Social justice and the future of flood insurance Authors John O'Neill, University of Manchester Martin O'Neill, University of York www.jrf.org.uk Viewpoint Informing debate Catastrophic flooding events have become increasingly frequent in the UK and, with climate change, are likely to become even more frequent in the future. This Viewpoint argues that social justice demands an insurance regime based on principles of solidarity, which guarantees access to flood insurance for vulnerable households. If the UK flood insurance regime moves further towards a free market, it will be at the expense of fairness and social justice. Key points • The	UK	flood	insurance	regime	is	in	a	period	of	change,	with	the imminent	expiry	in	2013	of	the	'Statement	of	Principles'	between	the Government	and	the	Association	of	British	Insurers	(ABI). • In	considering	what	should	replace	these	Principles,	two	contrasting models	can	be	distinguished: individualist, risk-sensitive	insurance,	provided	through	a	market	in which	individuals'	payments	are	proportional	to	their	level	of	risk; solidaristic, risk-insensitive	insurance,	in	which	those	at	lower	risk contribute	to	the	support	of	those	at	higher	risk. • The	UK	is	currently	moving	towards	an	increasingly	individualistic, market-based	approach	to	flood	insurance,	in	contrast	to	the	more solidaristic	approaches	in	most	comparable	countries. • We	distinguish	three	approaches	to	'fairness'	in	the	provision	of	flood insurance: 1. 'pure	actuarial	fairness'	–	insurance	costs	to	individuals	should directly	reflect	their	risk	level; 2. 'choice-sensitive	fairness'	–	insurance	costs	to	individuals	should reflect only	those	risks	that	result	from	each	individual's	choices; 3. 'fairness	as	social	justice'	–	insurance	in	the	provision	of	goods that	are	basic	requirements	of	social	justice	should	be	provided independently	of	individuals'	risks	and	choices. • 'Pure	actuarial	fairness'	does	not	provide	a	compelling	approach	to flood	insurance.	This	Viewpoint	defends	the	'fairness	as	social	justice' approach,	but	shows	that	both	approaches	two	and	three	provide strong	grounds	for	a	more	solidaristic	flood	insurance	regime. • The	purely	market-based	alternative	threatens	to	leave	many	thousands of	properties	uninsurable,	leading	to	extensive	social	blight. • There	are	a	number	of	possible	flood	insurance	models	that	would deliver	fairer	and	more	sustainable	outcomes.	There	is,	therefore,	an overwhelming	case	for	rejecting	a	free	market	in	flood	insurance	after 2013. March 2012 2 Introduction Future	policy	on	flood	insurance	has	become	a	pressing issue.	The	frequency	and	intensity	of	flooding	in	the UK	has	increased	and	can	be	expected	to	increase further	with	climate	change.	The	current	agreement on	insurance	in	the	UK	ends	in	June	2013	and	Defra is	currently	in	discussion	with	the	insurance	industry, flood	action	groups	and	other	interested	parties	as	to	its replacement. In	contrast	to	the	systems	of	flood	insurance	and compensation	that	operate	in	Europe	and	the	United States,	flood	insurance	in	the	UK	is	peculiar	in	having a	purely	market-based	approach	to	insurance	in which	risk	is	reflected	in	the	premiums	paid	and	borne by	individual	households,	albeit	with	a	subsidy	from low-risk	to	high-risk	households.	However,	if	left	to the	market,	with	the	increasing	ability	of	insurers	to differentiate	between	households	of	different	levels of	risk,	this	cross-subsidisation	is	likely	to	fall.	This will	leave	many	low-income	households	effectively uninsurable,	with	the	consequent	threat	of	many neighbourhoods	suffering	from	severe	social	blight. Very	little	in	recent	policy	discussions	has	addressed	the question	as	to	what	principles	of	justice	should	underpin the	provision	of	insurance	in	the	UK.	It	is	this	question that	we	address	in	this	Viewpoint.	We	will	argue	that	on any	plausible	account	of	justice,	the	existing	insurance regime	is	unjust,	and	a	shift	to	a	more	risk-sensitive regime	will	make	matters	even	more	unjust.	Equity, fairness	and	social	justice	require	a	more	'solidaristic' model	of	flood	insurance	for	households	in	the	UK	that protects	the	socially	vulnerable. 3 Climate change, flood and flood insurance: a growing problem Catastrophic	flooding	events	have	become	an increasingly	frequent	occurrence	in	the	UK,	particularly in	England	and	Wales.	The	flooding	in	summer	2007	was severe	and	widespread,	affecting	many	areas	in	England –	particularly	South	Yorkshire,	Hull,	Gloucestershire, Worcestershire	and	the	Thames	Valley	(Pitt,	2008).	Pitt, in	his	opening	remarks	to	the	review	of	flooding	in	2007, reports	that	the	floods	constituted	the	'country's	largest peacetime	emergency	since	World	War	II'	(Pitt,	2008,	p. vii).	The	intense	rainfall	in	Morpeth	in	2008	led	to	flooding that	seriously	damaged	around	1,000	properties	(Parkin, 2010;	Morpeth,	2011b,	appendix	3).	The	2009	Cumbrian floods	centred	on	the	town	of	Cockermouth	were	the most	serious	in	many	years,	with	the	flooding	of	1,800 properties	and	the	evacuation	of	200	homes	in	the	town (Smith,	2010,	p.2).	While	no	particular	flooding	event can	be	attributed	to	climate	change,	there	is	evidence that	fluvial	(river-related)	and	pluvial	(rainwater-related) flooding	events	are	likely	to	become	more	common,	as global	warming	leads	to	changes	in	weather	patterns, and	increases	the	frequency	of	extreme	precipitation and	other	extreme	weather	events	(IPCC,	2007;	Pall	et al.,	2011).	Catastrophic	floods	–	once	a	relatively	rare event	in	the	UK	–	look	set	to	become	a more	regular occurrence.	The	risk	of	flooding	has	become	serious: 'In	all,	around	5.2	million	properties	in	England,	or	one	in six	properties,	are	at	risk	of	flooding.	More	than	5	million people	live	and	work	in	2.4	million	properties	that	are at	risk	of	flooding	from	rivers	or	the	sea,	one	million	of which	are	also	at	risk	of	surface	water	flooding.	A	further 2.8	million	properties	are	susceptible	to	surface	water flooding	alone.	'	(Environment	Agency,	2009	p.3) Policy	responses	to	the	increased	frequency	of	extreme weather	events	can	take	a	number	of	forms.	The Government	can	seek	to	invest	in	flood-protection infrastructure	and	the	renewal	of	urban	drainage systems,	while	changes	in	agricultural	drainage practices	can	lessen	the	run-off	of	water	downstream. However,	these	may	often	be	limited	in	the	degree	to which	they	can	offer	protection.	In	addition	to	these methods	of	'hard'	adaptation,	'softer'	methods	of adaptation,	such	as	addressing	insurance	arrangements for	flooding,	will	also	be	necessary.	Assuming	that measures	of	'hard'	adaptation	have	their	limits,	there is	a	pressing	need	to	explore	the	options	in	terms	of providing	insurance-based	models	of	'soft'	adaptation. The	question	of	insurance	in	the	UK	has	become particularly	pressing	for	a	number	of	reasons.	The general	structure	of	the	management	of	flood	risk	in the	UK	is	distinctive	by	comparison	with	many	other European	countries.	Whereas	in	many	EU	countries,	as well	as	in	the	USA,	the	provision	of	insurance	or	relief against	flood	damage	is	provided	by	or	is	guaranteed by	the	government,	'the	UK	is	unusual	in	having	the majority	of	domestic	and	business	flood	damage	borne through	a	competitive	insurance	market,	albeit	with	a history	of	cross-subsidisation	between	policy	holders'. (Defra	2011b,	p.	2;	see	Box	1	for	a	comparison	with other	insurance	regimes).	The	UK	flood	insurance regime	has	recently	undergone	a	series	of	important modifications,	especially	with	regard	to	the	degree	of cross-subsidisation	between	those	at	different	levels of	risk,	and	is	about	to	enter	a	period	of	potentially fundamental	change	from	2013	onwards	as	the	current agreement	of	principles	between	the	Government	and insurance	industry	to	manage	risk	and	cost	comes	to	an end.	The	prospect	will	have	particular	implications	for the	poor	and	disadvantaged	(Lindley	et	al.,	2011). Already	a	disproportately	high	number	of	low-income households	are	without insurance.	The	increase	in premiums	and	excess	payments	will	render	insurance effectively	unavailable	to	many	more	households.	A shift	towards	an	insurance	regime	that	is	increasingly sensitive	to	risk,	together	with	an	increasing	number	of properties	at	risk	from	flooding,	brings	real	threats	of blight	to	communities	at	risk.	Many	more	low-income households	will	be	unable	to	afford	to	insure	the contents	of	their	homes.	Many	properties	will	face	the prospect	of	becoming	uninsurable,	raising	the	prospects of	neighbourhoods	in	which	houses	are	unsaleable	and uninhabitable	(ABI,	2008).	As	Houston	et al.,	note: Increased premiums may make more soughtafter areas the preserve of the rich; in other areas, such increases may lead to falls in house prices and subsequent filtering of lower income groups into these areas. The withdrawal of insurance altogether would be likely to blight areas of new development and cause problems for the resale of existing properties. (Houston et al., 2011 p.9) Given	the	potential	scale	of	the	risks	of	flooding	as	the effects	of	extreme	weather	events	increase	with	climate change,	there	is	an	urgency	to	current	discussions about	the	future	of	flood	insurance	in	the	UK.	The	ABI has	recently	estimated	that	some	200,000	households may	become	uninsurable	when	the	current	agreement ends	in	June	2013	(ABI	2012).	