Residents of hurricane-battered Florida are facing soaring insurance premiums. Some, in fact, can't afford any insurance at all. Smart people might interpret this as the market's way of saying, "Hey, dumbass. It isn't safe to live here. Better to look elsewhere."
But not Florida lawmakers. They've just signed on to a bill that would artificially lower insurance premiums by backing coverage with guarantees from state coffers. Unfortunately, it's money the state doesn't have. The bill guarantees $32 billion in relief from the state's "catastrophe fund" should (read: when) a major hurricane again hits Florida. Currently, the fund contains . . . less than $1 billion.
Since neither the state's catastrophe fund nor the state-chartered insurance company has anywhere near enough money on hand to pay the claims they may now be required to pay after a major hurricane, the measure is considered a gamble, even by proponents.
"We all need to pray to the hurricane gods," said state Sen. Steven Geller, who represents this beachfront condo city and negotiated a portion of the bill. "Yes, we're taking a risk. But what were our options?"
Critics have decried the measure as irresponsible. Under the legislation, in the event of a major hurricane, the state will pay claims by taxing home, automobile and some other types of insurance policies sold in the state. That makes it especially unfair, critics argue, to inland and upstate Floridians, who could be asked to help pay to help bailout riskier coastal areas in South Florida.
"If I wanted to gamble—personally, I don't even buy lottery tickets—and I'm pulling money out of my own pocket, that's one thing. But taking money out of someone else's pocket with the force of law is just irresponsible," said state Rep. Don Brown, the chairman of the insurance committee, who cast one of only two votes in the Florida House against the measure. "It's the most irresponsible measure that I ever was asked to vote on."
Not just irresponsible. Criminal. Can you imagine if a private insurer tried something as outrageous?
Of course, this isn't really a "gamble" at all. Florida lawmakers know good and well that if a whopper were to sock the Florida coast, Congress will be all too happy to pick up the tab. Anyone who objects will be ostracized as a cold-hearted hurricane victim hater, and "objectively pro-hurricane."
Remove all market incentives to steer clear of areas prone to natural disaster. Bail out victims with taxpayer dollars when entirely foreseeable disaster inevitably hits. Lather. Rinse. Repeat.
This is how government creates catastrophe.