Skydivers and motorcycle riders can have a hard time getting life insurance. Why shouldn't people building in the path of future floods and hurricanes have a hard time getting storm insurance?
Thousands of houses have popped up along the Chesapeake and Atlantic in Maryland even as knowledge of global warming and storm threats has grown. Neither state planners nor the Chesapeake Bay Foundation knows exactly how many, but just in Ocean City and surrounding Worcester County, 11,000 dwellings have appeared since 1990, the Census Bureau says.
Now people act offended and talk about tougher regulation when insurers have second thoughts about covering these places.
"Redlining," Del. Susan L.M. Aumann called it in The Sun last week. Insurers, added Sen. Norman R. Stone Jr., "can't just pick and choose based on some prediction of what may happen in the future."
What? Picking and choosing based on predictions of the future is called actuarial underwriting. It's what insurers do. Any carrier that didn't finance future claims by accurately pricing present risks would soon be bankrupt, and that wouldn't help policyholders, either.
There are two reasons for government to crank up regulation of insurance and other risk pools. One is social inequity. The other is market failure. Neither comes close to existing in the Maryland home insurance business.
Real redlining occurs when banks or other businesses boycott low-income neighborhoods. Raising premiums on million-dollar waterfront homes with tropical-storm bulls-eyes on their roofs is not redlining. It's using a couple of brain cells.
Nor is there any kind of breakdown in the Maryland property insurance market. Policy costs for Maryland homes near the water are rising faster than for inland dwellings, and some insurers have stopped adding new business, but no major carriers are scrapping Maryland coastal coverage.
More than 100 companies are licensed to sell homeowner policies in Maryland, according to the state Insurance Administration. Ten carriers vigorously compete for 85 percent of the statewide market, and nobody has more than a 22 percent share.
There is no market failure. And - sorry to repeat but I'm trying not to lose the slower readers in Annapolis - nobody is dumping existing coastal coverage.
Allstate, Maryland's No. 2 home insurer, said last year that it would stop writing new policies in much of Maryland and charge hurricane deductibles of up to 5 percent. No shocker there. Allstate has been extremely aggressive in adding coastal business with very cheap policies in the past decade, and now it's getting smarter.
State Farm, the No. 1 carrier, introduced a hurricane deductible of 2 percent and said it would stop offering new policies near the ocean. Nationwide, the No. 3 home insurer in Maryland, is also limiting new coastal business.
Yes, especially vulnerable places such as Smith Island seem to have much less coverage choice. To the extent that these communities were built before flood maps and the threat of rising oceans, they should receive government attention and assistance.
But they are a tiny part of the problem. People have built thousands of homes near the bay and ocean with full knowledge of hurricane threats and the unfair expectation that somebody else would bear the risk.
As an inland taxpayer, I'm tired of paying for the beach-house welfare plan called the National Flood Insurance Program, which sells cut-rate storm-surge coverage and bills Congress when the claims (inevitably) exceed reserves. I don't want to see my private wind-damage insurance also get more expensive thanks to runaway coastal development.
But that's what might happen under proposed legislation that would require insurers to sell, renew or cancel policies in the same manner across Maryland.
If insurers cut back on coastal coverage, they would have to reduce inland policies, limiting competition and theoretically driving up the cost. If they continued accepting coastal business, they might be tempted to pad inland premiums to help cover waterfront risk.
Instead, let's let the market beam messages about whether shoreside development is a good idea. It's probably nuts to have built up the coastline like this. Higher insurance prices are nature's and the economy's way of saying so.