It	is	in	this	context	that current	discussions	on	insurance	policy	are	taking	place. 4 The changing nature of flood insurance in the UK The	flood	insurance	regime	in	the	UK,	although	with similarities	to	the	regimes	in	Ireland	and	Portugal,	is peculiar	within	the	EU	in	having	a	purely	market-based insurance	scheme, which	does	not	involve	a	central	role of	the	state	either	through	direct	aid,	public	insurance or	through	acting	re-insurance,	so	acting	as	the	insurer of	last	resort.	The	flood	insurance	regime	in	the	UK	has recently	begun	to	undergo	a	series	of	changes,	and	will change	still	more	fundamentally	in	the	years	ahead. From	1961	through	to	1	January	2003,	flood	insurance in	Britain	was	governed	by	a	'gentleman's	agreement' that	divided	responsibilities	between	the	state	and	the insurance	industry.	Under	the	terms	of	this	agreement, it	was	understood	that	the	state	would	provide	flood defences	and	prevent	development	in	flood	hazard areas.	The	insurance	industry,	except	in	exceptional circumstances	of	unavoidable	'continual	and	regular flooding'	(Huber,	2004,	p.5),	would	provide	flood insurance	for	all	households	and	some	small	businesses regardless	of	their	flood	risks,	such	that	an	'additional premium	rate	would	not	exceed	0.5	per	cent	on	the	sum insured'	(Crichton,	2002,	p.127).	(Northern	Ireland	was not	mentioned	in	the	agreement,	but	it	was	'deemed'	to be	included	in	custom	and	practice.) Following	the	large	insurance	payouts	for	floods	in	the late	1990s	this	agreement	began	to	break	down.	It	was replaced	on	1	January	2003	by	a	voluntary	agreement between	members	of	the	Association	of	British	Insurers (ABI)	and	Government,	known	as	the	'Statement	of Principles'.	According	to	that	agreement,	ABI	members would	continue	to	offer	insurance	cover	to	existing customers	where	the	probability	of	their	properties being	flooded	in	any	single	year	is	1-in-75	or	less,	or where	flood	defences	planned	in	the	next	five	years	will bring	flood	probability	down	to	that	level.	Within	those areas	covered,	premium	charges	and	excess	payments are	allowed	to	reflect	different	levels	of	risk.	The	level	of payment	of	individual	premiums	is	not	tightly	correlated to	risk,	since	existing	insurance	schemes	involve	crosssubsidisation	from	those	at	lower	risk	to	those	at	higher risk.	According	to	the	ABI	there	are	currently	subsidies to	78	per	cent	of	homes	in	areas	of	significant	flood risk	(ABI,	2011a).	However,	while	cross-subsidisation exists,	those	at	higher	risk	still	face	higher	costs.	The	risk sensitivities	raise	particular	difficulties	for	those	on	low incomes. Box 1: Flood insurance regimes in Europe and the USA Globally	there	is	a	variety	of	different	insurance regimes	for	flooding	(Consorcio	de	Compensación de	Seguros,	2008;	Botzen	and	van	den	Berg,	2008; Crichton,	2011b). • France:	there	are	constitutional	guarantees	of the	principle	of	solidarity	for	natural	disasters: 'The	Nation	shall	proclaim	the	solidarity	and equality	of	all	the	French	people	with	respect to	burdens	resulting	from	national	disasters.' (Preamble	to	the	1946	Constitution.)	In	practice, insurance	is	provided	through	a	partnership between	the	state	and	the	insurance	industry. The	insurance	industry	collects	a	compulsory premium	for	natural	disasters	that	is	standard	in policies	and	which	is	charged	regardless	of	the level	of	risk.	The	state	acts	as	the	re-insurer	and hence	guarantees	payments	as	the	insurer	of	last resort.	Insurance	payments	are	made	in	the	event of	a	state	announcement	of	a	state	of	natural catastrophe.	Similar	solidarity-based	models	of insurance	involving	partnerships	between	the state	and	insurance	industry	operate	in	Belgium and	Spain. • Netherlands:	flooding	is	typically	excluded	from insurance	policies	in	the	Netherlands.	Under	the Calamities	Compensation	Act	(1998),	the	state	is responsible	for	losses	due	to	floods	which	are	not covered	by	private	insurance. • Iceland:	a	compulsory	insurance	regime	is operated	for	natural	disasters	including	floods under	a	public	insurance	company,	Iceland Catastrophic	Insurance. • Germany:	major	flooding	is	principally	covered by	public	compensation	packages.	Private	riskdifferentiated	insurance	is	available	but	there	is very	low	take	up	of	such	insurance. • USA:	catastrophic	flooding	is	typically	excluded from	private	insurance	policies	for	high-risk areas	and	is	covered	by	a	federal	National	Flood Insurance	Program.	The	Program	aims	to	make flood	insurance	available	to	those	in	areas	of high	flood	risk	–	'Special	Flood	Hazard	Areas'. It	offers	insurance	to	those	within	communities that	are	part	of	the	Program,	where	insurance	is conditional	on	the	communities	adopting	plans that	reduce	future	flood	risks. 5 Low-income	households	are	particularly	likely	to	lack insurance.	The	Pitt	review	notes: Low-income households are least able to recover from the financial impact of flooding and are statistically the least likely to be insured. The lack of home contents insurance in low-income households is widespread. Of people in low and very low-income households, one-third of all UK households, 69 per cent are in social housing. Of this 29 per cent have no insurance at all and 50 per cent do not have home contents insurance as opposed to 1 in 5 of those on average income. (Pitt, 2008, 9.28) The	proportion	of	households	in	the	rented	sector	that have	contents	insurance	is	particularly	low	(Blake	and Jong,	2008).	In	the	three	years	up	to	2009,	over	60 per	cent	of	those	in	social	rented	and	private	rented properties	lacked	contents	insurance,	compared	to	less than	10	per	cent	of	owner-occupiers.	Approximately	78 per	cent	of	those	without	contents	insurance	were	in	the rented	sector	(Poverty	Site,	2011).	The	figures	for	those with	contents insurance	in	low-income	households and	the	rented	sector	are	higher	in	Scotland	than	in	the rest	of	the	UK.	The	Scottish	Household	Survey	of	2007 showed	60	per	cent	of	households	in	the	lowest	income decile	have	contents	insurance,	but	this	still	compared to	the	much	higher	rate	of	96	per	cent	in	the	two	highestincome	deciles	(Hayton	et al.,	2007,	p.66). Fifty-six per	cent	of	local	authority	tenants	and	50	per	cent	of housing	association	or	private	tenants	had	contents insurance,	compared	to	98	per	cent	of	owner-occupiers with	a	mortgage.	However,	even	in	Scotland	the proportion	of	those	with	contents	insurance	has	fallen since	2005.	Existing	schemes	directed	at	the	rented sector	include	low-cost	'insurance-with-rent'	schemes with	minimal	or	no	excess	charges	and	security conditions.	The	uptake	of	these	schemes	has	been mixed	(Hood	et	al.,	2009).	Increases	in	premiums	that would	result	from	a	purely	market-based	regime	which was	fully	risk-sensitive	would	make	it	still	more	difficult to	include	those	at	risk	of	flooding	who	are	currently without	contents	insurance. The	absence	of	insurance	makes	recovery	from	floods difficult	and	affects	ability	to	prepare	for	future	flood events.	A	low-income	household	at	great	likelihood	of flooding	will	have	difficulty	in	accessing	insurance,	either through	increased	premiums	and	excesses	or	simply due	to	insurance	refusal.	Thus	the	Morpeth Flood Action Group Insurance Survey	reports:	average	increases	in buildings	and	content	insurance	premiums	of	71	per cent	for	flooded	households,	against	9	per	cent	for non-flooded	properties	in	the	same	postcode	and	a fall	in	premiums	for	properties	generally;	an	average	59 per	cent	increase	in	premiums	for	contents	insurance for	flooded	properties,	as	against	12	per	cent	for	nonflooded	properties	in	the	same	postcode	and	a	fall	in premiums	for	properties	generally;	and	higher	excess payments	for	flooded	households,	with	some	being	over £10,000	(Morpeth	Group,	2011b;	compare	the	similar results	for	Lewes	in	Dlugolecki	et al.,	2009,	ch.	7	p.	21). The	impacts	of	floods	for	low-income	uninsured households	are	evident	in	qualitative	research	on flooding	in	the	UK.	Consider	the	experience	of	a	tenant on	low	income	recovering	from	the	Hull	floods	reported in	Box	2. Box 2: Low-income access to insurance 'Helen, a council tenant, had no contents insurance and had to re-furnish her home on a very limited income (she was disabled and couldn't work). Having had this experience, Helen was determined to purchase insurance to protect her home in future. However, none of the companies she contacted would insure her. Even those whose cover was intact sometimes found the terms of their new policies very unfavourable, as Leanne described: "We went on the web looking for insurances and, like you say Isobel, other insurance companies don't particularly want to take you on and the premiums were that high it was unbelievable. So we stuck with the same insurance company and they took us back on and the premium only went up £50 and that wasn't a problem. But the excess has gone up £5,000 we have to pay on contents and £5,000 on buildings. So if the same thing happened again we've £10,000 to find before we start. And where do we pluck that from? Where do we get that from? We haven't got £10,000. Or do we save anything at all or do we literally just let the whole lot go and say it's all gone and claim what we can and just have everything lesser?"' (Whittle et al., 2010, p. 111)' 6 From 2013 and beyond The	current	agreement	between	the	ABI	and Government	ends	in	2013.	