Mandatory Minimum Insurance: A Rational Approach
In the face of increasing climate-related natural phenomena such as floods and droughts, the National Academy Leopoldina has issued a call for precautions. This recommendation comes as Germany grapples with the aftermath of recent catastrophic flooding.
While residential buildings in Germany can be insured for as little as 5 euros per month with minimal self-retention in case of damage, through elemental damage insurance within a residential building insurance, the message seems to have fallen on deaf ears. The majority of homeowners are currently not interested in suitable insurance protection, and only around 50 percent of residential buildings are insured against weather events.
The policy of withholding aid in times of need, intended to provide incentives for people to take technical precautions and obtain flood insurance on their own initiative, appears to be ineffective. This was evident during the recent flood disaster, which has highlighted the need for more legal and technical precautions to manage weather extremes.
The recent disaster has underscored the importance of precautionary measures like insurance. These measures can help minimize possible damages and climate-related deaths in the future. Risk-appropriate insurance can provide protection in case of damage and serve as an incentive for precautions to minimize damage from extreme weather events.
In the areas most affected in Rhineland-Palatinate and Saarland, less than 40 percent of residential buildings are insured against weather events. This low insurance coverage is a concern, as it leaves many homeowners vulnerable to the financial impact of future disasters.
In light of this, the National Academy Leopoldina suggests that precautions can be taken for climate-related natural disasters like pandemics and floods. The academy's recommendations include a legal obligation to insure residential buildings against natural hazards to increase resilience.
Ex-ante protection (insurance before a damage event) can increase societal resilience. By taking out insurance, homeowners can protect themselves financially and be better prepared for future disasters. This, in turn, can lead to additional preventive measures being taken, further increasing resilience.
In Switzerland, the authority responsible for regulating elemental insurance for residential units against natural hazards is the Federal Office for the Environment (FOEN). However, in 2017, some regional authorities decided that payments to affected persons would only be made in exceptional cases, including the cantons of Zurich, Schwyz, and Luzern.
Insurance premiums are not liked by everyone, but they can help reduce the number of climate-related damages and deaths. Despite the financial aid promised following the recent catastrophic flooding in Germany, it's not the smartest policy to withhold aid in times of need as an incentive for people to take precautions and obtain insurance.
In conclusion, the need for increased resilience in the face of climate-related natural disasters is clear. This can be achieved through a combination of legal and technical precautions, as well as the widespread adoption of risk-appropriate insurance. By taking out insurance, homeowners can protect themselves financially and be better prepared for future disasters, leading to a more resilient society.
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