Experts, morals, and insurance: Right and wrong?
There is a conventional wisdom that I never understood: insurance can reduce flood risk. Insurance encourages behavior otherwise considered too risky. That's sort of the point of buying it. That is why, at least in part, there are legal restrictions on what one can and cannot offer insurance for.
The argument for insurance to reduce risk is most often in tandem with land management regulation. But then, it is the land management regulations that discourage unwanted behavior not the insurance.
Directly using insurance to discourage activity turns insurance into a governing authority circumventing traditional opportunities and processes of public interaction with the decision making process. It is also elitists. If one is to use insurance to discourage behavior than the cost of coverage must be high enough to dissuade a behavior for most people. This means that the behavior is not equally or equitably discouraged but only discouraged for the vast majority that cannot afford the activity. This is poor democratic governance.
Perhaps the engrained belief about insurance stems from the esteemed, almost saintly, Gilbert White and the Bureau of Budget Task Force on Federal Flood Policy (1965) of which he served as chair. Knowles and Kunruether provide the following from the Task Force report:
A flood insurance program is a tool that should be used expertly or not at all. Correctly applied, it could promote wise use of floodplains. Incorrectly applied, it could exacerbate the whole problem of flood losses.
For the Federal Government to subsidize low premium disaster insurance or provide insurance in which premiums are not proportionate to risk would be to invite economic development in floodplain areas. Further, insurance coverage is necessarily restricted to tangible property; no matter how great a subsidy might be made, it could never be sufficient to off set the tragic personal consequences which would follow enticement of the population into hazard areas.
There are three embedded issues I will note.
1) The Task force characterizes a correct and incorrect means of utilizing insurance. Moreover, the correct means is expert while the incorrect means is not. Perhaps here is the root of all polarization over flood insurance.
2) The Task Force demands premiums in proportion to risk so as to avoid floodplain development. However, risk is not static and changes with perception and advances in science. Continuously matching scientific perspectives on risk challenges development history (hence, grandfathering in policies) and development plans (hence, suggestions for vouchers, etc).
White was clearly apposed to floodplain development for humanitarian reasons as stated above but also ecological reasons. It's not that such a position is ill advised its just a matter of opinion as to what to do and how insurance ought to be used. Indeed, it's a moral opinion. And it is at this point that much of contemporary dispute over the governance of risk and implementation of insurance arises.