Insurance for the next Big One

Source: New York Times (Free Registration)

There is impeccable logic to the argument that taxpayers should not be made to pay for the risks incurred by people who choose to live along a hurricane-prone coast or atop a major geological fault. More than half of all Americans, however, live within 50 miles of a coast. With premiums rising relentlessly and insurers cutting hundreds of thousands of homeowner policies from the Gulf of Mexico up the East Coast to Florida and Long Island, there is a real danger that millions might soon be unable to purchase insurance. That’s a compelling argument for government help. A well-designed program — one that priced insurance in a way that encouraged homeowners to think twice about where they build and local governments to think twice about their zoning policies — could mitigate the so-called “moral hazard” of encouraging people to make riskier choices than they otherwise would. The alternative of millions of Americans’ going without insurance is a far worse option.

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