Homeowner's Insurance - a Different Perspective

About the middle of April there was an isolated hailstorm in the neighborhood.  A few miles away was nothing, but on my block and in the immediate surrounding area houses and cars suffered some damage.  The hail tore window screens, chipped and cracked vinyl siding and (supposedly) damaged roofs.

I looked at the damage to my house and decided I could repair six screens myself, and with the help of a friend I repaired the siding damage with leftover siding from the matching shed that the previous owner built in the backyard.  The roof looked OK.  Total cost was about $30.

Over the next three months, however, driving through the neighborhood was like walking down the aisles of a home improvement show.  On well over half the lawns were signs from a dozen or more siding and roofing companies.  The hammering went on constantly, even on weekends.  The siding color on at least half of the houses in my subdivision has changed since Easter.  (Many of them are less than 10 years old.)

Everyone understands the typical thought process: “I paid all that money every year to the insurance company and now it’s time to get some back.”

A couple of things occurred to me.  First I assume the actions of my neighbors will raise my insurance premiums regardless of whether I filed a claim and regardless of whether they have the same insurance company.  Insurance companies are driven by risk of future claims as much as by today’s claims.

Second, this seems very much out of sync with the history of property insurance as I understand it.

Back in colonial times, and even more recently in the rural areas, when someone had a loss the community would often work together to fix it.  If a barn burned down, neighbors would have a barn-raising event where everyone would pitch in.  Wikipedia explains these events were particularly common in 18^th- and 19^th-century America.  If a family was in distress, finding a job too big to manage alone, the problem was solved by “enlisting members of the community, unpaid, to assist in the building of their neighbors' barns. Because each member was entitled to recruit others for help, the favor would eventually return to each participant.”  That was the custom.

Soon in the cities this practice faded away, but people still needed protection from destructive acts of nature.  Insurance took the place of community action.  Companies administered the insurance by collecting from everyone and distributing the money to those in need.  That change replaced the act of contributing tools and labor toward the erection of a new barn with an insurance payment.

No one in those 18^th century communities would imagine thinking, “Great, my barn is burning.  Now I can get paid back for all the times I had to raise someone else’s barn.”  This would be a very silly reaction.  Weird as it may sound, seen from this perspective, paying premiums to an insurance company is not a cost of owning a house, but an act of helping your neighbors and contributing to the community.

Sure the insurance companies haven’t done much to instill this kind of attitude.  They always act like the reluctant neighbor that doesn’t want to pitch in.  But this attitude may be healthier than resenting the annual premium payment and rejoicing when some major or minor disaster brings the opportunity for monetary revenge.