George Rebane
Every time I look at the news of floods, fires, earthquakes, and other large and predictable emergencies, the notion that the rest of us have to pay to make whole those who knowingly take those risks rubs me the wrong way. I lived most of my life in SoCal, one of the world’s most notorious earthquake and wildfire zones. But nowhere in our financial planning did we factor in that you and yours would have pay for resurrecting our financial fortunes if the Big One hit, and we found our house a rubble pile of 2x4s and stucco, with household goods marbled throughout.
Yet decade after decade there are millions who expect, nay, demand that kind of response from their fellow Americans across the land. They build and live in locales that are known to suffer from one kind of natural calamity or another with probability one – that’s certainty for the innumerates. And when the inevitable happens, we have what’s happening in Texas right now. (I really get frosted looking at big neighborhoods of million-dollar homes ass deep in water.) The federal politicians spending other people’s money can’t wait to get in there and tell all the afflicted how government is going to bail them out, and make them come out even better than before disaster struck.
Rebane Doctrine has the simple answer that puts the citizens’ gray matter back in their brain pans – the envelope please. (And last night I heard national columnist and Manhattan Institute fellow Jason Riley agree.) Get government out of the no-premium insurance business, and let the private sector take care of insuring those who insist on buying and living in known dangerous areas. These greedy capitalists will know exactly how to price the premiums so no one gets a haircut when the inevitable happens. You wanna live there, then you pay the price or take the risk.
The cognitively handicapped will argue that we all benefit from having millions live in places where we have to pay for their certain losses. But that is a position not supported by evidence. Hurricane Harvey gave us the ability to draw a line back from the coast behind which building homes and businesses would almost certainly not suffer from conceivable future flooding. Let the government provide flood insurance for those landward of that line, and those choosing to live on the gulf side would buy as much insurance as they want from the insurance companies. And for those unfortunates insisting on losing everything, there are enough compassionate ones among us private citizens who appeal to the generous among us to help fund recovery – here's an example, JJ Watt of the Houston Texans at www.YouCaring.com/JJWatt who has raised over $12M for flood relief.
The same goes for all the beachfront properties, those in high fire danger areas (where we lived for 25 years and paid for our fire and earthquake insurance which we finally had to use in November 1993 and January 1994), and, of course, all those good people enjoying the great California coastal climate waiting for the Big One while fixing things up in the interval from the ‘small’ ones.
‘Take what you will, but pay the price’ should instead read, ‘Take what you will, but don’t make others pay the price.’
Coda: And in the case of Houston, it looks like the nation's progressives also fault the people of Houston for the damage they have suffered from Harvey. To them the country's fossil fuel hub is Sin City Numero Uno, that and a lack of enough government regulations helped bring on its flooding. So how would they feel about the federal treasury being used to put Houston back together again? (more here)
Coda2: And then there’s the serious question of how finely should an insurance company be able to design the premiums it charges. If the national loss data clearly indicated that a certain subgroup of customers habitually suffer more of a certain kind of covered losses, should the premiums for that subgroup be higher than those subgroups who have lower claim frequencies and amounts? Or should the insurance company be made to charge ‘everyone’ the same amount? And how big is everyone? We know (or at least we knew) that teen driver’s have a higher accident rate, and therefore their insurance premiums were higher so as to make the riskier cohort of insureds pay their ‘fair share’. What are those fair shares, and what attributes of the insureds should the insurance company be able to take into account to offer a spectrum of premiums that recognizes the differential risks and keeps the costs down for those folks who are more careful or work/live in safer environments?
For example, suppose Americans of Estonian extraction are shown to have a higher rate of home accidents than everyone else. Should their premiums be commensurately higher, or should everyone shoulder the burden of the careless Estonian-Americans in their midst? Or ask the same question where the careless cohort is defined by people of northern European extraction, or some other ethnic, religious, racial, or cultural discriminant. In short, the perennial question in a society is ‘how widely should what kinds of risk be distributed? Your answers will most likely also be a litmus test for your socio-political ideology.
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