[SERI COLUMN]Some victims must be told ‘no more relief’

About 10,000 years ago, humans started a sedentary life as farmers. From that time on, we have endured natural disasters as the price we’ve had to pay for a more stable food supply and a longer life span. Previously, hunter-gatherers did not have to put up with the vagaries of weather and nature because they could simply pack up and leave for more hospitable lands with more bountiful rainfall and vegetation, and better protection from floods, volcanic eruptions and other catastrophes.
Since agriculture has become our main livelihood, we have cleared forests, built levees and dikes, and dredged riverbeds for large barges to navigate to protect us better from disasters while increasing our food production to feed ever-multiplying mouths.
But these purported enhancements to our environment have tended to make things worse, encouraging more people to build structures on perilous ground or otherwise uninhabitable patches of land. It, in turn, has resulted in more property damage and human casualties. That’s because so-called environmental engineering has made people oblivious to the horror of once-in-decades cataclysms, as these structures have reduced the frequency of smaller disasters in between.
It’s been just over a year since Hurricane Katrina hit the U.S. Gulf Coast region in late August 2005 ― a powerful reminder that we humans are still at the mercy of Mother Nature. According to climate scientists, the rise in sea-surface temperatures is closely related to the frequency and severity of storms. For example, during the 1985-1994 period, an average of nine hurricanes per year formed in the Atlantic, of which one was severe. From 1995 onward, an average of 16 storms formed; of which four were severe. In the years 2004 and 2005, Americans experienced seven of the 10 most destructive storms in history. So we’d better brace for what’s coming, even if we were lucky the last time around.
The question comes up: What do we have to do? All we modern people can do is make the best of the legacies our ancestors left behind, by minimizing damage, for example. We can make do with what we have, such as something called the market mechanism.
Florida’s experience is a good lesson for everyone. In the wake of hurricane Andrew in 1992, said to be one of the worst tropical storms in U.S. history in terms of insured damage before Katrina, most of the property and casualty insurance companies operating in the state went bankrupt after paying $15.5 billion in damages. The surviving large insurers such as Allstate and State Farm had to suffer huge losses from the hurricane, and they often refused to write new homeowners’ policies for the state’s residents.
Immediately after the disaster, the state of Florida set up a reinsurance fund, called the Hurricane Catastrophe Fund, to which the state government and insurers together contributed, with surcharges assessed on homeowners’ policies. In this way, the fund could raise $6 billion for the next 10 years. It worked like this: For insured losses caused by a hurricane, insurers operating within the state pay the first 75 percent, while 90% of the remaining 25% is covered from the state hurricane fund. That means insurance companies would be shielded from skyrocketing payouts while the state could reduce spending on disaster relief.
This risk-sharing scheme, however, is not free of flaws. But this market-based approach to damage reduction can at least change people’s behavior in a fundamental way. For example, insurers can charge higher premiums for those who choose to live in dangerous places. They can also penalize repeat claimants for the same damage by refusing to pay claims. Under this scheme, people will no longer expect that no matter how dangerous a lifestyle they maintain, the government will be there to save them.
In other words, people are allowed to do whatever they want with their properties, with one big caveat: They can enjoy breathtaking views by building homes cantilevered over canyons, beach houses on stilts, or mansions on fault lines, as long as they pay steep premiums according to assessed risks.
In Korea, as in most other industrialized countries, the government has always been the helping hand of last resort. People built and rebuilt their homes and commercial structures on floodplains and storm paths because they knew all too well the government would pay the damages in case rivers overflowed or typhoons wiped out their properties. At the very least, government should not encourage risk-loving people to erect structures in high-risk areas.
Nevertheless, from one disaster to another, the government provided most of the reconstruction money. Although the government introduced a storm-flood insurance scheme starting early this year, it is in force in only a few selected areas. It remains to be seen how effective this scheme will be, but it should represent an important break from the age-old thinking that the government will do everything for everyone.
Saying “no more relief” to victims of disasters may sound harsh and callous. But it is the only way to reduce unnecessary deaths and property damage in the long run.

* The writer is managing editor of SERIWorld, Samsung Economic Research Institute’s English-language Web site. The views expressed in this column are the author’s and do not represent those of the publication that carries it.

by Sangho Chung