It	is	very	unlikely	that	it	will	be extended.	Claims	on	insurance	in	high-risk	areas	have tripled	in	the	last	decade	(Ballard,	2011).	Moreover,	new insurers	who	do	not	have	a	legacy	of	business	in	higher risk	areas	have	a	commercial	advantage	over	those	who do,	thus	creating	market	pressures	within	the	insurance industry	to	move	away	from	existing	arrangements. Defra	is	now	in	discussions	with	the	ABI,	the	National Flood	Forum	and	other	parties	over	the	regime	that should	replace	the	existing	agreement	when	it	ends	in 2013. Defra's	final	report	on	flood	insurance,	Flooding and insurance: a roadmap to 2013 and beyond,	outlined	a number	of	principles	to	govern	future	flood	insurance. The	principles	were: 1. Insurance	cover	for	flooding	should	be	widely available. 2. Flood	insurance	premiums	and	excesses	should reflect	the	risk	of	flood	damage	to	the	property insured,	taking	into	account	any	resistance	or resilience	measures. 3. The	provision	of	flood	insurance	should	be equitable. 4. The	model	should	not	distort	competition between	insurance	firms. 5. Any	new	model	should	be	practical	and deliverable. 6. Any	new	model	should	encourage	the	take	up of	flood	insurance,	especially	by	low-income households. 7. Where	economically	viable,	affordable	and technically	possible,	investment	in	flood	risk management	activity,	including	resilience	and other	measures	to	reduce	flood	risk,	should	be encouraged.	This	includes,	but	is	not	limited	to, direct	Government	investment. 8. Any	new	model	should	be	sustainable	in	the	long run,	affordable	to	the	public	purse	and	offer	value for	money	to	the	taxpayer.	(Defra,	2011b,	p.5) One	question	that	might	be	raised	about	this	list	of principles	is	whether	they	are	consistent	with	each other.	For	example,	the	first	principle	encourages wide	availability	of	flood	insurance,	while	the	sixth principle	chimes	with	this	goal	by	pointing	towards	the significance	of	increasing	uptake	of	insurance	in	lowincome	households,	but	one	may	wonder	whether	this will	not	generate	a	deep	tension	with	the	potentiallycompeting	goals	of	tying	premiums	closely	to	risk (second	principle)	and	minimizing	the	costs	to	the	public purse	(eighth	principle).	To	take	a	further	example,	we need	to	try	to	discover	whether	the	second	and	third principles	are	mutually	consistent.	Can	an	insurance regime	really	guarantee	access	to	insurance	on equitable	terms,	whilst	nevertheless	being	essentially risk-sensitive? Clearly,	an	answer	to	that	question	in	part	requires	an answer	to	a	question	that	is	not	addressed	in	the	Defra report:	what	is	it	for	the	provision	of	insurance	to	be	fair or	'equitable'?	Thinking	about	the	relevant	senses	of fairness	or	equity	in	the	arrangement	of	flood	insurance is	not	a	straightforward	task,	as	it	involves	having	a	clear picture	of	the	function	and	significance	of	insurance, and	of	the	special	role	that	flood	insurance	might	play in	the	lives	of	people	who	can	(or	cannot)	access	it.	The aim	of	this	Viewpoint	is	to	provide	a	fuller	sense	of	what the	options	might	be	in	thinking	of	what	counts	as	fair or	'equitable',	and,	further,	to	look	at	the	sort	of	flood insurance	regime	that	we	should	endorse	if	we	take fairness	or	equity	seriously. Before	looking	at	rival	accounts	of	what	might	count	as 'equitable'	provision,	we	will	first	discuss	the	competing models	of	insurance	provision,	to	give	a	clearer	sense of	the	possible	options	as	the	UK	comes	to	renew	its regime	of	flood	insurance	provision	in	2013	and	beyond. Two basic approaches to insurance provision Insurance	provision	can	take	many	different	forms. However,	it	is	useful	to	distinguish	two	broad	idealised types	of	insurance	provision	(O'Neill,	2006).	By	thinking through	the	attractions	and	problems	of	these	two general	approaches,	we	can	get	a	clearer	sense	both of	the	issues	of	equity	at	stake	here,	and	of	the	possible options	that	the	UK	might	wish	to	adopt. a.	Individual, risk-sensitive insurance These	'mutual'	insurance	markets	operate	through the	pooling	of	risk,	with	payment	into	the	pool	being in	accordance	with	the	best	estimate	of	the	level	of risk	brought	to	the	pool.	Typically,	such	schemes are	private,	market-based	and	contractual.	The	level of	cover	offered	is	often	related	to	the	amount	of insurance	purchased.	Such	schemes	are	often	(but not	always)	voluntary;	individuals	therefore	have	a level	of	discretion	over	the	amount	of	cover	that	they wish	to	purchase. 7 b.	Solidaristic, risk-insensitive insurance In	this	kind	of	insurance	model,	risks	are	pooled, and	payment	into	the	'risk	pool'	is	in	accordance with	some	agreed	scheme	(for	example,	ability	to pay,	value	of	the	property	insured	or	perhaps	even strict	equality	of	contribution),	but	is	to	some	degree independent	of	the	level	of	known	risk	brought to	the	pool.	Thus,	the	level	of	insurance	cover	is independent	of	the	level	of	payment,	and	is	generally associated	with	level	of	individual	need.	Such schemes	often	tend	to	be	state	run,	are	typically comprehensive	(i.e.,	they	cover	everybody)	and compulsory.	Given	this,	individuals	tend	not	to	have discretion	over	the	level	of	cover	that	they	will	enjoy. A	typical	example	of	such	a	scheme	is	the	operation of	health	insurance	in	the	UK	(as	in	Canada	and most	EU	countries),	with	the	National	Health	Service supplying	a	(roughly)	standard	level	of	cover	to	all citizens,	funded	through	general	taxation. There	are	clearly	a	variety	of	different	kinds	of	insurance provision	between	these	idealised	types.	The	changing nature	of	the	flood	insurance	scheme	in	the	UK	since 1961	involves	an	increasing	risk-differentiation	of premium	charges	and	excess	payments,	from	the relatively	low	risk-differentiation	of	the	'Gentleman's Agreement'	(1961	to	2003),	which	was	closer	to	a solidaristic	risk-insensitive	scheme,	to	the	more	riskdifferentiated	schemes	of	the	'Statement	of	Principles' (early	2000s),	albeit	with	some	cross-subsidisation	in practice.	The	increasing	availability	of	data	that	allows insurers	to	discriminate	more	finely	between	areas	of flood	risk	is	leading	to	increased	risk-differentiation	and declining	cross-subsidisation.	The	end	of	the	Statement of	Principles	in	2013	raises	basic	questions	about whether	and	how	flood	insurance	should	move	in	a more	individualised	or	a	more	solidaristic	direction,	and whether	the	level	of	risk-differentiation	should	increase (thus	completing	the	move	from	a	more	solidaristic schemes	to	individualised	schemes)	or	decrease	(which would	represent	a	return	to	conditions	similar	to	those that	obtained	in	the	UK	for	much	of	the	last	century). More	solidaristic	schemes	are	more	typical	of	insurance regimes	in	Europe	and	the	United	States	(see	Box	1). The	shift	from	the	more	solidaristic	to	the	more individualist	risk-differentiated	form	of	insurance	has seen	increasingly	high	premiums	for	households	at risk,	and	growing	difficulties	for	some	households	in obtaining	insurance	at	all	(Crichton,	2007,	p.	v). Despite	these	apparent	socially	inequitable consequences	of	the	shift	to	a	risk-differentiated individualist	model	of	insurance,	the	literature	on	flood insurance	is	dominated	by	economic	arguments	for market-based	individualist	insurance	policies.	These economic	arguments	typically	appeal	to	claims about	the	efficiency	of	individualist,	risk-differentiated insurance. However,	the	claim	is	often	made	that	differentiating premiums	by	risk	is	not	only	more	efficient,	but	is	also fairer	or,	in	the	terms	of	the	2011	Defra	report,	'more equitable'.	Consider	for	example	the	following	comment on	the	decline	of	the	'Gentleman's	Agreement'	in	the	UK: The reformed Gentleman's Agreement differentiates premiums, charging houses in exposed areas more, and makes in that way the 'burden sharing' mechanism visible, debateable and exposed to criticism. Increasing efficiency and fairness are the result of the cost of unveiling the subsidising. (Huber, 2004, p.17) In	this	Viewpoint	we	argue	to	the	contrary.	Our suggestion	is	that	equity,	fairness	and	social	justice	do require	a	more	solidaristic	model	of	flood	insurance	for households	in	the	UK.	In	doing	so,	we	will	not	defend any	particular	solidaristic	insurance	scheme.	As	will be	evident	from	the	variety	of	solidaristic	insurance regimes	for	flood	that	are	in	operation	elsewhere	(Box 1),	there	may	be	a	number	of	alternative	institutional arrangements	which	could	all	provide	flooding	insurance on	suitably	solidaristic	terms.	These	range	from	the private-public	partnerships	of	the	kind	found	in	France, Spain	and	Belgium,	through	to	public	insurance	found	in the	USA	and	Iceland.	Nevertheless,	our	aim	is	to	develop a	principled	argument	for	the	necessity	of	some	such scheme	as	a	requirement	of	social	justice.	It	will	now	be useful	to	return	to	the	different	understandings	of	equity or	fairness	that	may	be	relevant	when	we	think	about	the justifiability	of	different	insurance	regimes. 8 Fairness and equity in insurance provision There	are	at	least	three	different	principles	of	fairness or	'equity'	that	might	govern	an	equitable	insurance provision.	They	move	from	the	narrowest	standard	to the	more	expansive.	The	plausibility	of	Defra's	set	of suggested	principles	turns	very	much	on	giving	a	further specification	of	the	concept	of	'equitable'	on	which	it relies.	