The smoke and mirrors game that’s been played with federal hurricane relief dollars appears to be causing a bit of confusion for Californians:
Hurricane Katrina, which killed more than 1,300 people, has had a dual effect on homeowners in the Bay Area, where geologists project a 62 percent probability of a magnitude 6.7 or greater earthquake in the next 26 years.
Some Californians called their insurance agents and signed up for quake coverage. But for many others, watching billions of dollars in federal aid pour into the Gulf Coast merely bolstered a sense that the government would come to the rescue after a big earthquake.
Until recently (as in… this weekend), it was assumed that the vast majority of homeowners in New Orleans did not have flood insurance. In fact, the illustrious Cato Institute said exactly that in September:
“Although flood insurance is heavily subsidized, many — even most — property owners in New Orleans do not buy this insurance, expecting the federal government to bail them out whether or not they are insured,” said Cato Institute Chairman William Niskanen in testimony to Congress about the disaster in September.
Oops. Like so many myths and assumptions about NOLA, this turns out to be false, and Polimom (along with Eugene Robinson and many others) took the bait. You’d think we’d have learned our lesson about all these misconceptions by now, wouldn’t you?
Members of Congress rose up in righteous indignation to scold residents of New Orleans, one of the most vulnerable cities in America, for failing to buy federal flood insurance and then coming hat in hand and asking to be bailed out with federal money.
The irony, now revealed in data painstakingly worked up by aides to Donald Powell, the Bush administration’s liaison to the disaster zone, is that Louisiana was a more enthusiastic participant in the National Flood Insurance Program than any other state in the nation.
So – the majority of homes in New Orleans had flood insurance after all, but since the federal government handles that insurance (via FEMA), the insurance settlements are getting mixed into the overall “federal relief” numbers. Californians are doing exactly what Da Po’ Boy and Bayou St. John David have long predicted: getting confused about federal “assistance” money, which includes insurance payments.
Leaving aside the rather crucial difference between failed levees in Louisiana and earthquake fault lines in California, Polimom can only gape in wonder at the stupidity of not owning earthquake insurance when the values of homes are so incredibly high. Yet it appears that only 14% of people in California have it. Amazing.
Californians have built vast metropolises atop seismic faults, but 86 percent of the state’s homeowners have no quake insurance, a proportion that has crept upward as memories of past quakes fade.
Gallons of metaphorical ink have been wasted on criticizing New Orleans, yet it seems the folks in Louisiana had a much better grip on reality than those in California have. However, if they insist on gambling with these expensive properties, I suppose we should let them. The end result might be, finally, a crash in those home values, and some relief for people who’d like to buy out there.
I’ve been looking for a summer home on the beach, personally. Maybe they’ll help me out.
Not to rush to the defense of California homeowners… but, earthquake insurance used to be mandatory (like car insurance) and regulated by the state and as a result, affordable for even the lowest in salary ranges. That all changed under the lovely reign of Pete Wilson (around 97 or 98 I think) and now it is extremely expensive and out of price range for even the upper middle class to afford said insurance coverage. The problem doesn’t seem to be entirely from the homeowners themselves. Some lobbyist is making an awful lot of money off regular people…
Tim –
I’m absolutely positive your statement about a lobbyist (or ten) making $ is true. Nevertheless, it’s truly difficult to picture anyone in this country, particularly in the wake of last year’s hurricanes, dismissing the thought of geographically-specific disaster insurance on the grounds of an expected federal bailout. From the article:
That comes to roughly $100 to $200 / month, and while I appreciate the enormous gap left by a $75K deductible, it’s not totally dissimilar to $340 / year on a $100K New Orleans house – also a lot of money when one has nothing.
The California Earthquake Insurance site (here) provides rates, by zipcode, insured home value, etc. It also describes how it is funded, and it would appear that an event more catastrophic than $7.2b would exhaust the funds, requiring settlements to be pro-rated. Obviously, if more people in the state insured, the available funds would be higher.
It looks like a major disaster waiting to happen to me…
You are right… if in fact people are sitting around expecting the taxpayers to be a giant disaster-relief ATM, then how unfortunate for them. But part of me thinks it’s a matter of people just not thinking… period.
Unfortunately, the Bay Area “culture” is a hard nut to crack. People here react to earthquakes like disaster alarm clocks and any shaking under 6 or 7 will illicit blank stares when an “outsider” (especilly one with little experience with earthquakes) points out that the ground just shook. There is a deep-seated denial here… Katrina should have awakened the masses, but alas most people here looked (and still look) at it as “their problem”. Part of the point of my blog (and yours too, I’m sure!) recently has been to hopefully open someone’s eyes to the fact that it’s not just a New Orleans-specific problem.
Oh… and also one particular thing that I have noticed that might explain the discrepancy in numbers of insurance holders between LA and CA… people in LA have a collective memory of disasters that they share and discuss amongst themselves and it’s a relatively stable populace (Pre-Katrina). In CA, it is a dynamic populace that moves in and out and people here are not as connected to their own history or to each other here. People tend to only talk about “safe” things like celebrities and liposuction… bringing up anything outside of that safe sphere illicits strange and hostile looks. There are few people who remember the Loma Prieta Quake as anything but an inconvenience. There is a tendency towards avoiding real discussion and as a result people seem very disconnected and out of reality here. It’s sad and when I was in NO last week I was made fully aware of how different I am from that disjointed culture because I am a product of a vibrant, connected culture. People in NO speak openly and readily and share, their collective memory remains intact.