Can't stop the floods?

Question

This is a good question i have listened to your answers and when i hear people say its because of the way we live i smile and then i think of the Dutch people who a third of them live below the sea level so man can stop the water levels but if nothing is done here in England next year the insurance companys will have another big pay out . So my first question still applies why dont the insurance companys do something? they have the money.

Answer 1

You seem to have a basic failure to understand capitalism.

Perhaps you are still being 'educated' in the UK .. in which case you need to do a bit of research before you go out into the 'real world'.

1) Insurance Companies are mainly owned by Shareholders .. this means EVERYTHING the Insurance Company 'owns' belongs to the Shareholders .. and in a lot fo cases the major shareholders of Insurance Company shares are (Company) Pension Funds ..please take this into consideration.

2) Insurance Companies exist to collect premiums and pay claims .. and any excess over the claims is paid out as dividends to the Shareholders.

IF (as you suggest) an Insurance Company used part of the premiums to improve flood defences (leaving aside the fact that it costs millions of £££ to protect a few houses) it would have less to pay out as Dividends. So Shareholders would sell up and the Company would go bust.

The MOST SENSIBLE thing to do, is for Insurance Companies to REFUSE TO INSURE houses that are built on flood plains.

Then Mortgage Companies would refuse to grant Mortgages and so building companies would stop building on flood plains and there would be less houses likely to be flooded ...

... this (in fact) is already happening .. many people who have been flooded have already discovered that the ONLY company willing to insure them is their existing company .. and that the existing company is demanding higher premiums..

Answer 2

They don't receive premiums in order to illiminate natural hazards. That's not what they do. An insurance company isn't a social welfare program. If you want someone to ensure that land in a particular region won't flood, then you should make an appeal to the government there. Government takes taxes for social welfare. Not private businesses like insurance companies. What you are suggesting is like saying Dunkin' Donuts should pay for a multi-billion dollar program to ensure that people are never at risk of gaining weight. Your idea is entirely unprofitable anyway.