As	we	shall	see,	Defra's	principles	may	be	able to	be	read	as	mutually	consistent	with	one	another	only by	virtue	of	relying	upon	an	independently	implausible account	of	what	counts	as	fairness	or	'equity'.	On	a more	plausible	understanding	of	what	counts	as	'equity', we	may	have	to	make	much	tougher	choices	between delivering	an	insurance	regime	that	is	fair	and	equitable and	delivering	an	insurance	regime	that	differentiates sharply	between	individuals	on	the	basis	of	flood	risk. Let	us	first,	though,	set	out	the	content	of	these	three senses	of	'fair	and	equitable',	starting	from	the	narrowest conception	and	moving	on	to	the	more	expansive. 1.	Pure actuarial fairness The	idea	here	is	that	one	treats	some	individual	fairly with	regard	to	making	them	bear	the	costs	of	their	own risks	when	you	align	the	costs	that	they	face	with	their associated	level	of	risk,	as	when	'an	insurance	company has	the	responsibility	to	treat	all	its	policy-holders	fairly by	establishing	premiums	at	a	level	consistent	with the	risk	represented	by	each	individual	policy	holder' (O'Neill,	1997,	p.1088). The	grounds	in	justice	offered	for	pure	actuarial fairness	is	that	it	is	unfair	to	ask	those	with	lower	risks to	subsidise	the	risky	behaviour	of	those	with	higher risk.	For	example,	one	might	think	that	it	is	not	fair	that safe	drivers	should	subsidise	unsafe	drivers.	However, this	pure	form	of	actuarial	fairness	has	clear	and	deep problems	when	it	is	applied	to	various	other	practical problems.	One	problem	is	that	it	forces	those	who	are unfortunate	through no fault of their own	to	bear	the full	costs	of	their	misfortune.	For	example,	it	does	not seem	fair	that	a	person	who	becomes	seriously	ill	with Huntington's	disease	as	a	result	of	their	bad	luck	in	the genetic	lottery	should	bear	the	full	costs	of	facing	that illness,	even	if	it	would	be	'actuarially	fair'	to	make	them fully	bear	the	costs	of	their	own	treatment.	Similarly,	for example,	we	may	plausibly	think	that	people	should not	be	discriminated	against	on	the	basis	of	their	class background,	gender	or	race,	even	when	those	features carry	with	them	an	actuarially	significant	increase	in	risk with	regard	to	some	potential	outcome. In	cases	where	a	purely	'actuarial'	account	of	fairness seems	too	narrow,	a	more	plausible	account	of	the ideas	of	fairness	and	equity	might	instead	focus	on the	significance	of	individual	choices.	This	leads	us	to consider	what	might	be	described	as	'choice-sensitive fairness'. 2.	Choice-sensitive fairness The	idea	here	is	that	insurance	premiums	against	some risk	should	be	set	at	a	level	that	reflect	those	risks	that are	the	result	of	each	individual's	choices,	but	should	not be	sensitive	to	differences	in	risk	that	are	no	choice	or fault	of	the	individual	in	question. This	elaboration	of	the	idea	of	'equity'	or	fairness	may seem	more	plausible	in	many	cases.	It	would	still recommend,	for	example,	that	those	who	go	on	risky winter	sports	holidays	should	bear	the	costs	of	their	own travel	insurance,	but	it	would	not	recommend	the	rather harsh	outcome	that	those	who	develop	Huntington's disease	because	of	their	bad	luck	with	regard	to	their genetic	risk	should	be	made	to	bear	the	costs	of	their condition. However,	this	principle	appears	to	have	outcomes	that are	unjustifiable	in	many	cases.	There	are	certain	'social goods'	that	an	individual	requires	to	lead	a	minimally decent	life,	or	to	engage	as	a	citizen	in	public	life,	and it	may	seem	unjustifiable	to	deprive	a	person	of	those goods,	even	if	their	potential	loss	is	the	consequence of	that	person's	choices.	We	may	take	the	view	that it	is	wrong	to	deprive	somebody	of	medical	care	in the	case	of	a	serious	motorcycle	accident,	even	if	the accident	was	a	result	of	their	own	choice.	We	may	also think	that	the	broader	demands	of	social	justice	require that	people	are	guaranteed	certain	goods,	rights	and protections	that	allow	them	to	live	in	relations	of	equality and	respect	with	one	another,	or	to	function	as	normal citizens	within	their	societies. This	brings	us	to	a	broader	and	more	expansive	account of	fairness	and	equity,	which	links	those	ideas	to	the broader	demands	of	social	justice.	Asking	about the	fairness	or	equity	of	arrangements	for,	say,	flood insurance,	is	asking	a	question	that	demands	the examination	of	how	that	particular	form	of	insurance plays	a	role	in	people's	lives,	and	how	that	role	may	be related	to	general	concerns	of	social	justice. We	might	succinctly	state	this	third	conception	of fairness	or	equity	as	follows. 9 3.	Fairness as social justice Insurance	should	be	provided	to	govern	the	provision of	at	least	some	class	of	basic	goods	independently	of the	risks	and	choices	of	individuals,	where	the	provision of	those	goods	is	required	by	basic	entitlements	of citizenship	or	basic	requirements	of	social	justice. The	question	of	which	of	these	three	accounts	of fairness	should	be	adopted	will	determine	what	will	be taken	to	count	as	an	equitable	provision	of	insurance. In	this	Viewpoint	we	defend	fairness as social justice for	flood	insurance.	However,	we	also	argue	that either	principles	2	or	3	above	would	require	insurance provision	that	is	less	purely	risk-sensitive	than	would	be offered	on	a	purely	individualistic,	risk-sensitive	model. The case for individualist, risk-sensitive flood insurance Why	might	one	take	the	view	that	systems	of	insurance that	differentiate	according	to	individual	risk	are	both more	efficient	and	fairer	than	solidaristic	systems? (a)	Efficiency The	central	arguments	for	the	efficiency	of	a	marketbased	risk-sensitive	insurance	regime	are	'moral hazard'	arguments.	By	making	people	bear	the	costs of	their	own	choices,	the	differentiation	of	premiums by	relative	levels	of	risk	encourages	agents	to	make choices	that	lower	their	levels	of	risk.	It	encourages individual	householders	to	make	their	properties more	flood-resilient	and	hence	lower	the	risk	of	flood damage.	At	the	same	time	it	will	discourage	property developers	from	building	non-resilient	properties	in	high flood-risk	areas,	since	those	properties	would	either	be uninsurable	or	demand	such	high	levels	of	insurance that	they	would	be	difficult	to	sell.	In	contrast,	solidaristic systems	carry	a	moral	hazard.	Individuals	insured	under solidaristic	systems	will	not	be	given	either	the	signals or	incentives	to	behave	in	ways	that	lower	their	own risks	and	vulnerabilities;	as	a	result,	neither	will	builders and	property	developers	who	sell	properties	to	those individuals. These	are	arguments	for	the	claim	that	a	market-based regime	in	which	individuals	bear	the	full	costs	of	their risk	will,	more	efficiently,	produce	better	consequences in	creating	a	flood-resilient	property	stock.	We	will respond	to	them	below.	However,	arguments	that stress	the	greater	efficiency	of	such	a	regime	do	not tell	us	anything	about	the	equity	or	fairness	of	such arrangements.	Moreover,	the	very	mechanisms	that ensure	the	effectiveness	of	a	market-based	insurance regime	in	delivering	flood-resilient	outcomes	–	that	is,	the use	of	price	signals	as	incentives	–	may	well	be	thought to	lead	directly	to	conspicuously	unjust	outcomes.	For example,	those	on	low	incomes	may	be	made	effectively uninsurable.	The	question	then	arises	of	why	we	should think	that	market-based	insurance	could	also	be considered	fairer? (b)	Fairness and equity One	argument	for	the	fairness	of	individualist	risksensitive	regimes	appeals	to	the	pure	actuarial	concept of	fairness	we	outlined	above:	the	argument	is	that	it is	unfair	that	one	part	of	the	population	with	a	low	risk should	subsidise	another	with	high	risks.	However, this	'pure	actuarial'	account	of	fairness	lacks	any	real plausibility,	and	conflicts	with	deeply-entrenched	beliefs and	considered	judgements	about	fairness	and	equity. We	do	not	in	general	believe	that	wealth	transfers	to	the more	vulnerable	are	'unfair';	indeed,	such	transfers	are regularly	seen	as	central	to	the	requirements	of	social justice,	as	we	see	for	example	through	the	operation	of the	National	Health	Service,	which	can	be	viewed	as an	institutional	scheme	for	protecting	the	vulnerable. Indeed,	many	of	these	transfers	from	the	fortunate	to the	unfortunate	–	to	the	sick,	the	old,	the	disabled	–	look to	be	requirements	of	justice	rather	than	somehow inconsistent	with	it.	The	concept	of	'pure	actuarial fairness'	is	thus	not	particularly	compelling.	It	requires those	who	are	unfortunate,	through	no	choice	of	their own,	to	bear	the	full	costs	of	their	misfortune.	This	strikes us	as	a	model	case	not	of	fairness,	but	of	unfairness. The	more	plausible	starting	point	for	an	argument	for the	fairness	of	a	fully	risk-sensitive	insurance	scheme is	the	choice-sensitive	principle	of	fairness,	in	which insurance	costs	should	be	sensitive	to	risks	that	are	the results	of	individuals'	choices	–	but	not	those	which	are not	the	result	of	choices.	It	is	not	risk	as	such	that	should not	be	subsidised,	but	the	choice	to	take	risks.	On	this view,	people	should	bear	the	consequences	of	their own	choices.	Accordingly,	the	claim	is	that	principles of	justice	should	be	choice	sensitive.	If	people	choose to	live	in	areas	of	high	flooding,	then	they	ought	to	bear the	costs	of	the	risks	they	incur	in	doing	so.	As	one respondent	put	it	in	a	BBC	forum	on	flood	insurance following	the	Cumbrian	floods:	'Simple	answer. Don't	buy	property	in	a	flood	risk	area!'	