OPINION:
The flash floods in Texas last month killed at least 134 people and destroyed many structures. Federal and state leaders claim the disaster was unavoidable and are considering further hamstringing support for the Federal Emergency Management Agency.
Unfortunately, this series of devastating floods was the latest example of how escalating climate-fueled extreme weather events make life more expensive and dangerous. The disaster underscores the need for a different government approach to keeping people safe.
Texas is the second most disaster-prone state in the U.S., and the latest data from the National Oceanic and Atmospheric Administration shows Texas experienced 20 separate billion-dollar disaster events last year. We should be strengthening the disaster safety net, not ripping it to shreds.
In recent years, however, state and local officials have neglected many opportunities to keep Texans safe, such as reducing emissions and tightening and abiding by land-use laws to keep homes out of high-risk flood plains. Kerr County, for example, has lax rules on the siting of recreational vehicle parks, a key affordable housing source severely devastated in the floods.
Without a strong state response, Texans must turn to property insurance markets for financial relief. Still, insurance alone can’t solve the interlocking issues of disaster response, land use, housing affordability, financial system risk and climate impact.
As insurance becomes more expensive and insurers pull out of markets, many people cut back on coverage or go without. (In Texas, with some of the highest rates of any state, average premiums increased by double digits in three years). Renters are especially vulnerable: renters insurance does not cover temporary housing. Because standard insurance doesn’t cover flood damage, few property owners hit by the Texas flooding were protected.
This is compounded by insurers’ self-serving responses to claims. Los Angeles wildfire survivors say their homes have been undervalued by adjusters, their claims have been delayed and they have been hit with rate increases while still awaiting payouts. One flooded-out North Carolina business owner impacted by Hurricane Helene said bluntly that insurers “take your money and they weasel out.”
Meanwhile, insurance companies continue to profit. A recent analysis found $6 in profit for every $1 in underwriting losses nationwide. Private insurers’ profit motive is in tension with their protection mandate. Because they make money from investing premiums, they are incentivized to raise premium rates, transfer financial risk to policyholders and capital markets and reduce payouts, sometimes in ways that amount to fraud.
Laws such as Texas’ “file and use” policy, which lets insurers increase rates before state approval, support this. Outsourcing disaster resilience and recovery to the private insurance industry increases costs without delivering results.
Because communities across the country face high risk of property damage from overlapping disasters, lawmakers should be increasing state capacity to reduce risks to households and bring down costs. Those efforts could include regional fire breaks in wildfire-prone areas, sewer upgrades in flood zones and neighborhoodwide home upgrade blitzes. Instead of siloing issues of insurance, disaster response, land use, housing affordability, financial risk and climate change mitigation, policymakers should recognize the power of the public sector to tackle these issues together.
At the state level, governments could create agencies to coordinate housing and disaster risk reduction or reform existing last-resort programs into reliable, affordable insurers. These would help ensure that residents in high-risk areas aren’t left without insurance as private carriers withdraw.
At the federal level, lawmakers could invest in and coordinate community-based resiliency and disaster prevention projects so entire neighborhoods could better withstand catastrophic storms. They could also develop national climate risk models, establish advisory councils, and improve federal flood insurance to cover more hazards and support community-based mitigation.
A federal reinsurance program could help states more efficiently finance public catastrophe bonds and other large-scale risk-sharing tools. This idea isn’t new: Congress created the Terrorism Risk Insurance Act after 9/11. However, any new federal reinsurance should prioritize supporting state or nonprofit programs rather than subsidizing private insurers.
Policymakers have the power to transform the home insurance system to one that genuinely reduces risk and provides affordable and fair protection. In the face of these devastating floods, policymakers should not ask, “How do we save the insurance industry?” but rather, “How can insurance tools help ensure housing resilience and affordability for all?”
• Moira Birss is a senior fellow at Climate and Community Institute. Ruthy Gourevitch is the housing director at Climate and Community Institute.
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