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Insurance Enablers
May 23, 2005
I read a short blip in the Grand Rapids Press yesterday about Allstate Insurance. They recently announced that they will no longer provide insurance policies in Florida. That makes me smile.
Now, I don’t know how big of a customer base Allstate had/has in Florida, it may have been small to begin with, but this announcement still could have a large impact on not only the insurance industry, but also the patterns of development that has become so common lately.
The reason the more recent hurricanes have caused more financial damage is not necessarily because they were stronger hurricanes, but because so many more people are developing land and living in areas that are prone to hurricanes. Therefore, a simple solution to the financial problems of natural disasters is to not allow people to live in these dangerous areas, or at least make those living in the danger areas more aware of the cost as well as more responsible for the costs of cleanup and repair.
Allstate’s decision is a step in that direction. Insurance and the expected payouts enables people to build in dangerous areas. If insurance rates rise, or if insurance companies refuse to hand out policies to areas where natural disasters regularly occur, far less people will be able to live there, thereby reducing financial damage and injuries or loss of life.
The insurance industry is not the only actor in this area, FEMA flood insurance, state governments and local zoning all play into the puzzle. If FEMA were to limit flood insurance and/or limit its natural disaster payouts, things may just change. If states were to focus growth inland, away from the dangerous coasts, they would have fewer problems to deal with in the event of a hurricane or natural disaster.
We have seen a large population shift from the Rust/Frost Belt to the Sun Belt, and much of this shift has been based on weather and the “quality of life” that comes with warmer climates. But few people have taken the time to acknowledge the financial burden this may have added to the insurance industry and federal, state and local governments… Allstate’s recent decision may be a catalyst for change in this population shift. If more insurers get on board with this kind of natural disaster aware policy making, our development patterns may well change in response.
One can only hope.
Posted by paul at May 23, 2005 08:29 AM
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