(BBC	2009). Correspondingly,	it	is	unfair	to	expect	others	to	subsidise those	costs. 10 The	appeal	to	choice-sensitivity	corresponds	to	one current	version	of	egalitarianism	in	recent	political theory,	that	of	the	luck-egalitarian.	For	the	luckegalitarian,	while	unequal	distributions	of	'goods'	that is	the	consequence	of	circumstances	for	which	the individual	is	not	responsible	are	unjust,	inequalities	that are	the	result	of	welfare	losses	consequent	on	voluntary choices,	for	which	individuals	are	responsible,	are not	unjust	(Arneson,	1989,	1990,	2011;	Cohen,	1989; Dworkin,	1981,	2000;	Rakowski,	1991).	Inequalities	are unjust	if	they	are	the	outcome	of	'brute	luck'	–	that	is of	unchosen	natural	and	social	circumstances	that	are not	the	responsibility	of	the	affected	agents.	However, inequalities	are	not	unjust	if	they	are	the	consequence	of 'option	luck'	–	risks	that	result	from	choices	for	which	the affected	agents	are	responsible	(Dworkin,	1981,	p.	293). If	one	thinks	that	the	losses	incurred	by	those	affected by	flooding	are	the	outcomes	of	the	choices	they	make	– be	this	about	the	location	of	their	homes,	their	decisions to	add	flood	defences	or	even	their	choices	in	decorating and	furnishing	their	homes	–	there	is	no	injustice	in requiring	them	to	bear	the	premium	costs	of	insuring the	additional	risks	associated	with	those	choices. Nor	is	it	unjust	to	expect	them	to	bear	the	full	costs	of damage	should	they	choose	not	to	take	out	insurance. The	voluntary,	risk-differentiated	premiums	of	individual insurance	are	consistent	with	the	choice-sensitivity	of justice.	Solidaristic	systems,	in	contrast,	are	unjust,	since they	require	the	prudent	to	bear	the	costs	of	the	choices made	by	the	imprudent.	It	would	be	unfair	to	expect prudent	households	to	bear	the	costs	of	the	choices	of careless	households. A	stark	formulation	of	the	luck-egalitarian	perspective	on natural	disasters	is	that	by	Eric	Rakowski.	The	choice	to live	in	a	place	that	is	prone	to	natural	disasters	is	a	matter of	'option	luck': If a citizen of a large and geographically diverse nation like the United States builds his house in a flood plain, or near the San Andreas fault, or in the heart of tornado country, then the risk of flood, earthquake, or crushing winds is one he chooses to bear, since those risks could be all but eliminated by living elsewhere. (Rakowski, 1991, p. 79) Rakowski	allows	that	losses	that	are	the	result	of	risks taken	in	order	to	'to	live	a	moderately	satisfying	life'	can be	taken	to	be	'instances	of	bad	brute	luck'.	However, even	this	brute	luck	is	transformed	into	option	luck	by	the existence	of	insurance,	and	the	familiar	arguments	for private	rather	than	state	insurance	are	evoked: With respect to brute luck below the baseline amount, what equality of opportunity establishes is nothing more than a universal insurance scheme. But if society is sufficiently advanced economically to make private insurance available, the state need not administer a single centralized insurance program. Indeed, leaving the provision of insurance to a competitive market would almost surely lead to more efficient coverage and greater consumer satisfaction. Thus, so long as no one is denied the opportunity to purchase insurance against bad brute luck at or below the amount justice initially requires, equality of fortune applauds the privatization of insurance... (Rakowski, 1991 p. 79) Given	the	provision	of	private	insurance,	the	public community	has	no	duty	in	justice	to	compensate	those who	suffer	loss	through	natural	disaster.	In	particular, it	has	no	duty	of	justice	to	compensate	the	uninsured. Their	losses	are	the	result	of	their	own	choices	for	which they	are	responsible:	they	are	a	matter	of	'option	luck' rather	then	'brute	luck'. Responding to the fairness arguments for individualist, risk-sensitive flood insurance There	are	two	responses	that	might	be	made	to	the	line of	argument	for	the	superior	fairness	of	risk-sensitive flood	insurance.	The	first	is	to	deny	that	principles	of public	policy	should	always	be	choice-sensitive	in	the way	such	luck	egalitarianism	might	suggest.	That	is,	it	is to	argue	in	favour	of	the	third	principle	of	equity	(fairness as social justice)	instead	of	the	second	principle	(fairness as choice-sensitivity).	The	second	strategy	would	be	to question	the	claim	that	the	losses	incurred	are	really	the outcome	of	pure	option	luck.	If	such	losses	cannot	be treated	as	the	outcome	of	deliberate	choices	for	which those	who	suffer	the	losses	bear	responsibility,	then there	would	be	reason	to	reject	individualist,	choicesensitive	flood	insurance,	even	on	the	second	principle of	equity.	We	will	examine	both	strategies	in	turn. a.	Should public policy always be choice sensitive? The case for 'fairness as social justice'. Should	public	policy	always	be	choice	sensitive	in	the ways	in	which	this	luck-egalitarian	line	of	thought	might suggest?	There	are	reasons	that	it	should	not.	There	are domains	in	which	choice-sensitivity	will	lead	to	ethically objectionable	outcomes.	It	will	lead	to	the	abandonment of	those	in	dire	need	(Anderson,	1999,	pp.	295–300; Fleurbaey,	1995).	For	example,	the	health	service	is normally	offered	to	all	on	the	basis	of	need.	As	Samuel Scheffler	puts	it: 11 'The fact that a person's urgent medical needs can be traced to his own negligence or foolishness or high-risk behaviour is not normally seen as making it legitimate to deny him the care he needs. Still less do people automatically forfeit any claim to assistance if it turns out that their urgent needs are the result of prudent or wellconsidered choices that simply turned out badly.' (Scheffler, 2003, pp.18–19) Why	should	health	needs	have	this	status	regardless	of the	choices	made?	One	answer	that	is	open	to	the	luckegalitarian	is	to	claim	that,	while	we	do	not	have	duties of	justice	to	respond	to	the	health	needs	of	others	where they	are	the	result	of	their	own	choices,	we	do	have other	duties	of	solidarity	or	compassion	to	so	respond, and	that	in	cases	of	extreme	hardship	these	over-ride strict	duties	of	justice	(Segall,	2007;	Segall	2009,	ch.	4). Another	response	is	to	reject	the	claim	that	justice requires	the	strong	forms	of	choice	sensitivity	that	the luck	egalitarian	assumes	(Anderson,	1999;	Scheffler, 2003,	2005;	Daniels,	2003;	Freeman,	2007,	ch.	4; Fleurbaey,	2001).	There	are	basic	social	goods	whose provision	is	required	as	part	of	the	basic	entitlements	of citizenship	or	social	justice.	There	are	basic	capabilities that	must	be	met	for	a	person	to	function	at	all	in democratic	society,	and	we	have	duties	of	justice	to meet	those	needs.	As	Norman	Daniels	puts	it:	'Our health	needs,	however	they	arise,	interfere	with	our ability	to	function	as	free	and	equal	citizens...	To	keep people	functioning	as	equal	citizens,	democratic egalitarians	must	meet	their	needs	however	they	have arisen,	since	capabilities	can	be	undermined	through both	bad	brute	and	bad	option	luck.'	(Daniels,	2008, p.77).	These	arguments	turn	on	the	importance	of	health for	the	opportunities	to	realise	a	variety	of	other	social goods	in	a	democratic	society,	such	as	education,	work, and	social	relations.	Where	the	provision	of	a	certain good,	whether	that	is	healthcare	or	other	forms	of	social protection,	can	be	seen	as	a	'gateway	social	good' (O'Neill,	2006)	protecting	one's	access	to	other	essential elements	of	a	worthwhile	life,	then	there	are	weighty reasons	to	make	sure	that	all	citizens	have	secure access	to	that	good. Similar	points	apply	to	the	social	and	housing	needs disrupted	by	flooding.	Many	of	the	'goods'	destroyed	in catastrophic	events	such	as	flooding	are	preconditions for	a	variety	of	other	capabilities:	the	loss	of	a	secure home,	the	health	effects,	the	dislocation	of	local communities	and	disruption	of	education	and	work	are all	consequences	of	such	events	(Lindley	et al.,	2011). They	have	a	disproportionate	impact	on	the	most vulnerable,	and	reinforce	existing	disadvantages. 'In floods, the more vulnerable groups such as the poor, the old, children, the disabled, and women suffer the greatest impacts, and these can be long-lasting. Intangible 'human' impacts, e.g. the loss of cherished family memorabilia by the elderly, can be much more costly to society in the longer term than tangible damage. This can result in the public and politicians underestimating the true impact of flooding in terms of not only the damage caused, but the long term mental distress and breakdown in social cohesion. (Dlugolecki, A. et al,. 2009, p.18) In	this	context,	flood	insurance	can	itself	be	seen	as	a 'gateway	social	good'	–	it	protects	access	to	a	broad variety	of	other	ongoing	goods	and	functionings. Without	it,	individuals	are	exposed	to	a	catastrophic economic	risk,	thereby	undermining	their	economic security	and	their	ability	to	plan	for	the	future.	When individuals	are	protected	against	the	prospect	of massive	economic	shocks,	and	have	reasonable expectations	about	their	future	economic	state,	this allows	them	to	engage	in	certain	kinds	of	long-term agency	and	planning	which	are	simply	impossible	in the	absence	of	such	protections	(Wolff	and	de-Shalit, 2007,	ch.	3).	This,	after	all,	is	the	essential	social	role	of insurance.	