Homeowners far away pay for Katrina

Discussion in 'Politics, Religion, Social Issues' started by zimv20, Jun 23, 2006.

  1. zimv20 macrumors 601

    zimv20

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    #1
    AP

    the policy of pre-emption manifests itself in unexpected ways. and if climatologists are correct, and we're going to see worse and worse storms...

    what's the future of property insurance?
     
  2. Ugg macrumors 68000

    Ugg

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    #2
    There is no future in property insurance because there's no future in property. I should qualify that by saying, no future for property in areas where increased storm damage is most likely, ie, coastal areas and river basins like the Mississippi, Missouri and Ohio.

    Hopefully, this will lead to less building in areas most likely to be damaged, but if NO serves as an example, it simply won't happen and people will continue to build in low lying areas.
     
  3. FrankieTDouglas macrumors 65816

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    #3
    If they're dropping her for that reason, then I hope they plan to refund all of the money she has poured into them. Because they're effectively saying "We're getting out before we have to actually work now."
     
  4. j26 macrumors 65832

    j26

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    #4
    Isn't it amazing? The whole idea of insurance was pooled risk, a societal approach. Now it seems to have moved to pure probability, a much more individualistic approach.

    It's yet another example of the atomisation of society. People in other areas should pay slightly higher premia to cover the overall risk (with some element of loading for living in a higher risk area), but the company obviously made the judgement that people in lower risk areas are not willing to share the risk with those in higher risk areas, and to keep premia low (and competitive), and profits high they have to refuse anyone with a genuine risk.

    thi sort of thing didn't happen when they were mutual societies.
     
  5. Desertrat macrumors newbie

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    #5
    j26, US insurance companies have been doing the statistical analysis, probability, thing for over forty years that I know of...

    'Rat
     
  6. j26 macrumors 65832

    j26

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    #6
    Yes, but I'm talking about the origins of insurance as a mutual sharing of risk which goes back over 100 years. We paid higher for insurance in Ireland after the World Trade Centre attack - that's the nature of insurance. Premia are based on the number and size of claims. Obviously there must be some element of accounting for higher risks, but refusing insurance for a purely statistical reason?

    There's no mutuality any more.
     
  7. Desertrat macrumors newbie

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    #7
    I can only guess, but in Ireland, I'd think the insurors took a look at "What if...?" and raised the rates "in case of in case".

    Two factors, I think, are applying in the U.S.: One is the prognostication of more hurricanes in these next few years, and more of them to be of higher wind speeds. Another is the incredible rise in prices of real estate in coastal areas. Move fifty miles away, inland, and the prices are often much less than half.

    From the article, note that 30,000 houses are apparently regarded as ultra-high risk, out of some tens of millions of insured houses.

    Face it: The financial hickeys since Hurricane Andrew and now with Katrina have made all the insurance companies reassess the entire system.

    What was done 100 years ago has little relation to how any business operates in today's world...

    'Rat
     
  8. calculus Guest

    calculus

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    #8
    If this kind of thing keeps happening insurance companies will do themselves out of business. If they only insure where there is no risk then they have no product to sell.
     
  9. zimv20 thread starter macrumors 601

    zimv20

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    #9
    let's say this trend continues, and more and more homes in such areas become uninsurable. i'd expect people, in large numbers, would start abandoning these areas.

    are we looking at insurance companies having the power to make ghost towns?
     
  10. Ugg macrumors 68000

    Ugg

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    #10
    I wonder what banks will do if no one will issue insurance for homes they own the mortgage on?

    How long before we see lawsuits brought by private citizens against bushco for failing to combat global warming? The naysayers are getting fewer and fewer and those sitting on the fence have mostly declared that it's a fact, not fantasy, that human activity is causing a lot of the problems. If the insurance companies declare virtual ghost towns, it's only a foretaste of the reality to come.
     
  11. zimv20 thread starter macrumors 601

    zimv20

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    #11
    every time i've closed on a mortgage, i had to prove i had homeowner's insurance.
     
  12. Desertrat macrumors newbie

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    #12
    No overnight happening, but if insurance gets to be notably more expensive in the ultra-high-risk areas, property values will fall. At some point they could fall enough such that the risk/reward ratio could be suitable for insurance companies to provide coverage.

    Forget about the ghost town idea. An unfailing adage: If you price it right, you can sell poop on a stick.

    Odds are, however, that Congress in its infinite wisdom will create some new version of its floodplain insurance subsidy program which now exists in many coastal and river-bottom areas. But hey, it spreads the risk in the aforenoted mutual society manner, right? :)

    'Rat
     
  13. CorvusCamenarum macrumors 65816

    CorvusCamenarum

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    #13
    Or they can just deicide to not pay claims. It seems to be working for them so far.

    http://www.consumeraffairs.com/news04/2005/katrina_lott.html

    I wouldn't be surprised to find out that they ran some statistical analysis that showed it would be cheaper to settle out of court than to actually honor the policies they wrote.
     

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