I’ve always been skeptical of government-backed monopolies and coercive institutions. Insurance—particularly home insurance in hurricane-prone areas—has long been a prime example of such a scheme. In the past weeks of hurricanes, when the winds cause catastrophic destruction and the rain pours down flooding entire cities, the insurance industry’s true nature is laid bare—a pyramid scheme that preys on the vulnerable and enriches the few at the expense of the many.
In areas prone to hurricanes and flooding, homeowners are forced to purchase insurance to comply with local building codes, mortgage requirements, and zoning regulations. This mandatory coverage creates a captive market, where individuals are coerced into buying a product they may not need or want. The insurance companies, aware of this captive audience, set premiums that are artificially high, knowing that homeowners have no choice but to pay up. It’s not only coercive, but another example of how big government scoffs at the individual, forcefully regulating their lives.
Home insurance companies promise to protect homeowners from financial ruin in the event of a disaster. However, in these hurricane-prone areas, they regularly deny or delay claims, leaving policyholders with little to no recourse. This is not an isolated issue of course; it’s planned obsolescence rooted in the insurance industry’s business model.
Insurance companies operate on the principle of pooling risk, where many policyholders contribute to a collective fund to cover the costs of claims. In theory, this could work well for minor incidents. However, when catastrophic events like hurricanes strike, the pool is drained, and companies are left scrambling to cover the massive losses. Another element to their disastrous model is that these companies—who themselves assess the risk of damage and loss during hurricane season as extremely high—may drop you from their policy over arbitrary reasons at any time, yet they do not issue new policies or increase coverage limits during hurricane season. This leaves many homeowners—who have paid insurance premiums for years—without any insurance coverage during these vital months where they would need it the most.
If you are “covered”—and they don’t claim bankruptcy altogether to avoid paying claims—insurers then turn to the government for bailouts, subsidies, or regulatory relief. This creates a vicious cycle. Insurance companies benefit substantially from the premiums they’ve collected and are purported to use these funds to pay out claims, but only after deductibles and other fees have been paid. When the remaining amount is generally insufficient to cover the full extent of damages, this leaves policyholders with significant out-of-pocket expenses. Meanwhile, the insurers’ profits continue to soar, fueled mainly by their artificially-high premiums and captive market.
House insurance in hurricane-prone areas is truly an unjust requirement for a multitude of reasons. At the top of the list is coercion. Homeowners are forced to purchase insurance, denying them the freedom to make their own choices about risk management. Secondly, the captive market allows insurers to set prices without much competition, resulting in excessive costs for policyholders. Lastly, as insurers often prioritize their profits over payouts, when disaster strikes, if they do “pay-out,” their scheme can leave policyholders with slow-walked and inadequate compensation for damages.
To dismantle this pyramid scheme, we must promote freedom and competition by allowing homeowners to opt-out of insurance, enabling them to self-insure or seek alternative risk management strategies. If we were to eliminate these government-backed monopolies and allow multiple insurance providers to enter the market, we could foster greater competition and perhaps drive down prices.
Given the frequency and magnitude of recent storms, it’s essential to recognize the pyramid scheme of insurance for what it is: one that exploits the vulnerable and enriches the few at the expense of the many. By promoting freedom, competition, and transparency, we can create a system where individuals are empowered to make their own choices about risk management and insurance without unjust government coercion.
