's own set of problems to address and I would fear that a standardized set of rules being applied may benefit some states, but really hurt others. I'd have to really think long and hard and be convinced otherwise to change my mind on that one.

As for my change to Real Estate, it was the best move I ever made. I was never truly happy in or passionate about insurance, but Real Estate truly is my passion. It's not like work when it's fun, right?