To	be	uninsured	in	the	face	of	flood	risk	is to	be	in	a	precarious,	agency-sapping	and	desperate situation.	Moreover,	this	situation	is	(a)	worse	for	those who	otherwise	have	fewer	resources,	who	tend	to be	more	vulnerable	(Lindley	et	al.,	2011)	and	(b)	given uneven	levels	of	insurance	coverage,	it	is	also	more likely	to	be	faced	by	individuals	who	otherwise	have fewer	resources.	Like	damage	to	health,	catastrophic flooding	events	can	lead	to	the	loss	of	basic	goods and	security	that	are	a	condition	of	other	functionings. Correspondingly	insurance	should	be	provided	on	the basis	of	a	conception	of	fairness	as	overall	social	justice outlined	earlier:	insurance	should	ensure	the	security of	at	least	a	class	of	basic	goods	(or	'gateway	goods') required	by	social	justice	independently	of	the	risks	and choices	of	individuals. b.	How much choice? Why even those who endorse equity-as-choice-sensitivity should reject choicesensitive flood insurance We	have	argued	that	insurance	policy	for	catastrophic events	like	flooding	should	not	be	choice-sensitive	in the	ways	that	many	justifications	of	mutualistic	risksensitive	insurance	assume.	However,	even	if	insurance schemes	should	be	choice	sensitive,	there	is	still	an additional	question:	how	far	are	losses	due	to	flooding the	outcomes	of	voluntary	choices	for	which	agents are	responsible?	A	choice	is	voluntary	only	if	it	can be	reasonably	foreseen	and	the	agents	have	real	and acceptable	alternatives	to	it.	Neither	condition	is	present for	many	victims	of	flooding. 12 The	losses	incurred	by	many	flooding	events	cannot	be understood	to	be	the	result	of	deliberate	choices	since they	could	often	not	have	been	reasonably	foreseen by	those	affected.	Individuals	cannot	reasonably	be expected	to	know	all	the	flood	risks	that	currently	exist, or	which	may	develop.	Levels	of	flood	risk	are	not	static and	well	known;	they	are	evolving	and	developing	in	the light	of	climate	change.	They	can	be	exacerbated	by failures	by	public	authorities	to	maintain	watercourses and	clean	drains.	Areas	of	flood	risk	change,	and households	previously	not	at	risk,	can	find	themselves newly	at	risk	as	weather	patterns	change	or	if	there	is new	building	development	upstream.	As	Environment Agency	flooding	maps	are	updated,	so	also	is	the number	of	properties	held	to	be	at	risk	levels	that	render them	uninsurable.	Consider	for	example	the	following report	from	The Sunday Times	in	2008: The number of properties blacklisted by insurers is set to double to 1m as the government releases its first maps of urban areas with inadequate drainage. At present, half a million homeowners live in areas classified as 'high risk' by the Environment Agency (EA) and are penalised with a supplement of up to 30% to their premiums and excesses of as much as £30,000. (Ali Hussain, 'Flood insurance blacklist swells', The Sunday Times, January 27, 2008, News, p. 11) Changes	in	the	maps	identifying	areas	threatened	by pluvial	(rainwater-related)	flooding	have	been	particularly marked	in	recent	years.	There	are	now	some	3.8	million properties	reportedly	at	risk	of	pluvial	flooding	in	England alone	(Environment	Agency,	2009;	Houston	et al.,	2011). Even	where	properties	are	new,	individuals	cannot	be reasonably	expected	to	know	all	the	flood	risks	where the	planning	system	has	not	indicated	that	such	risks exist.	Households	should	be	able	to	rely	on	the	fact	that if	planning	permission	has	been	given	for	a	new	building, then	it	is	reasonable	to	assume	that	it	is	not	at	significant flood	risk;	but	the	planning	system	often	fails	to	deliver this	guarantee.	Householders	also	have	access	to significantly	different	levels	of	information	about	flood risk,	depending	on	the	nature	of	their	tenure.	This	is particularly	significant	in	the	rented	sector	where	the proportion	of	households	with	insurance	is	already	low. While	buying	a	house	usually	involves	flood	risk	checks to	gain	insurance	in	order	to	obtain	a	mortgage,	for private	or	social	renters	there	is	no	similar	process	when they	choose	where	to	rent,	even	where	such	a	choice exists. Moreover,	the	choices	to	live	in	a	particular	place	are often	not	voluntary	since	low-income	families	may	not have	reasonable	and	acceptable	alternatives.	Many low-income	households	will	simply	not	be	able	to	afford to	move	elsewhere.	Low-income	households	living in	social	housing	often	have	no	alternative	housing available	to	them.	As	we	have	noted	above,	the	point is	granted	by	many	luck-egalitarians.	Rakowski,	for example,	allows	that	losses	from	risks	in	housing	that are	required	in	order	to	live	a	minimally	decent	life	can	be understood	to	be	instances	of	brute	luck.	However,	he suggests	that	the	existence	of	private	insurance	allows agents	to	convert	brute	luck	into	option	luck.	If	they	stay uninsured	then	this	is	a	result	of	a	voluntary	choice	and they	should	bear	the	costs.	The	argument	assumes, however,	that	agents	are	able	to	exercise	that	choice. Individualist	insurance	schemes	that	are	risk	sensitive may	confront	individuals	with	insurance	premiums	that they	are	unable	to	afford.	As	Elizabeth	Anderson	notes,	a person	on	a	low	income	who	puts	the	immediate	needs of	family	above	insurance	against	risk	acts	prudently	on the	budget	they	have.	It	would	be	wrong	to	make	them bear	the	full	costs	of	their	situation,	given	that	they	acted rationally	given	the	options	faced	(Anderson,	1999,	198). Moreover,	given	the	high	excess	charges	involved	in individualist	insurance	schemes	in	high-risk	areas,	lowincome	families	can	find	themselves,	through	no	fault	of their	own,	facing	onerous	losses	which	would	simply	not be	covered	by	their	insurers. The	existing	flood	insurance	regime	in	the	UK	is	already marked	by	a	degree	of	risk-sensitivity	that	means that	many	low-income	households,	particularly	in England	and	Wales,	are	unable	to	take	up	insurance. This	is	despite	the	existence	of	cross-subsidisation from	lowto	high-risk	properties.	A	shift	to	a	marketbased	system	of	insurance	for	flooding	that	requires individuals	to	bear	insurance	costs	that	fully	reflect	their risks	will	be	likely	to	worsen	that	situation.	It	will	lead	to increases	in	both	premiums	and	excess	payments	that effectively	leave	many	low-income	households	at	risk	of flooding	uninsurable.	Many	flood-threatened	areas	will consequently	be	blighted.	Given	the	scale	of	the	likely future	flood	threat	in	the	UK,	these	areas	are	likely	to	be widespread,	especially	in	England.	We	have	argued	that only	if	one	assumes	an	implausibly	narrow	'actuarial' principle	of	fairness	could	this	possibly	be	seen	as	an equitable	outcome.	On	any	plausible	theory	of	justice, choice-sensitive	or	not,	the	existing	insurance	regime is	unjust,	and	a	shift	to	a	more	risk-sensitive	regime	will make	matters	even	more	unjust.	There	are	very	strong arguments	in	justice	for	a	shift	to	a	more	solidaristic insurance	scheme,	as	such	a	scheme	would	allow	a person's	contribution	to	insurance	to	reflect	their	ability to	pay	and	the	value	of	their	goods	insured,	rather	than simply	their	level	of	risk. 13 Responding to efficiency and incentivebased arguments for individualist, risksensitive flood insurance We	have	made	the	case	for	more	solidaristic	insurance, but	acknowledge	that	such	an	approach	needs	to respond	to	lines	of	argument	grounded	in	considerations of	efficiency	and	the	importance	of	avoiding	'moral hazard',	where	individuals	lack	incentives	to	reduce their	risks.	The	arguments	run	that	solidaristic	schemes provide	neither	the	signals	nor	incentives	for	individuals to	make	their	homes	more	flood	resilient	and	for property	developers	to	build	homes	that	are	at	lower risk	of	flooding.	It	has	been	argued	that	some	versions of	solidaristic	models	such	as	the	US	insurance	model actually	give	perverse	incentives	that	promote	building in	flood	plains	(Crichton,	2011b).	These	are	important arguments.	They	are	not,	however,	decisive	objections to	solidaristic	flood	insurance	as	such;	they	point	to important	regulatory	implications	that	must	be	addressed alongside	the	implementation	of	solidaristic	insurance. An	initial	point	that	needs	to	be	made	is	that	it	is	not only	solidaristic	insurance	schemes	that	are	open	to moral	hazard	objections.	A	market-based	risk-sensitive insurance	regime	for	flood	brings	its	own	moral	hazards. By	shifting	the	costs	of	risks	onto	individual	householders, it	removes	incentives	for	collective	action	to	address flood	hazards,	be	this	at	the	community	or	government level.	In	particular,	it	weakens	some	of	the	incentives for	government	action	to	provide	flood	defences	that have	been	a	feature	of	previous	agreements,	and which	are	required	under	solidaristic	schemes	in	many parts	of	Europe.	There	is	a	collective	moral	hazard	that individualistic	risk-sensitive	regimes	will	shift	the	burden of	adaptation	onto	those	most	at	risk	of	flooding,	as opposed	to	maintaining	public	provision	of	adequate flood	defence.	The	potential	for	a	collective	moral	hazard is	apparent	in	current	plans	for	flood	management	in England.	While	the	Environment	Agency	projected	that	its flood	risk	management	budget	would	need	to	increase	by 9	per	cent	between	2012	and	2015	to	maintain	adequate flood	defences,	its	budget	for	flood	risk	management	is projected	to	fall	by	10	per	cent	during	this	period	(Public Accounts	Committee,	2012,	1.2). What	does	need	to	be	acknowledged	in	response	to	the moral	hazard	arguments	against	solidaristic	schemes is	that	such	schemes	do	carry	specific	regulatory implications.	