Florida is an interesting example. If development patterns there were left to market forces, the coasts of Florida would not be as significantly developed. Insurance costs would prohibit it. But the state's insurance regulations control prices and force inland homeowners to subsidize the insurance rates of coastal homeowners. Even worse, as insurance companies flee this distorted market, the state stepped in and now runs its own insurance company, which is building a massively underfunded risk portfolio. Literally the state of Florida is at risk of bankruptcy if another hurricane Andrew hits.
Another factor is, if the storm is big enough, the feds step in with FEMA and bailout people who are underinsured.
People living in Florida's hurricane alley pay nowhere near the cost of the risk of living there, and the result is overbuilding, and catastrophic property losses when the big one eventually does hit.
Sorta like earthquakes in the SF bay area. Humans aren't rational. Considering relatively few people actually get earthquake insurance in California, I'm sure theres some level of the cognotive dissonance by many of those who agree with the main thrust of your point.
They are rational in this case. They are getting others to cover the expense of their lifestyle. If someone is going to bail you out why would you bother not living as you'd like.
Another factor is, if the storm is big enough, the feds step in with FEMA and bailout people who are underinsured.
People living in Florida's hurricane alley pay nowhere near the cost of the risk of living there, and the result is overbuilding, and catastrophic property losses when the big one eventually does hit.