Editorial: Insuring For Nature’s Worst Not Always Natural

There is a great deal in the news these days about insurance—about people who have bought it and whose companies are dodging payment, and about people who don’t bother to get it and think the rest of the people should pick up the tab when disaster strikes.

Most people in California lack earthquake insurance despite the high risks, we’re told. What’s more, many believe that if their homes are destroyed, the Federal Emergency Management Agency (FEMA) will bail them out.

When questioned about his Florida home being destroyed by a hurricane, one celebrity said flat out that FEMA restored his first one, and they will restore it if it gets demolished again. This guy was one who could probably rebuild out of his pocket change, but he knows how FEMA works. So like many people, he plays the odds and uses the loopholes to his advantage, while the rest of us pay.

Along the Gulf Coast, having insurance might not make any difference. One would assume that storm-driven tidal waves pushed inland would be considered a natural disaster, but insurance companies don’t want to pay for homes destroyed by the storm surge. If that isn’t a natural disaster, we don’t know what is. However, the insurance companies want to parse words. So in this case, what does “disaster” mean?

Farmers along the Missouri River normally have federal crop insurance, but have been told that if the government (the Corps in this case) releases sufficient water from reservoirs to flood cropland, the farmers will not be eligible for crop insurance. Can you imagine? Responding to federal law at the behest of the U.S. Fish & Wildlife Service, the Corps (flogged and trampled for years over the issue) may release water in May to enhance the natural spawning of the pallid sturgeon. It’s a gamble, of course. Experts in wildlife management tell us that there is no assurance that raising the water will help the sturgeon. The May rise in the Missouri is not a sure thing either. It depends on the level of the reservoirs at the time. If the levels are too low, the Corps will cancel it. But the fact remains that if there is a spring rise, and if that spring rise “unnaturally” floods farmland, then it is the product of a government edict. We think havoc the government wreaks is havoc for which the government should pay.

Of the people we have thus far discussed, some are innocent victims. Others are playing the odds and expecting others to pick up the tab for lessening their woes. Unfortunately, that has become the American way too frequently. Also unfortunately, many seem not to realize that the U.S. can be endangered by breaking its bank, perhaps easier than from outside invasion. The federal coffer is not bottomless. Even lately, the U.S. debt limit was raised officially so we can spend more money that we don’t have.

The federal government could eliminate some loopholes in its insurance program, and it could impose legal restrictions on insurance companies. It would not be interfering with private enterprise. Any company that is allowed to extract huge amounts of money year after year from people who believe they are covered by insurance needs to be regulated. Otherwise it becomes a feeding frenzy.

Perhaps FEMA will come through for Gulf Coast hurricane victims who are finding out that their insurance companies don’t want to pay. If it does, that means the rest of the country will have to pick up the tab. We would be more pleased if the insurance companies were taken to court and it was decided whether or not they are legally responsible. And then, as we mentioned before, some tough restrictions should be imposed on the companies. Never again should there be a question about tidal surge being a natural disaster and insurable. Why is that any less a disaster than a tornado or hurricane? It would be an entirely different matter if insurance companies spell out that they will not pay in the case of tidal surge or storm-driven floodwater. The sad fact is that insurance holders in hurricane devastated areas thought they were covered.

Among our complaints about insurance and victims of natural disasters are those people who simply cannot bear to live elsewhere and rebuild in the same vulnerable locations. It should be stipulated in cases where FEMA does pick up the tab for property destroyed in such locations that it would happen only once. By law, the taxpayer should not be required to bail the victim out a second time if they build again in the same spot. The victims should be required to purchase insurance to cover the danger, and if they don’t, they should be out of luck. It’s a tough lesson, but it is a fair one.

In an interview last week, New Orleans’ Mayor Ray Nagin applauded the efforts of the Corps of Engineers in rebuilding the levees and floodwalls. He said if the city is now hit by a Category 5 storm, the city will go but the floodwalls and levees will most likely stand. Mayor Nagin, who has drawn much criticism for his response to Katrina, is up for re-election on April 22, with about two dozen candidates hoping to take him out of office. We hope his optimism about the Corps work does not convince people to rebuild in the same dangerous locations.

A big fear in the hearts of many people across the nation is that the government will try to rebuild New Orleans exactly where it is and let people move right back into the fish bowl. Nagin expects the city to be mostly restored within the next five years. A Louisiana legislator once asked the federal government for $250 billion to rebuild the city. Later, in an attempt to explain to the average person what that figure represents, a writer explained that it would mean a payment of more than a million dollars for every New Orleans homeowner.

The fat is already in the fire. American taxpayers are already stuck for billions that will be spent in the recovery effort along the Gulf. In too many cases, those billions are being mishandled. But there is no reason to rebuild New Orleans exactly like it was and make us sitting ducks for the next go-around.

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