They	require	an	alternative	set	of	incentives to	individuals	to	make	their	homes	more	resilient	–	for example	through	subsidies	on	flood	resilient	measures, particularly	for	those	on	lower	incomes.	They	require stronger	planning	regulations	to	control	building	of	new properties	at	flood	risk,	and	stronger	building	regulations governing	flood	resilience	in	new	build	and	repair	to flood-damaged	buildings.	There	are	however	very strong	grounds	for	such	a	tighter	regulatory	framework. The	regulatory	differences	governing	flood	risk	between England	and	Scotland	are	particularly	revealing.	As David	Crichton	(2011a)	has	recently	noted,	there	are major	differences	in	planning	and	regulation	within the	UK	between	England	and	Wales	on	the	one	hand, and	Scotland	on	the	other,	which	have	made	a	large difference	in	the	degree	of	flood	risks	households	face. In	England	roughly	10	per	cent	of	new	build	is	in	flood plain.	In	contrast,	in	Scotland	there	has	been	no	new build	in	flood	plain	since	1995.	The	extent	of	new	build in	flood	plains	in	England,	in	particular,	(see	Table	1)	and the	absence	of	regulations	on	flood	resilience	in	building raise	serious	problems. The	contrast	is	in	part	due	to	differences	in	population density,	which	put	pressure	on	building,	in	particular	in the	south-east.	However,	it	is	also	in	part	due	to	different planning	and	building	regulations.	Where	English planning	regulations	permit	building	in	flood	plains where	there	is	no	alternative,	Scottish	Planning	Policy does	not	permit	building	in	areas	in	which	'the	flood	risk exceeds	the	200	year	return	period',	i.e.	where	in	any year	there	is	a	greater	than	0.5	per	cent	probability	of flooding.	Scotland	has	stronger	regulations	governing the	capacity	of	sewage	and	drainage	systems	for	new building.	It	also	has	stronger	minimum	standards	for flood	defences.	Building	regulations	ensuring	flood resilience	in	the	housing	stock	are	more	developed. Scottish	planners,	through	Flood	Liaison	and	Advice Groups,	are	engaged	with	local	communities,	the emergency	services,	insurers	and	other	interested parties	in	drawing	up	flood	plans.	The	differences	in regulatory	regimes	between	England	and	Scotland are	reflected	in	the	number	of	households	that	are	at risk	of	flooding,	and	the	resilience	of	communities	in responding	to	those	risks.	Despite	higher	rainfall	north	of the	border,	communities	in	Scotland	face	substantially lower	flood	risks.	While	5	per	cent	of	Scottish households	are	at	a	0.5	per	cent	flood	risk	in	Scotland, 23	per	cent	of	households	in	the	England	face	a	higher 1.0	per	cent	risk	(Crichton,	2011a,	p.	558). Solidaristic	insurance	models	do	carry	implications	for stronger	regulation.	However,	there	is	a	powerful	case for	a	stronger	regulatory	framework	governing	building and	planning,	to	protect	communities	against	the	risk of	flooding	throughout	the	UK.	Such	an	improvement in	regulation,	if	it	brought	all	of	UK	planning	up	to Scottish	standards,	would	remove	many	worries	about solidaristic	insurance	creating	perverse	incentives	to build	in	vulnerable	areas. Finally	moral	hazard	arguments	against	solidaristic schemes	have	to	be	placed	in	the	context	of	wider arguments	about	justice,	which	we	have	outlined	in	this Viewpoint.	Even	if	a	shift	to	a	highly	risk-sensitive	market regime	in	insurance	did	provide	signals	and	incentives that	lower	overall	flood	risk	in	the	long	term,	it	would be	unjust	to	achieve	that	end	by	placing	the	burdens on	those	of	low	income	who	face	the	risks	of	floods 14 unprotected	and	with	least	ability	to	manage	those	risks. Part	of	the	argument	about	the	nature	of	the	insurance regime	concerns	the	degree	to	which	societies collectively	should	protect	those	who	are	vulnerable to	the	outcomes	of	actions	for	which	there	is	a	wider, uneven,	but	shared,	responsibility.	To	the	degree	that the	increased	frequency	and	intensity	of	flooding	is	the outcome	of	climate	change,	it	is	the	outcome	of	actions for	which	those	who	are	most	vulnerable	often	carry	the least	responsibility.	There	is	a	particular	double	injustice if	those	on	low	incomes	who	are	least	responsible	for greenhouse	gas	emissions	are	faced	with	the	greatest burdens	of	policy	responses	to	the	problems	they create	(Thumim	et al.,	2011,	Lindley	et al.,	2011).	Public policy	regarding	insurance	should	reflect	the	wider joint	responsibilities	for	the	problems	emissions	cause, including	flooding. Fairness, social solidarity and the future of flood insurance In	this	Viewpoint,	we	have	argued	that	on	any	plausible theory	of	justice,	be	it	choice-sensitive	or	not,	the existing	insurance	regime	is	unjust,	and	a	shift	to	a	more risk-sensitive	regime	will	make	matters	still	more	unjust. There	is	a	strong	case	in	justice	for	a	more	solidaristic system	for	flood	insurance.	However,	we	have	already noted	that	the	current	trend	in	flood	insurance	in	the UK	is	moving	in	precisely	the	opposite	direction.	If	there is	no	new	policy	to	replace	the	current	Statement	of Principles,	then	with	the	increasing	ability	of	insurers	to differentiate	the	flood	risk	of	different	properties	there will	be	a	shift	towards	decreasing	cross-subsidisation, and	thus	towards	pure	individualised,	risk-differentiated schemes,	in	which	payments	and	excess	will	fully	reflect predicted	risks.	One	consequence	will	be	that	a	large proportion	of	the	housing	stock	in	England	and	Wales will	become	uninsurable,	and	this	in	turn	is	likely	to generate	severe	social	blight. It	is	in	this	context	that	discussions	are	taking	place between	Defra	and	representatives	of	the	insurance industry,	the	National	Flood	Forum	and	other	parties. The	current	outcome	of	these	discussions	appears	in the	Defra	report	Flooding and insurance: a roadmap to 2013 and beyond	(Defra	2011b).	While	this	report does	acknowledge	the	threat	of	social	blight	and	does consider	a	risk	pool	involving	some	cross-subsidisation as	one	of	the	policy	options,	the	report	tends	towards an	increasingly	individualised,	risk-sensitive	regime. Given	the	wide	diversity	of	regimes	that	exist	for	flood insurance	globally	(Box	1)	the	report	considers	only a	narrow	range	of	free-market	insurance	regimes	as options	for	policy	after	2013.	While	the	Defra	report notes	that	the	UK	is	peculiar	in	having	a	purely	marketbased	regime	for	residential	insurance,	this	marketbased	approach	is	left	largely	unquestioned	and	the report	simply	assumes	the	necessity	of	a	market-based approach,	with	repeated	emphasis	on	the	importance of	removing	'market	distortions'.	As	we	noted	earlier, fairness	and	equity	in	insurance	provision	are	mentioned among	the	principles	governing	any	new	regime. However,	the	concepts	are	not	defined	in	Defra's	report and,	as	they	are	used	in	the	discussion	of	different options,	the	report	appears	to	operate	without	further Table 1: Land Use Change – percentage of new dwellings built within areas of high flood risk, by region, 2000 to 2010 Percentage Government Office Regions Year North North Yorkshire East West East of London South South England East West and the Midlands Midlands England East West Humber 2000 1 5 11 9 2 6 22 7 8 8 2001 2 5 11 10 3 5 18 7 9 8 2002 2 4 11 12 3 7 20 6 11 9 2003 2 5 12 11 2 7 28 7 8 9 2004 1 3 9 11 4 7 27 6 7 9 2005 1 5 12 9 3 8 15 6 8 8 2006 1 4 15 12 4 9 19 8 7 9 2007 2 6 14 12 5 6 16 5 5 8 2008 3 2 14 10 4 5 23 5 7 9 2009 1 3 10 10 3 10 21 9 8 11 2010 2 8 11 7 4 4 21 5 7 9 Source:	Land	Use	Change	Statistics,	DCLG	2011.	www.communities.gov.uk/planningandbuilding/planningbuilding/ planningstatistics/livetables/landusechange/	(accessed	10.2.12.) 15 argument	with	a	narrow	actuarial	conception	of	equity. Thus,	for	example,	it	recognises	that	a	policy	of	doing nothing	will	result	in	'the	unwinding	of	the	cross-subsidy', but	claims	that	this	'therefore	removes significant distributional and equity impacts'	(Defra	2011b,	p.	6).	A focus	of	the	report,	in	particular	of	its	second	working group,	is	on	a	version	of	the	moral	hazard	argument for	individualised	insurance.	The	report	argues	that incentives	need	to	be	created	to	ensure	households reduce	their	own	risks	to	flooding,	even	if	this	leads	to higher	premiums	for	those	most	at	risk: On the cross-subsidisation of insurance for properties, it was recognised that if flood risk was better reflected, this could lead to the cost of policy terms increasing as well as decreasing. The Group agreed that this was a more preferable situation to that at present, even if it did lead to increased premiums for some, as it would provide an incentive for all individuals to manage their own flood risk. (Defra, 2011b, p.12) At	the	same	time	the	report	takes	for	granted	the	current UK	Government's	agenda	of	reducing	'regulatory burden',	and	rules	out	a	stronger	building	and	planning regulatory	regime	to	reduce	the	risk	of	flooding	(Defra, 2011b,	pp.	23–27).	Together	with	the	wider	relaxation	in the	planning	regime	following	the	Localism	Act	of	2011, the	corresponding	burden	for	reducing	new	build	in	the flood	plain	will	fall	on	an	insurance	regime	that	more fully	reflects	risks.	