Social justice and the future of flood insurance

John O’Neill and Martin O’Neill

What would be a fair model for flood insurance?

Catastrophic flooding has become increasingly frequent in the UK and, with climate change, is likely to become even more frequent in the future. With the UK's current flood insurance regime ending in 2013, this 'Viewpoint' argues that:

  • there is an overwhelming case for rejecting a free market in flood insurance after 2013;
  • this market-based approach threatens to leave many thousands of properties uninsurable, leading to extensive social blight;
  • there are a number of possible flood insurance models that would be fairer and more sustainable.

The Viewpoint outlines three approaches to 'fairness' in flood insurance, and argues that the second and third of these would be the most 'solidaristic' – i.e. those at lower risk of flooding would contribute to the support of people at higher risk:

  • 'pure actuarial fairness' – insurance costs directly reflect the level of risk faced by individuals;
  • 'choice-sensitive fairness' – insurance costs should reflect only those risks that result from each individual's choices;
  • 'fairness as social justice' – insurance should be provided independently of individuals' risks and choices when covering basic requirements of social justice.
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