Increasing flood risk
The research previously showed that the influence of insurance policy on floods is not given sufficient attention. In many European areas this appears to be even a greater cause of increasing flood risk than climate change. Growth is stimulated by how compensation for damage is now structured. This reduces the possible financial consequences and allows the positive aspects of building in hazardous areas to outweigh the disadvantages. The risks seem smaller, but in reality the danger is just as great.
Encourage risk avoidance
By making premiums sensitive to the risk of the insured, incentives are provided to avoid risk. For example, households or companies are less likely to live in a floodplain if it is significantly more expensive to insure there. Households can also adjust their buildings and/or contents to be less vulnerable to natural disasters. It is therefore important that insurance policy maintains a certain principle of solidarity, where risk is shared between policyholders in risk areas and those outside them.
Affordable premium
Countries such as France and Spain consciously choose to keep premiums affordable by strongly regulating premiums for climate risks. Tesselaar's research shows that these countries are considerably better at keeping flood insurance affordable. Bbut, on the other hand, the research also shows that future development in floodplains is more extensive compared to countries such as the Netherlands and Germany. As a result, the future overall social costs of flooding are higher in this group of countries. Due to the strengths and weaknesses of both insurance systems, it is desirable to combine both.
Responsibility
A robust insurance system is essential to absorb the costs of such disasters. Given the important social function of insurance against natural disasters, many governments themselves take responsibility for providing this. However, it appears that governments are often poorly skilled in the operational side of insurance. It is therefore important that climate risks are covered as much as possible by insurance, and that insurance is at least partly carried out by private insurers.