Could the Insurance Industry Do What NOAA Does?

Weather Underground co-founder Jeff Masters argued the other day that NOAA's highly accurate storm tracking substantially lessened the economic cost of Irene and urged his readers to reject proposed cuts to NOAA's budget. He makes the point that it costs approximately $1 million to evacuate each mile of U.S. coast, and that increasingly accurate forecasts are reducing potentially enormous evacuation costs.

After substantiating the accuracy of NOAA's storm track prediction, Masters concludes:

The cost of hurricane damages in the U.S. has been doubling every ten years since the 1960s, and is expected to continue to double every ten years, even without the likely coming increase in storm surge damages due to accelerating sea level rise. A Category 1 hurricane doing $10 billion in damage should be a wake-up call that we need to continue our investments in hurricane research to reduce the costs of the inevitable coming storms. Slashing funding by 40% for a research group that was instrumental in saving $700 million in costs from just one storm makes no sense, and I hope Congress will reconsider the proposed cuts for NOAA's Aircraft Operations Center.

I find it hard to argue against the utility of NOAA but libertarians of my acquaintance say that if the agency's work is really valuable, the insurance industry and potentially others could fund it. I'm inclined to think that NOAA is one of those things that government is constitutionally justified in doing, and does well. However it's a thought provoking suggestion. If NOAA was seriously underfunded in the ways that matter to the insurance industry, could insurers and vendors who serve them step in to do what needed to be done?

Insurers and vendors undoubtedly benefit from NOAA's work, though clearly they are not the only beneficiaries. As the Irene experience corroborates, economic damages from hurricanes are often several times as great as insured losses -- which is to say that others are benefiting more than the insurance industry from NOAA's work.

However, if NOAA was to cease to exist, why in principle couldn't the insurance industry and/or its vendors, and potentially other industries fund the kind of work NOAA does, including the Hurricane Hunter flights (dear to Jeff Masters not only because of the vital information they provide but because he flew with the Hunters in the 1980s)?

What makes this kind of information different than what is yielded by non-governmental outfits such as Underwriters Laboratories or the Institute for Business & Home Safety (IBHS)?

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio