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Insurance as Public Service

"Consumer advocates"--who spend their time demanding that everyone toss money at anyone who "consumes" a product or service, are on the march, this time against insurers.  Apparently they have just discovered the ill effects of Hurricane Andrew in 1992--reduced insurance coverage. Reports the New York Times:
The storm stunned insurance companies and, after paying out more than $22 billion in claims in inflation-adjusted dollars, they began rewriting policies to protect themselves as much as homeowners. They also developed computer programs intended to limit payouts on claims. As a result, American homeowners are having to make do with much less coverage at steadily rising prices. In Miami and other places along the coast, insurance prices have skyrocketed, deepening the national slowdown in home sales. The insurers say they have had to take defensive measures to stay in business and pay claims as operating costs have climbed. “If you're being overly generous in covering risks and you're not taking in sufficient premium, it doesn't make business sense,” said Richard Ward, the chief executive of Lloyd's of London, a large insurer of homes and businesses in the United States.
This view of insurance horrifies "consumer advocates," who apparently believe the job of insurers is to pay claims irrespective of merit.  The Times adds:
The cutbacks in coverage, consumer advocates say, have contributed to the slow recovery of the Gulf Coast from Hurricane Katrina and will most likely hamper recovery from the recent wildfires in California. “You have a different mentality at the insurance companies,” said Andrew Barile, a consultant who has spent his life in the industry. “They no longer worry about the public service aspect. They're concentrating on the bottom line.”
Does it occur to anyone that perhaps the Gulf Coast is not the wisest place to encourage intensive development?  Or fire-prone, semi-aird sections of California?  And that if people want to live there, it makes sense for them to bear more of the risk? Insurers should be held responsible for the policies that they write.  But we shouldn't expect them to subsidize risky development.  They are, appropriately, private profit-making ventures, not public utilities.