I read an article the other day about the increased number of people who have built in hurricane-prone areas since the government offered flood insurance. Likewise, since earthquake insurance there has been a higher rate of development along earthquake fault lines.
It’s got me thinking that we totally misunderstand insurance as security. I have health insurance; that doesn’t mean I won’t get sick, it doesn’t mean that when I do get sick it won’t cost me financially and inconvinience me deeply. It just means that someone will be there to help me out with the costs. I still wash my produce and cook my food because even with insurance I’m still better off staying healthy. I have car insurance, but I still lock my doors and try to drive safely. Those who use their insurance as security to live on shaky ground look to the uncertain future as a guarantee, and they are sacrificing themselves.
Insurance is good, necessary, even. But common sense should still have a place in our lives. At the end of the housing boom that dominated most of this century a lot of people are facing foreclosure now that their ARMs are ballooning. I know people who have purchased their homes on interest-only loans at the peak of the housing bubble with the complete assurance that the value “will only go up” and that soon they can flip the property and use the equity gained to purchase a place they really want. The problem is that property prices have started to decline, and soon many of these people will face foreclosure. It looks like California, in particular, is going to see foreclosure rates it hasn’t seen since the Northridge earthquake.
I digress. Housing speculation is another example of the same mind-set, but I wanted to focus on the insurance phenomenon. After Katrina, those with the appropriate insurance were okay, but they still struggled, and would rather not have had to endure the devastation at all. Unfortunately, there were uncounted more who didn’t have insurance and are still trying to get on their feet. Everyone was mad at the government for letting this disaster happen; everyone was looking everywhere for a scapegoat. Now many of the large insurance companies are completely pulling out of the area. Insurance did not alter the cosmos and make the area safe and we are wrong for ever thinking that it could. But the area was not as populated before insurance came in, and will likely see a population decrease as insurance pulls out.
I’m not writing anything earth-shattering, I’m just musing on our social workings. Yes, living on the coast is pretty and fun, and yes I live in a danger-prone zone, too (armed with my renter’s, earthquake, car and health insurance.) I just can’t help but wonder most days if the benefits and insurance are enough to off-set the risks. I think those who lived through Katrina might answer with a resounding “NO.”