Saturday, July 12, 2008
Insurance does not pay to cover certainty. If it is certain that a house will be flooded in the next 12 months the appropriate twelve month premium is the cost in full of replacing the damaged property. The better we are at predicting flood risks and identifying high-risk properties the higher the premiums on those properties will be.
That is how insurance works. Any other argument is to take the position of Canute’s couriers.
For properties with an extremely high flood risk, for which complete flood-avoiding defences are not feasible, we may need to move into another strategy altogether. For example, payments to help adapt the properties, and the lifestyles of the people who live in them.
Wiring the houses so electric points are situated high on the walls. Developing sealing flaps to place over ventilation bricks, to reduce damp penetration if water comes that high. Developing built in sealing barriers for doors that can be raised by householders.
There are real property benefits to living in attractive areas like riverside locations. The downside of that location cannot be entirely insured against.
Unless you envisage a kind of National Health Service for flooded houses, free at the point of use.
Incidentally, the point about insurance and certainty is the reason why all insurance-based health-care systems are doomed. With better long-range diagnostic techniques the identification of long-term health costs for individuals will begin to push premiums up towards levels where they are effectively pre-pay subscriptions for actual costs. It may be that by about 2050 only an NHS style finance structure is even theoretically viable if low-income people are to have any sort of coverage.
I fear this is a case of good intentions; poor thinking.