For	the	reasons	we	have	outlined, this	will	have	consequences	for	those	who	currently	find themselves	at	flood	risk	that	could	be	defended	on	no plausible	theory	of	justice. The	ministerial	written	statement	on	the	2011	Defra report	appears	actively	to	endorse	the	trend	away from	subsidisation	and	towards	an	individualised	risksensitive	insurance	regime	(Benyon,	2011).	However, in	the	wider	discussions	of	flood	insurance	in	the	UK, there	is	acknowledgement	within	flood	action	groups, and	even	in	the	insurance	industry	itself,	that	a	policy that	lacks	a	solidaristic	component	is	both	socially	unjust and	unsustainable.	Thus	there	is	some	recognition	in	the insurance	industry	that	a	fully	risk-sensitive	insurance regime	would	be	socially	unacceptable	(Houston	et	al 2011	p.48).	This	recognition	is	clearly	expressed	in	the response	of	the	ABI	to	the	ministerial	statement: No country in the world has a free market for flood insurance which provides affordable and accessible cover for high risk households without some form of Government involvement and it makes no sense to rule out a subsidy before Defra have even done the analysis. To ensure potentially 200,000 high risk households have access to flood insurance in 2013, the Government needs to...help develop a sustainable subsidy model which is paid for either by taxpayers, low risk households or both. (ABI, 2011b) Given	a	commitment	to	some	form	of	social	solidarity, the	central	argument	is	to	what	degree	solidarity should	be	included	and	what	form	it	should	take.	The presumption	of	the	Defra	report,	in	favour	of	marketbased	solutions,	and	against	both	solidaristic	risksharing	and	sensible	regulation	of	planning,	stands	in the	way	of	developing	an	agenda	to	protect	those	who are	vulnerable	to	flooding.	It	also	carries	its	own	longterm	economic	as	well	as	social	implications.	Preventing the	blighting	of	neighbourhoods	will	not	only	prevent harm	to	those	affected,	it	will	also	reduce	demands	on public	resources	in	the	long	term	in	comparison	to	those that	would	be	required	for	their	subsequent	renewal	and regeneration. There	are	a	variety	of	different	forms	more	solidaristic regimes	for	flood	insurance	can	and	do	take	(Box	1), ranging	from	those	that	involve	publicly	resourced provision	and	subsidies,	to	those	that	involve	some form	of	cross-subsidy	through	a	common	levy	paid into	standard	insurance	schemes.	Among	current participants	in	the	debate	in	the	UK,	different	proposals involve	different	degrees	of	social	solidarity.	One	model the	ABI	have	been	considering	is	a	hybrid	system	which would	involve	insurance	that	is	fully	sensitive	to	risk	up to	a	particular	threshold	of	risk.	Properties	above	that threshold	would	be	in	a	system	of	pooled	risks	that would	allow	some	cross-subsidisation	within	that	pool so	that	premiums	would	be	below	a	price	that	fully reflected	the	levels	of	risk	(Oxera,	2011).	Other	recent proposals	have	been	more	substantially	solidaristic.	In particular,	the	approach	for	insurance	reform	offered	by the	Morpeth	Flood	Action	Group	moves	much	further in	a	solidaristic,	risk-insensitive	direction,	away	from	a market-based	risk-differentiated	regime: 16 In a situation where continuing climate change has the potential to vastly increase the flood related costs of private insurance companies year on year – the cost of covering flood damage was £3 billion in 2007 – the market led approach to the financing of flood risk in the UK no longer works. It does not provide viable solutions for significant numbers of properties in need of flood insurance. Without government involvement the prevailing culture of laissez-faire is unsustainable. (Morpeth, 2010 3.1) In	its	place	they	initially	proposed	a	private-public scheme	in	which:	flood	insurance	is	mandatory	for	all property;	insurance	premiums	are	differentiated	not	by risk	but	by	the	value	of	the	property	being	insured;	and the	funds	collected	through	the	insurance	companies are	passed	on	to	an	agency	which	administers payments.	This	proposal	appeals	to	a	more	solidaristic, risk-insensitive	model	of	insurance	provision. 'A community cannot prosper if sections of it are rendered unsaleable or uninhabitable. The concept of pooling resources and sharing costs is a fundamental principle of insurance and is evident in many areas of British life – one person subsidises the NHS medical treatment of their neighbour, another person contributes to the education of their neighbour's children and a town dweller subsidises the cost of postal delivery to someone living in a remote area. The proposal for a flood insurance scheme follows the same principle.' (Morpeth, 2010, 3.4.9) More	recently,	the	Morpeth	Flood	Action	Group	has offered	a	revised	proposal	that	does	offer	some element	of	risk-differentiation	within	a	solidaristic model	(Morpeth,	2011a).	A	universal	'Community	Flood Levy',	based	either	at	a	flat	rate	or	a	percentage	of	the premium,	would	be	charged	on	all	household	insurance policies.	This	would	subsidise	those	at	higher	risk,	but households	above	a	particular	council	tax	band	in	those areas	would	still	pay	some	premium	to	reflect	that	higher risk. Conclusion Different	proposals	for	future	flood	insurance	each appeal	to	different	arguments,	both	about	the	justice and	efficacy	of	each	kind	of	insurance	schemes.	The central	arguments	for	more	solidarity-based	schemes appeal	to	the	socially	inequitable	consequences	of risk-differentiation,	and	the	tremendous	social	costs of	excluding	some	individuals	from	the	prospect	of accessing	such	insurance,	both	in	terms	of	the	direct effects	on	their	own	lives,	and	in	terms	of	the	knock-on effect	of	blighting	potentially	huge	swathes	of	housing. We	have	argued	in	this	report	that	any	plausible	theory of	justice	requires	a	strong	solidaristic	component	to	an insurance	regime	for	flood.	It	has	not	been	our	aim	in	this Viewpoint	to	argue	for	any	particular	scheme.	We	have noted	that	there	a	variety	of	forms	such	a	scheme	could take	(Box	1),	including	that	advocated	by	the	Morpeth Flood	Action	Group. Given	that	the	lack	of	contents	insurance	is	particularly evident	in	low-income	households	and	among	those in	the	social	and	private	rented	sector,	justice	requires that	any	solidaristic	scheme	includes	particular measures	aimed	at	protecting	those	groups.	A	minimal requirement	of	justice	in	any	new	flood	insurance	regime is	that	it	protects	the	most	vulnerable.	The	increase in	insurance	premiums	that	would	result	from	a	risksensitive	market	regime	does	not	meet	this	requirement. Rather	it	will	worsen	their	position. Any	just	policy	must	find	some	place	for	social	solidarity in	the	design	of	insurance	arrangements	for	flood.	The alternative	is	to	create	a	situation	in	which	we	would be	predictably	causing	not	only	a	sizeable	swathe	of blighted	properties,	but	also	very	many	blighted	lives. It	is	for	good	reason	that	almost	no	other	advanced country	has	countenanced	a	purely	market-based approach	to	this	important	matter	of	public	policy.	As climate	change	brings	policy	on	flood	management further	up	the	public	agenda,	it	is	vital	that	public	debate about	the	future	of	flood	insurance	moves	beyond Defra	presumptions	in	favour	of	purely	market-based solutions.	Instead,	a	range	of	policy	options	must be	given	serious	consideration,	recognising	that	the regulation	of	flood	insurance	is	not	merely	a	technical question,	but	a	question	of	social	justice. 17 Acknowledgements David	Crichton	acted	as	a	consultant	on	this	report. We	would	like	to	thank	him,	although	it	should	be emphasised	that	the	views	expressed	in	this	report	do not	necessarily	reflect	his	own. We	would	also	like	to	thank	the	following	for	their comments: Alan	Bell Matt	Cullen Katharine	Knox Josh	Stott Richard	Christian Sarah	Lindley Nigel	Lawson Richard	Starkey Gordon	Walker Glossary of special terms Individualist, risk-sensitive insurance	–	forms	of 'mutual'	insurance	where	individuals'	payment	into the	'risk	pool'	is	proportional	to	their	level	of	risk,	as with	private	motor	or	travel	insurance. Solidaristic, risk-insensitive insurance	–	forms of	insurance	where	those	bearing	lower	levels	of	risk contribute	to	the	support	of	those	bearing	higher	risk, as	with	the	UK	National	Health	Service. Brute luck	–	those	risks	which	individuals	face through	no	fault	or	choice	of	their	own	are	matters	of brute	luck. Option luck	–	those	risks	which	individuals	face	as the	result	of	choice	are	a	matter	of	option	luck. Luck-egalitarianism	–	a	choice-sensitive	view of	justice	that	holds	that	individuals	are	entitled	to the	equalisation	of	those	aspects	of	their	situation that	are	the	results	of	brute luck,	but	that	individuals should	bear	the	costs	and	benefits	associated	with their	own	choices	and	option luck. Moral hazard	–	a	situation	in	which	individuals	or organisations	do	not	bear	the	costs	of	a	particular risk	and	hence	lack	incentives	to	change	behaviour to	reduce	that	risk.	In	insurance,	it	refers	in	particular to	the	phenomenon	whereby	an	individual	who	is able	to	insure	against	a	particular	risk	now	has	less incentive	to	reduce	their	exposure	to	that	risk,	as when	a	fully	insured	driver	of	a	rental	car	is	indifferent about	the	prospect	of	the	vehicle	being	damaged through	his	careless	driving,	and	hence	drives	less carefully	than	he	otherwise	would	have	done. 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