Functional Democracy

SUMMARY

• The insurance industry is leaving markets where the effects of global warming make insuring costs prohibitive. In some cases, this leaves the local government as the insurer of last resort.
• Follow this link to the original story.this http://www.forbes.com/feeds/ap/2007/11/02/ap4294977.html 

COMMENTARY 

• Insurance is not a suitable product to sell in the free market because of the necessity for generating excess profits to cover the inevitable expenses due to claims resulting from catastrophic events that are difficult to anticipate.
• The resulting high premiums burden the insured and there is no guarantee that the insurance company will remain in business to meet the claims when a disaster occurs.
• Insurance is an essential form of protection for the prudent citizen whether it be for health, property, or liability.
• Currently, the government provides resources to those people who have failed to plan adequately for catastrophic events in their lives. Therefore, there is little incentive for many people even to get insurance.

SOLUTIONS 

• Because the national government has a responsibility to protect its citizens and because the national government has the ability to use taxes to cover excessive claims, it should be the sole provider of essential (that is non-speculative) types of insurance. The government does not need to hoard a surplus of assets for potential claims and it does not need to make a profit. People would pay for the actual cost of the insurance and the government would no longer need to feel responsible for protecting people who refuse to protect themselves.
• Require that people who want protection get the appropriate government insurance. Make people responsible for getting their own insurance or suffering the consequences that may befall them when disasters occur. This will release the government from the burden of paying people compensation for their poor decisions.
• The government needs to manage flood controls more effectively and to assess more accurately the flooding characteristics of the land. As the environment changes, through new construction or dramatic events, the government must inform the affected people as to what their risks and insurance needs actually are, so that they may make informed choices about their insurance needs.