In the recovery phase of several recent disasters I have seen an increasing number of incidents where insurance was unable to satisfy the needs of the disaster victims. The failure is not that the needed insurance products did not exist; it’s appears to be an increasing number of citizens are not carrying basic insurance. Insurance is a difficult expense to justify when a normal person can go their entire life and never claim on the policy. But when faced with a catastrophic loss or major expenses due to an insurable peril, the decision to have insurance is immediately justified. This is an emerging and possible urgent issue impacting the basic resilience premise of disaster assistance programs. What makes this more tangible is that the majority of the cases where we see this gap are with the most vulnerable segments of society.
Government disaster assistance programs generally exclude assistance for perils that can be insured at a reasonable cost. There is an assumption by governments that the population will take reasonable steps to protect themselves and their property. This concept of self-protection includes an expectation that citizens will purchase reasonable insurance, and this I would argue is a key assumption in the government’s view of its social resilience. What appears to be the trend however is that large segments of society are unable or unwilling to protect themselves by investing in basic insurance products. It therefore maybe time to modify our assumptions about social resilience and recognize the potential risk that a majority of society is unable to meet the basic insurance expectations.
This issue of insurance is not particular to one segment of the population or society. At a recent conference U.S. emergency managers cited statistics that showed only 20% of eligible flood plain properties had the required FEMA Flood Insurance even though to qualify for assistance property must be insured. In Canada we also see a similar issue with water back up insurance, experience has shown that a majority of homeowners have opted not to add a back up extension to the basic homeowners policy. The damage from a recent tornado also revealed that 1 in 6 homeowners who experienced a total loss did not carry even a basic homeowners policy. Despite this lack of insurance most homeowners find a way to recover without disaster financial assistance. More concerning from a recovery perspective is that this level of personal resilience is rarer at the lower income levels of society and with those most vulnerable.
Basic insurance needs are rarely met with those of limited economic means. The economically disadvantaged make choices every day on how to spend their meager funds. As one drops down the hierarchy of needs, funds are depleted long before insurance needs are addressed. What results is a segment of society that lives without the ability to replace their basic possessions such as clothing, basic furniture, and other household items. These same people live in public housing or low rental properties in conditions that probably have greater exposure to risks such as fire or water damage. In some cases this type of housing exists in areas where the threat of natural disaster impacts is greater as the land is less desirable.
Secondly we are seeing a lack of insurance on First Nations. Setting aside cultural differences (which are too complex to address in this blog) it has been noted that with very few exceptions First Nations housing stock is uninsured. This alone is a risk that needs some mitigation as a large number of First Nations are routinely exposed to hazards such as wild fires and flooding. Until now our response programs seem to have prevented the worst case scenario, but it will only take a single wildfire to sweep through a First Nation to create a crisis. In addition to the risk to the housing stock it appears that the majority of First Nations citizens live in these hazard heavy areas without tenant’s insurance.
It would appear that there is an increasing gap between society's expected level of financial protection and the coverage afforded by government disaster assistance. A more thorough study is required but my experience indicates that a vulnerability exists.
Government disaster assistance programs generally exclude assistance for perils that can be insured at a reasonable cost. There is an assumption by governments that the population will take reasonable steps to protect themselves and their property. This concept of self-protection includes an expectation that citizens will purchase reasonable insurance, and this I would argue is a key assumption in the government’s view of its social resilience. What appears to be the trend however is that large segments of society are unable or unwilling to protect themselves by investing in basic insurance products. It therefore maybe time to modify our assumptions about social resilience and recognize the potential risk that a majority of society is unable to meet the basic insurance expectations.
This issue of insurance is not particular to one segment of the population or society. At a recent conference U.S. emergency managers cited statistics that showed only 20% of eligible flood plain properties had the required FEMA Flood Insurance even though to qualify for assistance property must be insured. In Canada we also see a similar issue with water back up insurance, experience has shown that a majority of homeowners have opted not to add a back up extension to the basic homeowners policy. The damage from a recent tornado also revealed that 1 in 6 homeowners who experienced a total loss did not carry even a basic homeowners policy. Despite this lack of insurance most homeowners find a way to recover without disaster financial assistance. More concerning from a recovery perspective is that this level of personal resilience is rarer at the lower income levels of society and with those most vulnerable.
Basic insurance needs are rarely met with those of limited economic means. The economically disadvantaged make choices every day on how to spend their meager funds. As one drops down the hierarchy of needs, funds are depleted long before insurance needs are addressed. What results is a segment of society that lives without the ability to replace their basic possessions such as clothing, basic furniture, and other household items. These same people live in public housing or low rental properties in conditions that probably have greater exposure to risks such as fire or water damage. In some cases this type of housing exists in areas where the threat of natural disaster impacts is greater as the land is less desirable.
Secondly we are seeing a lack of insurance on First Nations. Setting aside cultural differences (which are too complex to address in this blog) it has been noted that with very few exceptions First Nations housing stock is uninsured. This alone is a risk that needs some mitigation as a large number of First Nations are routinely exposed to hazards such as wild fires and flooding. Until now our response programs seem to have prevented the worst case scenario, but it will only take a single wildfire to sweep through a First Nation to create a crisis. In addition to the risk to the housing stock it appears that the majority of First Nations citizens live in these hazard heavy areas without tenant’s insurance.
It would appear that there is an increasing gap between society's expected level of financial protection and the coverage afforded by government disaster assistance. A more thorough study is required but my experience indicates that a vulnerability exists.
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