The other day, I sat down for dinner with a couple that had an insurance agency in Hawaii. We got on the topic of living on the beach and the threats of Tsunamis and Hurricanes. They of course offered flood insurance at their agency – and it wasn't cheap to day the least. Recently the Federal Government had in response to Hurricane Sandy redrawn the flood maps, most moved inland quite a ways, miles in some cases. Let's talk.
This solves two problems for the Federal Government, National Flood Insurance Program, and FEMA, namely, it helps pay for FEMA costs after disasters leaving a large pool of money from premiums. It also means you have more people paying into the system.
For an insurance agency, this gives them the opportunity to educate homeowners and business owners about the National Flood Insurance and ways to deal with such insurable risks – insurance agencies can offer free seminars to get new clients, or have an excuse to call on long time clients to re-adjust policies and potentially sell them more insurance, good news right? Not so fast.
There was an interesting article on MSNBC Money on September 5, 2013 titled; “Report: Tsunami would swamp California's economy,” by Alicia Chang. I suppose that goes without saying really, but the same could occur anywhere along the Pacific Rim, further many of the major Earthquakes in Alaska have sent the Tsunami out into the Pacific not downward along the shoreline. Further, if you look at a globe you can see why this report is misleading in many regards. The article stated;
“The potential impacts, based on a hypothetical magnitude-9.1 jolt off the Alaskan peninsula, were detailed by a team led by the U.S. Geological Survey to help emergency responders prepare.”
What bothers me is that all these hypotheticals we see all the time really push the limits of advice to policy makers, almost to the point that no one would be allowed to build a home anywhere near the coast, imagine the cost to the economy in that case, if we were to move everything now, or raise flood insurance costs through the roof, to the point no one could afford to live there?
One could ask why the US government is suddenly getting into the insurance business, they are with health care and now they see dollar signs with the National Flood Insurance program and more money for FEMA, both are completely out of money, well so is the Federal Government which is deficit spending each year. Maybe we need less government, but either way, you'll need more insurance in case of flood if you live in low lying areas by the coast – because the government says so. Please consider all this and think on it.