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2011-01-13

Good intention but poor idea

Comments on Rahel Carter “Flood insurance must be accessible to all”, 13//01/2011, http://www.theaustralian.com.au/news/opinion/flood-insurance-must-be-accessible-to-all/story-e6frg6zo-1225986572360

This proposal might appear to be a good idea at a time of a floods crisis, it is highly likely that people will realise it would be wrong to do that when cool heads prevail after the heightened emotions during the current crisis.

Rachel Carter may ask why.

The simple reason is that doing what she proposed would make some people reduce their own responsibilities in considering the location of their homes and residences, that would in turn make the impacts of any natural disasters unnecessarily much more severe in terms of damages to properties and lives.
It is a typical issue of moral hazard.

It is not a good idea to take away insurance agencies the right to determine the costs of insurance according to the real circumstances and risks.

Government regulations may be necessary, but undue legality prescriptions can be very harmful.

There must be sufficient information available to the public for them to consider location matters in terms of potential natural disasters.

The recommendations from the inquiry into the Victoria black Saturday bushfires have implications for the issues here.

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