Barriers to more effective US disaster insurance
Sir, You are right about the need for much greater purchase of disaster insurance but, perhaps, say verylittle about how difficult it might be to make it available (“Shaky foundations of disaster bailouts”, editorial, July 28).
Particularly in the US, government regulation and intrusion into the nominally private market for property insurance have created a mechanism that will prove very difficult to eliminate. In addition to the US federal government's provision of national flood insurance, most states facing serious hurricane risk run wind insurance programmes and several others run fully fledged social property insurance schemes. All but one state have mechanisms for political oversight of insurance rates.
In some cases, it is even illegal to collect the data needed to make the proper rates. This intrusion into the market keeps rates well below their risk-adjusted levels and creates the moral hazard you mention. The system needs the changes you outline but implementing the changes will take a long time.